How to Create a Franchise Business Plan

What Should a Franchise Business Plan Include?

A business plan is a document that outlines the goals, strategies, and operational plans of a business. In short, it is a roadmap to success. Not only is it an essential tool for an aspiring business owner to get started, but it serves as a benchmark for measuring progress and making adjustments as needed down the road.  

If you are planning to purchase a franchise, creating a thorough and effective business plan is essential to your success. Not only will it help you prepare for what lies ahead, but it is also a requirement if you are looking to secure financing. In fact, a well-written business plan can make the difference in whether a lending company approves your loan.    

Information You Need to Write a Compelling Business Plan  

A business plan is not something you can just jot down in a few minutes. Rather, you will need to spend intentional time compiling information and developing a strategy that will form the blueprint of your business. 

Here are several items you should consider including in your franchise business plan: 

  • Relevant work experience
  • Insights from existing franchisees 
  • Statistics within the industry 
  • Current industry news 
  • Updated data related to local economy 
  • Local marketing tactics  
  • Franchise Disclosure Document (FDD) 
  • Additional franchisor literature 
  • Necessary permits and licenses 
  • Market area map that includes all current and potential competitors

What Should Be Included in a Franchise Business Plan? 

Clearly, forming a business plan requires a diligent effort. However, if you are looking to own a franchise business, you won’t need to start from scratch since the franchisor has already compiled much of the information you will need. While you still need to work hard to put together a solid business plan, there are several templates available for guidance. No matter which template you choose, your business plan should include the following sections: 

Executive Summary 

This section will provide a mission statement for the business and then explain how your business will achieve its goals. Someone should be able to read the executive summary and know the purpose of your business and the potential it has in its given market. 

Business Description

The information provided here should be thorough. Fortunately, Item 1 in the Franchise Disclosure Document (FDD) will give an overview and history of the franchise you are seeking to buy. Furthermore, you should include details related to products and services, market and competition, business operations, and the potential challenges your business might face. 

Operations & Management Summary

This section will explain how things will get done in the business. It should outline the structure of the management team and include specific instructions related to the day-to-day operations of the business. Team members should be able to refer to the operations part of the business plan as they aim to implement the business’s strategies. 

Market & Industry Analysis

You will need to provide an analysis on the market that you are entering, which includes: 

  • A description of the marketplace
  • What your competitors are doing
  • Details that support your specific business strategy

Furthermore, you should also understand the industry along with its risks and opportunities, so that you can build strategies that take advantage of the opportunities while mitigating potential risks.

Competitive Analysis

You shouldn’t start a franchise business with your blinders on. It’s important to know what your competitors are doing and how they are performing. Evaluating your competitors is a way to validate the predictions you have for your business’s performance. By this point, you have probably already gathered all the information you need about your competitors. Ensure that you perform a thorough analysis of this information as it will guide you in your business decisions.  

Marketing & Sales Plan

What you include here is dependent on which franchisor you work with since you are obligated to use their sales and marketing tactics. You will want to know the process for targeting new customers and how much flexibility you have to implement your own marketing strategies. You should also provide specific information related to the initial marketing plan and what the ongoing marketing strategy will look like. Finally, it’s important to explain how the franchisor will support you in these efforts.

Financial Plan

This section should thoroughly outline the financial details of your business: where it has been, where it currently is, and where it’s going. The data will include: 

  • Business costs 
  • Current funding for the business 
  • Expected future financial needs  

While the actual financial performance of each franchise unit will vary, the Franchise Disclosure Document (FDD) provides information that is helpful for making financial projections. 

  • Item 19 includes the financial performance representations (FPR) for a prospective franchisee 
  • Items 5-7 have helpful financial information related to the initial fees and investment needed

Speaking with existing franchisees is also an integral part of this process. 

Pro forma is another part of the financial section, and it includes projections of future expenses and revenues, which you can corroborate with the following business information:  

  • Balance sheet
  • Cash flow
  • Profit or loss statement 

Perhaps it goes without saying, but be sure to update your business plan if something changes. It is not a document you should finish and then put away to gather dust. It is a valuable resource, and you should use it at every stage in your business if you want to be successful.  

Ready to Get Started With Your Franchise Business Plan?  

Creating a thoughtful and detailed business plan is key to each step of the franchising process. If you are ready to get started with owning a franchise business, then FranNet is here to help. Our franchise consultants will provide the resources, support, and guidance you need to make an informed buying decision. Schedule a free consultation today! 

Mar 17, 2023