Although a business plan for a new franchise should be similar to that of any other business start-up, certain parts of the plan are particularly important to get right when attempting to obtain funding for a franchise from a financial institution.
The business plan should include a full explanation of the product or service being offered by the franchise, why customers would choose it rather than a competitor’s offering and describe plans to ensure that the product or service remains competitive as the franchise develops.
Probably the main reason for choosing a franchised business is to make use of the franchise’s existing brand, in order to facilitate rapid growth within the market sector. The franchise brand will largely define the position, in relation to perceived value and image of the product or service within the market and thus influence the marketing methods used to increase the franchise’s turnover.
If a lender has received adverse reports regarding a particular franchisor, then you are unlikely to be offered a loan that encourages you to build a working relationship with the franchisor. In your business plan, you should include as much information as possible about the franchisor’s strategy, business systems and future plans. Details regarding the division of initial and continuing franchise fees between franchisor and franchisee should also be included, together with cash flow projections and other financial data relating to the proposed franchise operation. A credible franchisor will be able to provide the prospective franchisee with much of the information required for this part of the business plan.
What the potential franchisee really has to do is create a business plan that will persuade the bank that the chosen franchise is the right business proposition for the franchisee’s particular circumstances and skill set. For example, operating a fast food restaurant is very different from running a franchised financial services consultancy.
A business plan for a new franchise is broadly similar to the type of plan required for a traditional business start-up, but some specific issues need to be addressed;
use of the franchise’s branding has a major impact on the kind of marketing plan that is required;
the credibility of the franchisor will exert a major influence on a financial institution’s decision as to whether to lend money to a new franchisee.