Creating a Business Plan for Your Franchise

Acquiring a franchise business has an added advantage because franchises have a higher success rate than start-ups. However, creating a business plan is the initial first step for entrepreneurs who want to venture into a new market franchise. A well-developed franchise business plan enables business owners to convince other investors and lenders to give them the capital needed to materialize their franchise dreams. It allows lenders to critically evaluate whether the prospective franchisee will be successful or not and offers a straightforward account of the prospective business, the leaders involved, and the likelihood of getting their money back before approving any loans to the franchisee.

The creation of a business plan is simple. Although a standardized length of a business plan does not exist, lenders prefer a concise and precise presentation, covering all the aspects of the prospective franchisee.

A typical business plan is comprised of the following sections:

i. Business Description

This section provides necessary information about the prospective franchise, including its history. It also includes a brief description of the products and services the company will offer.

ii. Market Analysis

This section includes a comprehensive analysis of the specific location where the business will operate from, target customer demographics, direct competitors, potential risks, and how the business owner will mitigate the identified threats to ensure the company thrives.

iii. Management Structure

This section offers a detailed company management structure and business core values. It specifies the positions responsible for the daily management of business operations, their qualifications, and salaries and benefits they will receive. Besides, the section specifies whether the franchise will be a sole proprietorship or run by multiple owners.

iv. Marketing Plan

A new business succeeds when it employs the right strategies to reach potential customers and convert them into real customers. This section provides an overview of how the franchisor will advertise and market the prospective business. It also includes a description of the training the business owner will complete before setting up the business.

v. Financial Projections

It requires a significant amount of money to get any business off the ground, and the franchise is not an exception. In this section, the franchisor should give the lender all the details about the financial situation at hand, including how to obtain the whole initial investment capital. However, a lender may not finance all the franchise investment.

Besides the funding request, a franchisor needs to indicate a reasonable time frame when the lenders will receive their money in full, supported by actual figures detailing the start-up costs, expected profit or loss, and projected sales.

vi. Appendix

The appendix is not a part of the business plan but an additional section that includes items that improve its presentation. It can include items such as management figures, media clippings, and tax returns, among others.

Although an exact formula for developing a business plan does not exist, the listed vital elements are essential. When buying into a franchise, a business plan serves to document how and why it will succeed.