Creating a business plan for your franchise

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What to include in your franchise business plan

The franchise business plan is a crucial document in the franchise set-up process. Get it wrong, and your dream of managing a business will suffer a terrible blow. Get it right, and youre on your way to becoming the owner of a brand-new franchise unit. Here, we get to grips with why a business plan is important and offer tips and tricks for writing one. Then, we take you through the basic structure of the business plan and explain what it needs to contain.

What is a franchise business plan?

A franchise business plan is a document that you draft when applying for finance for your new franchise unit. It is used to argue your case and should aim to convince lenders that youre a safe investment and capable of making the business work. The vast majority of the information you need for the business plan can be found in the franchisor's Franchise Disclosure Document.

Why is a business plan important?

  • It helps you to make sure your business idea is feasible by outlining how it will materialise over the coming years. You might find that when writing up your ideas into the structure that it isnt realistic.
  • You can set goals and discuss how they will be achieved. Its important to look far into the future, including the financial return you are expecting to make.
  • It helps organise all of your ideas in one place. It should highlight where your priorities are and so less important ideas can be left out, saving time and money.
  • Once everything is organised in an easy-to-read structure, it will be easier to notice any gaps or factors you havent yet considered.
  • You can work out the financing that is needed.
  • Having a clear action plan will be invaluable in your start-up phase. It will guide you through this critical period and be referred back to frequently. Dont be afraid to adapt the business plan whenever you feel necessary. Its better to have an up-to-date business plan at all times so you can showcase the most accurate representation of your business to lenders, partners, recruits etc

Tips for Writing a Professional Business Plan

  • Keep it short and concise. Only write what the reader will be interested in knowing. Of course, you will have lots of ideas that you want to get across, as you are - or should be - passionate about the concept. But its important that the business plan is easily digestible. Business plans need to be able to be used on an ongoing basis, and overly detailed ones often make this difficult.
  • Make sure its written well. Check rigorously for any spelling, grammar or punctuation errors. This is your opportunity to showcase your professionalism and dedication to the success of your business. If its poorly written, it indicates to the reader that you cant be bothered and arent taking the opportunity seriously.
  • Be organised and professional. We recommend putting a cover on your business plan and including a contents page, with every page and section numbered. You could use charts if they are helpful in explaining your point. Also, to keep the main body of the business plan as readable as possible, include detailed information in an appendix. For instance, this might be market research data, in-depth financial forecasts, CVs of your management team and any specialists etc.
  • Review, review, review. Read through the business plan numerous times before sending it to lenders. You could even ask for a second opinion from your business partner or a professional. Ask them what impression it creates for them. Make sure it sounds realistic and not overly ambitious. Really focus on the executive summary because many readers use this as basis of whether they are going to read on.

Creating a Business Plan for Your Franchise

We now look at the structure of the business plan and what each section should cover.

  1. Executive summary.
    Essentially, the executive summary is the introduction to your franchise business plan. It will provide an overview of the business and offer a brief insight into what your aspirations are for the franchise unit and how you want to achieve them. Most executive summaries start with a description of your business goals. It will then go on to talk about how you hope to achieve these goals and how long it will take you.Franchisees need to be sure that they include information that enhances their standing with lenders and demonstrates that you have a firm understanding of business essentials. For instance, its a good idea to discuss how you hope to differentiate yourself from the competition and carve out your niche in the market. This section should be a general introduction that reflects and summarises whats in the rest of the document, so it might be a good idea to write it last.
  2. Business description.
    Here, its necessary to provide a more detailed description of the franchise and detail some of its history. This section is used to inform and convince lenders that the franchise has a history of financial success and can be trusted to deliver on its promises. Consequently, its a good idea to write about historical events that support this perception of the franchise. It will be followed by a brief overview of the products or services the franchise supplies (these will be covered in greater depth later, so dont go too over the top) and similar descriptions of the market in which the franchise operates, as well as your competition.
  3. Product description.
    This section goes into greater detail about the products and services the franchise offers. In some business plans, this will be included in the business description section. However, if you feel that your product or service demands greater attention, it can easily be expanded into its own paragraph. In this part of the plan, you may also want to discuss what you can and cant sell as part of the franchise system. Often, there are restrictions on what products a franchise can offer and what its unable to supply. If your franchise has a monopoly on a particularly popular product, this is where you explain just how big a selling point this is.
  4. Management summary.
    The management summary deals with your business general organisational structure and, more specifically, your management team. It will establish how you want to organise the business, who will occupy key posts and what makes them qualified for the role. Its a good idea to include as much background and employment history as possible for each of your management staff, as lenders will want to know that youve got a capable team around you. However, it's vital to ensure that all the information you include is in some way relevant to their role at the franchise all superfluous background details should be omitted.
  5. Sales and marketing.
    The sales and marketing section deals with the sales and marketing methods youll be using as a franchisee. Most owners of profitable franchises ensure that they retain control over their marketing campaigns and resources. This allows them to carefully nurture the business branding and ensure all franchisees are putting out a unified, coherent message. Because of this, youll need to do your research and request information from your franchisor to ensure that your business plan is accurate. Most of this section will be dedicated to explaining the techniques youll use and detailing where youll advertise, how youll attract new customers and how youll launch your new business.
  6. Financial projections.
    To calculate accurate financial projections for your new franchise unit, youll probably need the help of your franchisor. Together, youll be able to calculate what your projected revenue will be by comparing the financial records of franchise units in similar circumstances. There are a lot of things to consider when youre preparing financial projections and theyre notoriously inaccurate but always remember to take a cautious approach and not make wildly ambitious predictions. A lender is just as likely to frown on unrealistic expectations, as they may indicate a business thats barely profitable.
  7. Financial needs.
    Finally, the financial needs section of the business plan deals with your outgoings and the amount of capital youll require to run the business. Its where youll talk about the issues of royalty fees, marketing fees and other regular expenditures. Most franchise business plans will also require a cash flow statement, profit and loss statement, and balance statement to be included in this section.

Conclusion

The franchise business plan is a vital document that could either make or break your attempt to become a franchisee. Consequently, you need to devote a great deal of time and effort to ensure that it's entirely as it should be. The best franchises to buy are those that help you through every stage of the franchising process, so dont be afraid to request guidance and advice if you feel that you need it. Without financing, youll struggle to get your new business off the ground, so dont underestimate the importance of a well-considered business plan.

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