Franchise business plan

What is a business plan? A business plan is a blueprint for how you wish to run your business. It is also used to secure funding from a bank for buying your franchise and should outline how you would use the money and importantly for the bank, how you would pay it back.

Preparing your franchise business plan will help you to clarify your ideas and define your long term objectives. You should be realistic in what you write and make sure that you highlight future plans as well as current ones.

It is a very important document and so it is vital that you get ALL what you want to say across in the plan accurately and concisely.

What’s in a business plan?

All business plans will vary according to the franchise you are buying but will usually cover the same areas. Your franchisor will help you to prepare it but should not write it for you as it is your business plan and only you know how you wish to run the business.

Your business plan should include:

1. Executive summary
Though your executive summary should be the last page you write as it is a summary of your business proposal, it should be the first page of the plan. Some banks or investors will make a provisional judgement on whether to lend to you on the basis of your executive summary and so it is vital you take time to write it and get others to read it for you to make sure everything is explained properly. You should keep in mind that not everyone will know about your franchise business and so you need to outline this clearly in the executive summary.

It should cover:

    • About the franchise and the franchisor
    • What the product or service is that you would be selling and the USP’s it has over competitors
    • The opportunity that exists in the market for your business
    • Who you are and what experience you have
    • Who your management team are and their experiences
    • Your financial projections
    • What funding you require

2. Your business
In this section you should outline information on the franchise you are buying into and what the product or service is you are selling.

It should cover:

    • What the franchise business is, how long it has been established, history of the business and the franchisor and plans for future growth
    • Who you and any other owners of your franchise are, including your experiences to date
    • What the product or service is you are selling
    • What USPs you have over competitors
    • What the longevity of the franchise business is and how the business can be adapted to meet changes in the market and satisfy customer’s needs
    • What disadvantages or weaknesses the business has and how you/the franchisor plans to overcome these.

3. Market and competition
In this section you should highlight who your target market is and provide information on the competition that exists. You need to identify that there is a viable market for your franchise business and why you stand out from your competitors.

Include details of market research you have undertaken and the source of any stats you have used.

It should cover:

    • Who your target market is i.e. potential customers, and what their characteristics are
    • The size of the market and if it is growing, declining or stable
    • How your product or service will meet the specific needs of customers
    • What the strengths of the market are and any opportunities that exist
    • Any weaknesses or threats and how you/the franchisor plans to overcome or adapt to these
    • Information on the franchisor’s current market share
    • If there are any franchisees operating in a similar market then you can include information on how well they are doing in their market
    • List any customers or sales the franchisor has lined up for you
    • If a franchise resale, detail existing customers and potential for attracting new business
    • List your competitors and their advantages and disadvantages compared to your business
    • What USPs you have over your competitors and how you plan to acquire some of their share of the market

4. Sales and marketing
In this section you will highlight how you plan to promote your service/product to your target market.

It should cover:

    • How you plan to position your product/service in the your target market compared to competitors e.g. price point, quality of product/service, customer service
    • The marketing the franchisor does to promote your product/service nationally and what impact that has on your local market
    • The brand awareness your product/service currently has
    • How you plan to market your product/service to your local market
    • How you will sell your product/service to your local market
    • What your monthly sales projections are
    • What repeat business if any you plan to achieve
    • Any customers you have lined up to buy your product/service
    • How you will continue to identify and attract potential new customers

5. Management
In this section you need to include details of the management structure of the franchise business.

It should cover:

    • Who the franchisor is and their background and experiences
    • What experience and skills you have for running your franchise business (and also those of any other owner)
    • What your strengths and weaknesses are
    • How much commitment, time and money, you are putting into the business
    • What your salary and other benefits will be
    • Who your management is and what their roles are
    • How you plan to cover sales, marketing, bookkeeping, administration, IT etc
    • Any management reporting systems the franchisor will include
    • The support you will receive from the franchisor

6. Operations
In this section you need to outline the facilities you have.

It should cover:

    • The location of your franchise and what the pros and cons of the location are
    • What facilities you require to start your franchise business
    • How many staff members you will require and what the individual roles are
    • What suppliers you will use and why the franchisor selected them
    • How quickly will your business be up and running
    • What your monthly sales will be
    • What your average sales value will be
    • How long it will take to convert any lead received
    • The potential for repeat business
    • How you intend to collect payments and what payment terms are
    • When you foresee breaking even

7. Financial forecasts
In this section you should put what you have said about your new franchise into numbers. Your franchisor will be able to help you with this as will the bank you are seeking funding from. You may also seek the help of a franchise accountant.

It should cover:

    • What your realistic sales forecast figures are
    • What your cashflow is i.e. what is coming in and going out on a monthly basis. You need to show that your business has money to survive.
    • When you will be cash positive i.e. when you will have more money coming in than out
    • A profit and loss forecast for the first two or three years of trading.
    • What your key assumptions are

8. Financial requirements
In this section you should outline how much money the business needs to borrow.

It should cover:

    • How much finance you would be looking to borrow and the type of loan you would be interested in
    • What the finance will be used for
    • How much you will be investing
    • How you plan to repay the loan

9. Risk assessment
In this section you should highlight any potential risks to the business. This should allow the bank to see that you understand the business and give them confidence that you have all areas covered.

It should cover:

    • The areas in which something could go wrong i.e. provide some “what-if” scenarios
    • What you would do if it did go wrong
    • What help you would receive from the franchisor
    • The contingency funding you may need

10. Appendices
In this section you should include:

    • Financial forecasts – monthly sales, monthly cashflow, P&L)
    • List of assumptions – profit margins, debtor and creditor payment periods, interest and exchange rates etc
    • A copy of the franchise prospectus
    • CVs of key personnel
    • Your market research data
    • Product literature or technical specs
    • Names of target customers
    • External data sources

Notes on presenting your plan

    • Do not assume that everyone will have the same knowledge of the business as you do; make sure you cover all areas of the business.
    • Keep the business plan concise; only include information that is relevant to the reader. Any detailed information should be included as an appendix.
    • Make it look professional; add a cover and also a contents page, as well as making sure that you number each page.
    • Make sure that you re-read the plan and ask your franchisor to read it as well as family and friends. Ask them for any feedback/comments.