Franchise Model Business Plan

The good news is that a lot of the legwork will have already been done
for you by the franchisor versus developing a business plan for a startup
from scratch. Most of the financial information you will need can be
found in the franchisor’s Franchise Disclosure Document (FDD). But
there is still work to be done.
There are a variety of templates available for developing a business plan,
but here we outline the top six sections that should be included:
1. Executive Summary
The Executive Summary portion of your franchise business plan should
describe your business’s purpose and goals. Begin with a short
description of your product or service and list your objectives. How are
you fulfilling a hole within the marketplace? What is the growth
potential? Outline how your business will succeed and achieve its goals
given the market and competition.
2. Business Description
The next part of your business plan will be a thorough description of the
franchise business. Item 1 of the FDD provides an overview and history
of the franchise. A rundown of the products and/or services offered, an
overview of the market and competition, an explanation of the
operations process for delivering goods to the consumer, and a summary
of the risks and challenges should also be included in this section.
3. Management Summary
The next part of your franchise business plan should include a listing of
the key members of your management team who will be an integral part
of the day-to-day operations. Include as much background information
and prior experience as possible for each member focusing on items
most relevant to the franchise business.
4. Sales and Marketing
In franchising, sales and marketing tactics are largely dictated by the
franchisor. You will need to research their process for targeting new
customers and include an explanation of the marketing and advertising
support offered to you by the franchisor.
How will they get the word out about your new location? What types of
ongoing advertising campaigns do they provide? Talk to the franchisor
about how much leeway individual franchisees have in local marketing
and advertising and include a plan for your specific unit to show how
you will drive customers to your business.
5. Financial Projections
Item 19 of the FDD outlines the financial performance of both
franchised and franchisor-owned units but keep in mind that profitability
can vary from unit to unit.
Many variables go into predicting profits for an individual franchise
location including geography, sales volume, and management. Look to
the franchisor to help guide you based on similar units and talk to other
franchisees. Remember, it’s better to err on the conservative side when
making financial projections.
6. Financial Needs
Your financial plan should include three key items: a profit and loss
statement (P&L), a balance sheet, and a cash flow statement. A lot of the
information you need for this section can also be found in the FDD
including Items 5-7 which lists startup costs and estimated initial
investment.
It's important to research any ongoing fees and royalties that may be
required of you as well and ask the franchisor about any other costs that
could arise during your first year of operation.
There is no exact formula for developing your franchise business plan
but these key elements are fundamental. Remember that your business
plan is essentially a sales document and should demonstrate how and
why your business will be successful.
Creating a Business Plan for Your Franchise:
Creating a business plan doesn't have to be complicated.
There is no standardized length for a business plan, but no lender wants
to read a novel-length presentation. The main thing is that the plan is
thorough enough to cover all aspects of your franchise. You want to give
the lender confidence that you are prepared to take on the managing of a
business that will turn a profit in a reasonable amount of time.

The key is compiling the proper information to address the reservations

of the lenders you will meet with. This is where opening a franchised
business offers a notable advantage over an independent business.
The Franchise Disclosure Document (FDD) provided by the franchisor
of the system you are investing in contains a great deal of the
information needed to complete a business plan.
This information includes the company’s corporate background, a
description of the target market, the competitive advantage of the
product/service, marketing initiatives, plus the start-up and ongoing
costs. Some franchisors even offer assistance to franchisees in the
preparation of the plan.
Common parts of a business plan include the following; according to the
Small Business Administration (a sample business plan is located at the
end of this article):
Company description: A good place to look for the information for this
section is Item 1 of the FDD. Provide an overview of the franchise and
its history to the lender. You will also provide a brief outline of the
franchise’s service/product (more detailed information will be given in
the next section).
Service/product description: Describe in detail the service and/or
product your franchise will provide to customers. This section can be
combined with the company description. Again, Item 1 of the FDD is
where you will find much of the information you need for this section.
Item 16 will also help discuss what you will and will not be able to sell
as a franchisee of a particular franchise system.

Market analysis: Use this section to prove to the potential lender that
you are not jumping into a business venture on a whim. Concentrate on
the specific area (market) in which the franchised business will be
located. The territory described in the FDD will help you to a point.
Franchise Business Plan
Management structure: This section provides a look at the people who
will be responsible for the day-to-day operation of the franchise,
particularly you as the owner.
Is this venture going to be a sole proprietorship or will there be multiple
owners? Explain if you will be involved day-to-day with business
operations, or will be acting as an absentee owner.

For yourself and all of the others with an ownership stake, if applicable,
detail all business qualifications.
Marketing plan: 'How are you going to get customers?' is the main
question you’re answering in this section. Use FDD Item 11 to your
advantage here. It provides an overview of the franchisor’s an
advertising and marketing efforts. Also, it describes the training you will
complete before opening. Often marketing and sales courses are part of
required training.
Financials: This is the meat of your business plan. In this section, don’t
only ask for the money you need. Give the lender the big picture of your
financial situation as well. Detail how you are going to obtain the entire
initial investment. Oftentimes, a lender will not be financing all of the
franchise investment. Are you using a mix of personal savings, loans,
credit, etc.?
In addition to the funding request, you will be doing some financial
projections. Give a reasonable time frame when the lender can expect
full repayment of the loan, and back up that claim with figures. Include
graphs and charts detailing the start-up costs, projected profit and loss,
and projected sales forecast for the franchise.
The franchisor can be of significant help to you in completing this
section (via Items 5 and 19 of the FDD, and in direct conversation).
However, keep in mind the franchisor is restricted legally about making
certain claims about projected earnings.
Be conservative with the projections as unexpected delays and
unforeseen circumstances do happen.
Appendix: The appendix technically isn’t a part of the business plan, but
an additional section to present items that would enhance your
presentation.
Include items you feel would be necessary to giving the lender a
complete picture of you and the franchise you are seeking financing for.
Examples include the resumes of management figures, tax returns,
media clippings, etc.

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