Opening a franchise can be an exciting way to get into business for yourself while leveraging an established brand. However, like any business, having a solid plan is critical to giving your franchise the best chance at success. Here are some tips on how to build an effective business plan as you embark on your franchise journey.
Research the Franchise Thoroughly
Before writing your business plan, be sure you have thoroughly researched the franchise you intend to pursue. Get detailed information on:
The Initial Franchise Investment
Understand precisely what is included in the initial franchise fee and any additional costs needed to open the doors. Know the estimated total investment to determine if it aligns with your budget.
Ongoing Royalty Fees
In addition to the upfront costs, most franchises charge ongoing royalty and marketing fees. Get precise data on these fees so you can accurately project your profitability.
An advantage of opening a franchise is leveraging the systems and support of the franchisor. Understand exactly what type of initial and ongoing training, field support, and other assistance the franchisor provides.
Researching these key areas will give you the information needed to determine if the franchise investment makes sense for your goals.
Create Detailed Financial Projections
The financials are one of the most critical sections of your franchise business plan. This includes detailed projections on costs and revenue to determine potential profitability and return on investment.
When putting together your projections, be sure to:
Use Verifiable Assumptions
Any assumptions about sales, expenses, or other financial metrics should be verifiable. For example, you can talk to existing franchisees to get real-world data on revenues and operating costs.
Project Monthly Cash Flow
Look beyond profitability and project monthly cash flow for the first few years. This will give you greater visibility into how much operating capital you’ll need.
Run Best and Worst Case Scenarios
Create projections for your base case scenario and best and worst case scenarios. This will help you understand the sensitivity of your projections to changes in key assumptions.
Having detailed, reality-based financial projections will be critical for determining if the franchise opportunity makes economic sense. It will also help when it comes to securing financing.
Outline Operational Plans
In addition to the financial overview, your franchise business plan also needs to outline operational plans, including:
If site selection is part of the initial franchise process, detail the analysis process you will use for selecting the optimal location. Factors like visibility, accessibility, neighbourhood demographics, and local competition should be considered.
Understand the specifications and requirements to build out and equip your franchise location. Outline expected timelines and costs so this significant investment is appropriately budgeted for.
Hiring & Training Plans
Staffing and training your team is no small task. Describe your plans for hiring, including staffing needs, compensation, and recruiting tactics. Also, outline the training regimen for bringing your staff up to speed before opening day.
Opening & Marketing Promotions
Finally, you will use detailed tactics like local paid advertising, direct mail campaigns, and grand opening promotions to generate buzz and customer awareness when opening your franchise.
Having this operational strategy mapped out demonstrates you understand everything involved in getting the business up and running.
Manage Ongoing Compliance & Regulations
In addition to standard business compliance issues like licenses and permits, franchises have additional compliance considerations. Your plan should:
Outline Franchisor Requirements
Detail any compliance requirements like training certification, annual conventions, minimum hours, standard operating procedures, and brand standards you must adhere to as a franchisee.
Manage Industry Regulations
If you are opening a regulated business like food service, childcare, or healthcare, describe how you will comply with local and state regulations.
Demonstrating a strategy for managing legal and regulatory franchise obligations is critical for success.
Assemble an Advisory Team
As an entrepreneur, trying and tackling everything yourself can be tempting. However, a critical success strategy is assembling an advisory team that includes:
Have a lawyer who specializes in franchising review your franchise agreement and help look out for your best interests.
Work with an accountant experienced with franchises to help you understand the tax implications and optimize financial management.
Reach out to the franchisor and other franchisees about forming an informal advisory board you can turn to for advice on getting your franchise off the ground.
Don’t go it alone! This expertise and mentorship in your corner reduces risk and saves costly mistakes.
Writing a comprehensive business plan takes time but is a beneficial exercise for thinking through if a franchise aligns with your goals and developing the roadmap for giving it the best shot at working out successfully. Leveraging an established franchise’s brand recognition and systems can be a more effective pathway to owning your own business rather than starting from scratch. You can set yourself up for franchise success with thorough planning and preparation!