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Write a Franchise Business Plan

By: Dave Howell - Updated: 11 Oct 2012 | comments*Discuss
Franchise Franchise Opportunities

The franchise business model may give you an almost off-the-shelf enterprise to run, but this doesn’t mean you can avoid writing a detailed business plan.

You may of course need your business plan to convince your bank or other financial backer that your franchise opportunity is worth their investment, but a business plan is much more than this.

Franchise opportunities offer you a ready-made business, but have you thought through how you will operate this on a day-to-day basis? What about your cash flow and how would you react if your franchise suddenly had a crisis? These questions can be answered by your business plan.

How to write a business plan

The franchise opportunity you have identified now needs to be planned in detail. The franchise handbook may give you details about the mechanics of how your franchise operates, but it doesn’t offer any guidance on how to run the franchise as a business. This is where your business plan comes into play. A business plan can deliver:

  • Financial forecasts that can show you at a glance if the franchise opportunity you are pursuing is actually making the profits you have projected.
  • A roadmap for each of the components of your business from marketing to customer service. Your business plan is your guide to how you intended to develop each of the components that constitute your new franchise business.
  • Clearly defined unique selling points that can be used to market your franchise. You may have been drawn to the franchise opportunity as it seemed to have a unique selling point you can market, but your plan will show you how to turn that perception into a profitable reality.
  • Contingency plans. All franchise opportunities come with a risk. Your business plan can help you develop strategies to deal with any crisis when it occurs.

Business plans step-by-step

The franchise opportunity you have identified now needs to be supported with hard facts, or at least well researched educated guesses about market share, customer spending, profitability and investment potential. All these factors need to be brought together into your business plan and should clearly describe the franchise opportunity you want to develop into a successful business. Follow the steps below to create a business plan to help you develop and operate your franchise.

Step 1: Know your market
Without a market and therefore customers, even the best franchise opportunity will not be able to earn you a living. Taking some time to research the market your franchise will be selling to will reveal if the market the franchise perceives to be there is actually a reality and has the money to spend on your franchise’s goods or services.

Step 2: Costs and profit
One of the most complex components of a business plan to write are the financial pages. Some of the figures you will already have including the cost of the franchise license and the amount of royalty you have to pay to the franchisor and when. From these basic figures you can then build the other financial projects around them. From the cost of equipment to advertising, look at every possible cost - fixed and variable - that will impact on the profit of your franchise. Once these financial projections are complete, you can assess whether the franchise opportunity is as goods as you initially thought.

Step 3: Future and contingency
The franchise opportunity you want to explore can mean navigating some very unexpected waters as you not only learn about the franchise itself, but also what it means to run a small business for the first time. No business owner/manager knows what is around the corner, but this doesn’t mean you are powerless.

In this section of your business plan, try and think about what could stop your franchise operating profitably. Everything from natural disasters to interest rate shifts could all have an impact on the profitability and the long term longevity of your franchise business. The more detailed your plans are about the possible crisis that could occur in your business sector, location or market the better you will be able to cope if these events actually occur.

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