How to make a franchise business plan

If you decided that franchising is the right investment for you, finally, it is the moment of truth. It is nice to have a business in mind and start the venture right away, but before anything else, evaluate first your financial capability in terms of capital investment and miscellaneous expenses.

Therefore, the next thing you need to focus on after the big decision is financing or securing the funds required to materialize the franchise.

Where to get funds?

Unless you have enough money saved to cover initial costs, an alternate option is to seek the help of a lender so you can get enough starting capital. It does not necessarily mean that the whole amount must come from a loan; all you need to fulfill first is the remaining amount.

Consider the difference between the amount of money you currently have to invest and the amount of money needed to open and maintain the business until you reach the breakeven or the point when the business is already making a profit.

The breakeven point is not apparent until you have reached a specific time frame where your profit is already measurable. To set your expectations, this may take a year or more, depending on the franchise.

The Role of Business Plan

When taking a loan, you need to convince lenders why should they let you borrow a capital. This is exactly why you need a business plan. This plan helps lenders in assessing the borrower and the business if it is profitable in the future or not.

There is a higher chance of loan approval if you have a clear business concept and a course of payment that presents a win-win situation between both parties.

Set a meeting with the lender and present the plan. Do thorough research about the business to back up claims for the desired result.

Business Plan Is Not Just For Money

Yes, the plan is not intended only to get the funding. Instead, it forces you to take the investment seriously and to anticipate the challenges that may happen during the business opening. In other words, it sets your expectations right.

Moreover, as you leverage in franchise ownership, your business plan should always be used as a guide in helping you reach the set franchise goals from the beginning.

The business plan is the first step in the franchising journey but you must not rely solely on this alone. Still, hard work and perseverance determine your commitment to running the business with all your heart and focus.

The Business Plan

The golden rule: A business plan does not need to be complicated.

You do not need to follow a format or make another version of your undergraduate thesis for this. All you need is a plan that is understandable and has covered most aspects of the franchise.

Give the lender the impression that you are ready and capable enough to manage a business and make it profitable in a certain amount of time.

Common Parts of a Business Plan 

Here are the following parts of a business plan.

Company description

This is usually on the first item of the plan. It provides a franchise overview for reference to the lender. It is nice if you will provide a brief outline of the service or product.

Service or product description

This part gives the overall details of the service or product provided to customers. You must elaborate well on this part so you won’t confuse the lender with the nature of the business.

Market analysis

This section is intended to prove your potential lender that your decision is not an impulse to enter the franchise industry. Be more specific in the market where the business will be located. You can also use the territory description to make a point.

Specifically, discuss and elaborate on the following:

  • How big is your market?
  • What are the demographics of the market?
  • Is the market a good target concerning the service or product?
  • Who are your competitors, and what is your competitive advantage?
  • Discuss the experts’ forecasts about the service or product? Specifically, in trends of the specific market.

Management structure

This section should provide information about the responsible people in the company. Moreover, this section must lay your plan for the day-to-day operation of the franchise. What type of ownership are you planning to have?

Also, explain your involvement in daily business operations. It is important to note if you will be acting as an absentee owner. Give all the business qualifications and state all your experiences that are relevant to being a successful business owner.

Marketing plan

This section provides an overview of the franchisor’s advertising and marketing efforts. Also, this includes all relevant training to undergo before starting the business, including marketing and sales courses.

Financials

It is the core of the business plan. Do not only ask for money. Paint a picture of your situation to the lender. State how are you going to fulfill the initial investment. It is important that you tell this part because lenders will not be financing all of the franchise investment. You must state if you are also using savings or just pure loans.

Also, make a financial projection. Give a reasonable time frame to pay your loan based on the amount borrowed that may or not include the start-up costs, projected profit and loss, and projected sales forecast.

If you have difficulty doing this part, ask help from your franchisor. Yet, do not overdo your estimates and projections to prevent any unexpected problems.

Appendix

This is not really necessary but could still help enhance the information on your presentation. Attach items that you deem necessary to giving the lender a complete idea of you and the franchise that needs the funds.

As previously mentioned, the best outside source of information to complete your business plan is the franchisor. No other outlet is going to know the franchise system better than the owner.

You can also use additional resources such as online sites and websites that offer site visitors a substantial library of sample plans to review. If ever, any prospective franchisees can also hire a professional business plan writer to do the job.

Tips For a Business Plan

Here are some useful tips you can use when making the business plan.

  • Compile the proper information to address the reservation of the lender you will meet with. It is at this point that a franchised business offers an advantage over an independent business.
  • Make sure that the franchise disclosure document (FDD) from the franchisor contains the necessary information needed to complete a business plan.
  • Always include the company’s background, a description of the target market, the competitive advantage of the product or service, the planned marketing initiatives, and the start-up plus ongoing costs.
  • Be mindful of the pitfalls. Although it is alright to disclose some possible obstacles along the way, you can always opt to minimize its presence in the plan. Use a more positive way of positioning this idea as this can impact the plan.
  • Grammar is life-saver. Make sure that your work is error-free and grammatically correct before passing it to the possible lender. A concise and well-done work gives a more professional impression towards you.

Conclusion

In the end, a business plan is a great tool not just for educating you but in securing the fund you need for the business. 

It compiles all the necessary details about your ideal franchise business, the market advantage and competitive edge over other brands, the thorough market analysis plus strategies employed in the daily operations, and lastly, the managerial roles of the franchisee through the help of the franchisor.

As mentioned above, this plan does not need to be grand and complicated. The simpler the better. Having a brief but well-detailed franchise plan gives you an edge in earning the lender’s loan approval. That must be your main goal when making this plan.

There is no doubt that starting a business is not easy. Unless you have are financially stable to support the investment, it is impossible to realize a business without the help of other financial institutions.

Save as much as you can, but if what you have is not enough, do not hesitate to take the risk. It is part of your franchising journey. It is the exact same reason why you must make the business grow in the long run. After all, your profit dictates how well the business is thriving in the economy.

Are you all set in making your first business plan? If yes, then cheers! Congratulations on making the best decision of your life. Educate yourself as well with the common questions you must ask a franchisor to fuel your franchising journey.

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Let us make your franchising journey a success, one step at a time.

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