I have a table like:
TemplateBody
---------------------------------------------------------------------
1.This is To inform #FirstName# about the issues r
As long as the values for the Variables are unique ('#FirstName#' etc.) you can join each variable to the table containing TemplateBody:
select replace(replace(t.TemplateBody,'#FirstName#',variable.theVariable),'#Location#',variable2.theVariable)
from
[TemplateBodyTable] t
left join
(
select TemplateValues theVariable,Variables
from [VariablesTable] v
) variable on variable.Variables='#FirstName#'
left join
(
select TemplateValues theVariable,Variables
from [VariablesTable] v
) variable2 on variable2.Variables='#Location#'