How to Write a Franchise Business Plan: 10 Solid Steps


Why Is A Franchise Business Plan Vital?

A franchise business plan is a tool that helps you map out your goals and strategies for achieving them. It can give you a clearer picture of what you want to accomplish. The plan also enables you to think about your business from an outsider’s perspective. A good plan highlights your strengths and weaknesses that you may not have noticed before.

The plan acts as a guide to help you understand the issues and opportunities associated with your business. It will help you track your progress, make adjustments and keep your business on course. Beyond the value of planning, the process of writing a business plan can help refine your business idea. It gives you more structure and greater focus. That’s why it is critical that you carefully structure your franchise business plan to cover essential elements of your business success and challenges.

Franchising is an excellent and popular business model to scale and build upon the already successful brand. In Canada, the franchising businesses contributed over 100.6 billion CAD and created 1.9 million jobs by 2019. The numbers are equally high in the US, too, with over 8.43 million jobs and 787.5bn USD of economic output. Some of the world’s most known businesses use the franchising model—companies like Tim Hortons, Shell Canada Ltd, and Canada Bread representing Canada’s top franchising brands.

Suppose you are part of the franchising ecosystem or are looking to become one. In that case, a franchise business plan is a tool you will use to make the business case for owning or franchising your business. A franchise business plan is a clear, concise document that you write for a specific audience. It is different from a general business plan and requires individual attention.

“Going into business without a business plan is like going on a mountain trek without a map or GPS support – you’ll eventually get lost and starve!”

― Kevin J. Donaldson

Elements of A Good Franchise Business Plan

A good franchise business plan is detailed and well-organized. It shows the reader where your business is at, where you want it to go, and what you need to do to get there. It helps you to see the big picture, to consider the main points of your business. But, to create a good business plan, you’ll need to know what makes a good franchise business plan. One of the most important sources of information needed to complete a franchise business plan is the Franchise Disclosure Document (FDD) that is provided by the franchisor. Information contained in the FDD comprises of franchise corporate background, target market description, product/service competitive advantage, marketing strategies, and start-up plus ongoing costs.

Three critical elements indicate the potential of success of your product or service; Desirability, Feasibility, and Viability. Desirability talks about whether customers would want to buy your product or service. The feasibility talks about your capabilities to deliver them. The viability is about whether you will get enough customers, revenues, and profits to make your venture successful. This triangle is a concise and useful tool to create your plan.

Let’s outline a few key elements that help you ensure that you have a good franchise business plan.

Executive Summary

The executive summary is an overview that provides a snapshot of your franchise background, current status, strategies, and goals. It must engage the reader with a compelling, high-level overview of the entire business plan.

Business Overview

The business profile is a one or two-page overview of its general business environment. It includes the different market segments, competitors, strategic advantages, and market opportunities. Investors will also want to see a business profile that details a company’s general business and market environment.

Management Experience & Capabilities

One of the most challenging parts of writing a franchise business plan for most potential franchisee businesses is detailing the team’s management experience. First-time and experienced franchisee owners alike must present a comprehensive and realistic picture of management to the franchisor. This picture provides an insight into the personnel responsible for day-to-day franchise operations and includes a detailed description of the strengths and weaknesses of the management team.

Product Description

Just as you would present yourself in a job interview, you need to put your best foot forward in your product description. Here, you describe the product and/or service your franchise will provide to customers. This element is one of the most critical parts of that plan, so it’s essential to be as professional and thorough as possible. However, do not write an overly technical product description. You intend to sell, not educate.

Marketing Plan

Even if your business plan has a pitch that clarifies what you want to do, your franchise business needs a marketing plan. It should be an extension to the franchisor’s advertising and marketing strategies documented in the FDD.  It provides the answer to the question “How are you going to get customers?” A good marketing plan will help you determine what type of marketing you need to grow your business. A well-written marketing plan is the first step to creating a successful business.

Operations Plan

The operations plan is your written documentation that covers step-by-step processes on how you will run your business. It includes details about your organization structure, infrastructure, and ecosystem. You should also have details about how you plan on improving your operations over time, such as any new initiatives you may be planning.

Breakdown of Expenses

The business plan’s primary purpose is to persuade a banker or investor that you are an acceptable risk. If you are trying to impress a banker or investor, there should be no guessing about your expenses. A well-written breakdown of costs in a business plan is essential. If you are seeking a bank loan, the analysis is often a requirement. Your research should include detailed costs for product, labor, and overhead.

Business Feasibility & Revenue Projections

The Feasibility section is a critical part of any business plan. It is the section where you will show that the franchisee’s idea has merit. Key thing to remember is that franchisors are legally restricted in making specific claims about projected revenues. Therefore, it is good to be conservative with revenue projections given that unforeseen events and delays can happen at any given time.

An apt feasibility section will cover risk assessment, market assessment, marketing strategy, and growth projections of your franchisee business.

Financial Projections

You’ll likely be required to project cash flow for three to five years. You’ll need to base these requirements on achievable goals and reasonable estimates. It depends on your location, the current economy, the customers you’re targeting, and many other factors. Writing financial projections for a franchise business is a vital component of a successful franchise opportunity. Make sure to include charts and graphs showing detailed franchise start-up costs, profit and loss as well as sales projections.

Funding Requirements

Funding requirements are the financial support you require from outside to achieve your business goals. It details how you will obtain the entire capital investment. More often than not, you will find that lenders will not fund the whole franchise investment. A mix of personal savings and a line of credit will be needed to kick-start the franchise business. Your objective should be to get at least a couple of years’ runway for your franchise. Always provide a reasonable timeline to the lender for the loan repayment in full and use figures to back up your claims.

Challenges in Creating a Good Franchise Business Plan

Getting started

Not being aware of the elements of good business plans and how to structure and present those elements adds to procrastination. The next problem is the amount of time and effort that goes into creating a franchisee business plan. Creating a good franchisee business plan can be a challenge for several reasons. Given the importance, many entrepreneurs take inordinate time even to get started.

Making the plan detailed yet concise

The key to a successful franchisee business plan is to present a detailed yet readable analysis of your franchise opportunity. While you might want to include detailed information, it might be hard for your readers to read the plan entirely if it’s too long.

Ensuring accurate & realistic representation of financial projects, expenditure plans, and growth potential

The most important single element in your franchisee business plan is your financial projections. These should be based on thorough research and should be prepared by a professional if possible.

Inadequate research on business & competitive environment

If the research is inaccurate or inadequate, the inferences you draw can be erroneous. It can force you to adopt incorrect assumptions that may create challenges moving forward. Such insufficient research can also create negative impressions for lenders and investors.

To Sum Up

When potential franchisees create their business plan, they need to remember that it is a plan, not a winning lottery ticket. It is a tool to help a franchisee make the right decisions about their business, not guarantee a successful business. A few things can help franchisees create a good business plan that achieves the objectives. An expert’s guidance can be most valuable. Hiring a professional consultant can also be a good idea. They can bring a team of experts and specialists to ensure that you have an excellent franchise business plan. An experienced consultant can help you only create an ideal plan and give ideas to make your franchisee business strategy more robust. These ideas, in turn, increase your chances of success.  At Vaisus, we create great business plans that outline realistic goals, to help you navigate your business fo the next three to five years. We make sure that everyone is on the same page. Contact us TODAY!