How to Develop a Franchise Business Plan
Originally uploaded on 06/09/2017. Updated on 30/03/2019.
A carefully crafted business plan is a key element of any successful business – including franchises. Business plans should outline the business’ strategies and the manager’s intended method of achieving company goals. It should be a declaration of targets and financial forecasts and include details about you, your background and experience. In developing it, you should think about the types of obstacles and opportunities that you could encounter when running the franchise. It is particularly helpful to spend some time considering issues that could crop up further down the line.
Put some thought into where your premises are likely to be and whether you’ll be home-based. Do you know much about your competitors and what you can do to differentiate your business from theirs? Your franchisor should help you answer these questions, but you’ll need to be able to demonstrate your understanding of the business plan when you meet with professional contacts. Lenders, for example, will use it to evaluate whether your future franchise business is on course for success.
It is the help from the franchisor that makes creating your business plan easier than it would be for someone setting up an independent business. A lot of the hard work will already be done for you, as you’ll most likely have access to business plan templates from your franchisor. You can then alter these to suit your requirements. Your franchisor will also give you a copy of the company’s Franchise Disclosure Document (FDD), which will give you all the financial information you’ll need to finalise your plan.
>> Read more:
5 Points to Bear in Mind
So, what does a business plan need to include in order to satisfy lenders’ requirements? A standard business plan can be split into five key sections. Here is what you need to do to create a brilliant business plan:
1. Start with a brief introductory section. Provide an overview of your business and detail the service or products you’ll be offering your customers. Demonstrate an awareness of your competition – who are they and how will you differentiate yourself from them? Explain how you plan to run your business and mention the risks and issues that you believe you could encounter when starting up the franchise.
2. Define your management style and values. Give an overview of your management structure and, if possible, state the names of the people who will fill the available roles. The success or failure of the franchise relies on the employees you recruit, so if you have selected staff based on their experience or expertise, state this in the plan – this will help you when it comes to sourcing funding.
3. Describe how you will grow your customer base. You must be able to give customers a reason to choose your business and keep coming back for more. How will you build brand awareness once your business is up and running? What is your unique selling point and how will you advertise and promote your products and services?
4. Calculate financial projections. This section will form the main body of your business plan. Here you’ll need to predict how your business is going to perform and detail any costs and fees. Developing accurate financial figures is integral to the success of the business. This is where franchisees can benefit; because of the numerous franchises already in operation, franchisors tend to have a good idea of the amount of profit franchisees can expect to make. Your franchisor will also be able to help you prepare any cash flow projections.
5. Work out what funding you need. Provide details about the set-up fees for your particular franchise business, including the franchise fee and working capital needed. Spend time and effort to make this section as accurate as possible – even if you don’t need to borrow any money.
So, a strong business plan is an essential part of building your franchise business. The good news is that there is plenty of help out there. You can request a template from your franchisor or even download one from a business website. Business planning software can also help, but many entrepreneurs are unsure as to whether it is worth investing in costly software. Top Ten Reviews compared the best business plan software and found that LivePlan, Business Plan Pro and BizPlanBuilder offered the best tools for writing an effective business plan.
Should you hire a professional?
Even with templates and software to guide you, writing a business plan can be extremely overwhelming – especially if you’ve never had to prepare one before. If you’re concerned and decide to consult a professional, you can hire an expert business plan writer who can support you with many aspects of the writing process. The writer will help you carry out market research for your chosen industry and support you in creating cash flow forecasts. They will ensure that the document contains all the necessary content and write it out in a professional tone. Entrepreneurs can also approach the business plan writer for further advice on the business.
Appointing a business plan writer is an additional expense, but it could have a significant impact on the future of the company – especially if it helps the franchisee get funding. The importance of getting the first few steps right shouldn’t be underestimated.
However, while a business plan writer will help you to create the plan, you'll be the one bringing it to life when you start your franchise, so it will be useful to write the plan on your own if you can. It will give you a solid understanding of your industry, your competitors and your customers, helping to boost your profitability in the long-run. There are masses of books, websites, templates and software packages to support you through the writing process, and you can always turn to your franchisor for further guidance. In short, franchisees should be able to find all the information they need to create a winning business plan.
Alice Tuffery, Point Franchise ©
In this series, we provide tips on starting a franchise and the process of running [...]Article published on 02/01/2020 12:30
Our Mythbusters series focuses on clarifying any misconceptions you may have about [...]Article published on 31/12/2019 16:30
The mythbuster series tackles any misconceptions people tend to have about starting [...]Article published on 30/12/2019 12:30
If you’ve ever considered running a franchise, the first thing that probably comes [...]Article published on 22/01/2020 15:37
BECOME A FRANCHISEE