Do I Really Need a Business Plan for My Franchise?
Developing a business plan takes some planning and forethought and entrepreneurs often wonder if one is really necessary. There are a lot of benefits to it though. Here are some reasons developing a business plan from your franchise is a good idea.Developing a business plan takes some planning and forethought and entrepreneurs often wonder if one is really necessary. There are a lot of benefits to it though. Here are some reasons developing a business plan from your franchise is a good idea.
The most important reason to develop a business plan is that it forces you to think about every detail of your franchise and anticipate any problems or issues that might come up. In addition, it highlights for you the importance of having enough money and resources on hand to not only handle the daily running of the franchise, but all the other expenses that might pop up.
Also often times not only does the franchisor require you to submit a business plan, but so does the bank if you are applying for a business loan. Before they hand over any cash, they are going to want prove that you have a successful business venture that is well thought out and that your financial projections are solid.
The good news is that creating a business plan for a franchise is usually easier than if you are starting your own company from scratch. Your franchisor will be providing you a lot of the information, including financial documentation, that will be needed for your plan so that means at least a little less research on your end.
When developing your business plan, make sure you include the following sections:
- An introduction that includes a description of the business in which you highlight the products and services you will provide, a description of the marketplace you will be operating, as well as any risks or challenges you anticipate.
- There should also be a section where you lay out all the key management roles you will need in your franchise. If you already know who will fill these roles, then include a little bio of each of them and/or a resume which highlights their experience related to the running of a franchise.
- A marketing section is also important. Here is where you will lay out the competitive advantages your franchise unit will have as well as give as much of a sense as possible what your marketing and advertising strategies will be.
- You should also include Pro Forma Financial Projections which basically means any income statements, cash flow statements that are relevant to the business as well as balance sheets that project what the financial performance of the business will be once it open. Always make sure your estimates are on the conservative side because you don’t know what kind of delays or obstacles you will face, especially that first year.
- Even if you are funding this whole venture out of your own pocket, in your business plan you should still meticulous list all your startup costs including the money you will need to survive on until your franchise starts turning a profit. Don’t forget to factor in a budget for marketing and advertising and leave yourself a little cushion for lean times or unexpected emergencies or repairs.
Whether or not you have to submit your business plan to the franchisor before being approved to join their system or you just need it for the bank, it is a good idea to develop it as soon as you know which franchise you want to join and before you sign any final paperwork. This way if there are going to be any warning signs on the path you are about to embark on.Before you officially sign off on anything ask to talk to current franchisees and ask the following questions:
Here are the most important franchisees questions to ask:
- How would you rate the franchisor? Make sure to ask if the franchisee is satisfied with their relationship with the franchisor and what they are like to work with. Specifically ask how much support they give. Are they pretty much hands-on or do they just give minimum training in the beginning and then just collect their fees?
- Have you made the profit you expected to make? Don’t be afraid to talk frankly about numbers. See if they are comfortable being totally transparent with you about their unit’s gross revenues and cash flow. Ask if they have made the profit they expected to make. Also be sure to ask what their pre-tax profits have been for the last three years. These numbers will help give you a better picture of whether these franchises are profitable.
- How much training did you receive? All franchisors give some training to their new franchisees, but it tends to vary across the board. If this is your first time owning a business, then you especially will want a lot of support up front. Ask the franchisees what type of training they had, how long it lasted and if they are given a mentor they can reach out to when they have questions. Ask them to be honest on whether they felt the training was effective or not and if they thought there was enough training.
- What is the supply chain process like? Ask the franchisees you are able to talk to about logistics as well. Find out what supplies and services you are expected to buy from the franchisor and what that process is like. Does the franchisee feel like he or she gets enough supplies in an adequate fashion? Are the products and services you are expected to sell of good quality? Is there a positive customer reaction? Also don’t forget to ask if they feel like they are getting a good price from the franchisor or if they feel like they could getter a better price on their own?
- What are daily operations like? Other good questions to ask include questions about the effectiveness of operational procedures? Are there a lot of rules to follow? Will you be given any operational manuals to follow? Are they well-written and easy to understand? How much freedom are you given to make your own decisions? Is there room for you to implement your own ideas?
- How much assistance do you receive for advertising and marketing? Some franchisors will offer you assistance with advertising and marketing. Many will even have national and regional campaigns that you can participate in. Find out how this franchisor handles advertising and marketing and whether their franchisees feel it is effective or not? Get a good idea of how much it will cost you a month and whether what they provide will be enough to help you attract new customers.
As with any big business decision, make sure you have thought it through very carefully and have done all the research and planning to ensure that your new venture is a success.
Want to learn more about developing a business plan for your franchise? Contact MBB Management today.