Franchising 101

Plan for Success

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In the process of building and financing your franchise, a business plan is a crucial step. By laying out the goals of your franchise in a step-by-step manner, you can envision the exact methods and processes through which you will succeed. Most importantly, it will give the banks, investors, and lenders an idea of the scope and specifications of your project, so they’ll feel more comfortable providing their support. The idea of creating a business plan may seem overwhelming to someone who has never created one before, but Rick Chittley-Young, Partner at BDO Canada LLP, has set out a handy set of tips to help you decide what to include in your plan.

Start with a franchise summary

A business plan must begin with a summary of the franchise you intend to purchase, and your overall vision for how this franchise will find success. The introduction to the business plan should also contain essential background information on the franchisor, including their track record, their other franchisees, and their products and services – basically, a company profile. The introduction should also include an appraisal of the general market that this franchise will be catering toward.

In the body of the business plan, start by describing yourself and your strengths and experiences as a manager, as well as any other people in management positions whom you intend to hire. This is especially crucial, as the quality of management can ultimately make or break a franchise.

Analyze the competition

Next, you should elaborate on what makes your products or services stand out from the competitors. What specific features or benefits do your products or services contain? What makes your franchise unique, what sort of niche does it embody, and what will make it especially marketable and profitable? Inspire confidence by explaining how you expect to meet sales and revenue targets, and how your products or services will be delivered to the customer.

Outline marketing and operations plans

The marketing section, which comes next, describes the state of the market sector, including the competition and the market trajectory. This section can include how you plan to use your strengths and overcome your weaknesses. It should also mention potential threats and opportunities the franchise will face, and how the franchise will capitalize on the opportunities and reduce the threats. This section may also elaborate on the demographics and characteristics of the customer base, the expected market share, and the overall marketing strategy. This section will necessitate a considerable degree of market research in order to grasp the overall situation in your franchise sector. You can also discuss your pricing strategy here.

Next comes the operations section, which explains the business principles and outlines the logistics, such as location, property, facilities, leases, employees, insurance, technology, equipment, and suppliers. This paints an overall picture of how exactly the products or services will be produced.

Set financial goals

Finally, the financial section concerns how the franchise is expected to perform financially, and clarifies your own personal financial situation. This section should ideally include the monthly budget and cash flow projections for the first two years in which the franchise will be operational. While completing the financial analysis, it’s advantageous to show personal financial statements that outline your net worth. The cash flow projections are particularly important, since they put a monetary amount to the expectations that people will have for your franchise. This clarification helps investors visualize the expected scope of success, and will allow them to realistically appraise their investment in your business model.

In addition to outlining your goals and the process through which they will be achieved, a business plan may also contain background information on your company. It should contain explanations of why the company will be profitable, in addition to the main focus on how it will happen.

A business plan should establish the existence of a market for your products and services, demonstrate the capability of you and your management team, prove that you have the adequate financial and physical resources, identify obstacles and how you will face them, and establish a general timeline and plan for the franchise, including contingency plans.

Determine your audience

A business plan can be directed toward different audiences. It can be internally focused, directed toward people within the company, or externally focused, addressing the concerns of external stakeholders, such as investors, customers, clients, lenders, and donors. The plan often encompasses a timeframe of three to five years.

The plan can be presented on paper, electronically (through PowerPoint, for instance), orally, or through a mix of any of these formats.

One of the main purposes of a business plan is to help the business owner, as well as the clients, stakeholders, and partners, visualize the direction in which the franchise is headed. Business plans also help reassure the banks, lenders, and investors about the soundness of your franchise. Without a solid business plan, much of your PR may be less convincing, and it may be more difficult to secure donations.

Last helpful hints

Business plans are meant to be written in simple terms, avoiding overly technical jargon. Assume that the reader is unfamiliar with the more specific technicalities of your franchise, and treat the business plan as a sales document.

A shortened and condensed version of a business plan is called an “elevator pitch.” This can be used to complement a larger business plan, although by no means is it a substitute for one. The elevator pitch is short, succinct, and to the point. It is called an elevator pitch because it is meant to be short enough that someone could pitch it during a typical elevator ride to an office floor.

While following the above steps will give you an idea of what to put in your business plan, ultimately every business is different, as is every business owner, so you should feel free to inject your own personal flair, to give your investors a better idea about what you and your franchise represent.

Embracing the business plan format and using it to promote and elaborate on your business model can help reassure your investors, partners, and clients about the soundness of your strategy and your confidence in your franchise.