The Tricks To A Great Franchise Business Plan

Written on the 11 June 2010 by Theo Afkoudias

We love doing business plans for franchises mainly for the same reason people consider buying one - most of the hard work has already been done by the franchisor or the prior franchisee.

We have done hundreds of business plans from all industries and at all stages of business life – start up, growth, expansion, etc. When a prospective franchisee contacts us and tells us they are proposing to buy a franchise and the franchisor and the bank has asked for a business plan, we’re delighted.

Here’s why.

Below we've listed some of the typical components of a business plan - consider the ticks (√) we’ve given the franchise when compared to a stand-alone business (X):

Past financials available

√ Typically available from prior franchisees
X Non-existent or not always trustworthy in a stand-alone business

Marketing

√ Typically guidance and mentorship is available from franchisor
X Owner required to research best marketing methods for industry and estimate cost

Operations, processes and procedures

√ Typically franchisor has processes and procedures in place
X Owner required to research possible processes and procedures, hardware, software, quality control, invoicing, CRM systems and estimate cost

Human resources

√ Typically franchisor will assist with suggesting staffing requirements based on other sites and peak demand times for staff is usually known
X Owner required to estimate service demand throughout week and also required to understand ever changing HR laws

Management

√ Franchisor typically available to mentor and add layer of management
X Owner may need to hire services manager(s) or consider business coach

Financial projections

√ There are always past financials of target site or others available to base projections on
X Usually pure estimates

Business expansion

√ Easier expansion with franchisees buying multiple franchise sites
X Can open multiple sites but risk typically equal to that of opening original site

Across all areas of a business plan, the ‘work’ has been done or the information required is much easier to acquire.

Information is expensive

You see, with a business plan the source of the information contributes greatly to the cost of the business plan. If, as a provider, we have to go out and research marketing strategies or an operations strategy, the cost of the business plan starts heading into the thousands.

Rather, with franchises all the information is typically much more easily available from the franchisor for a new site or the prior franchisee for an existing site.

No free ride

All this doesn’t mean the franchisor will typically hand out franchises to just anyone – they have a brand to protect and a vested interest in the franchise succeeding.

Many prospective franchisees are given the task by the franchisor to produce a business plan as part of the selection criteria (especially if the franchisor is a large business with lots of people applying for a franchise). This makes sense as the franchisor has spent years or even decades building a well regarded reputable brand and the last thing they want to see is one of their sites stumble or even fail.

The franchisor is looking for the franchisee to ‘showcase’ themselves in a business plan - what are you bringing to the table?

Here, we work with prospective franchisee to extract all relevant information across the various components of the business plan. The franchisee is handed a brand, a site and full operations manuals and the availability of the franchisor to call upon. However we work with franchisees to help them consider: