A good franchise business plan demonstrates that you have an understanding of the corporate culture the franchiser has worked so hard to create. It also illustrates that your plans will advance and enhance the company's brand through targeted, respectful and effective marketing strategies.
The Franchise Business Plan is about ~25-30 pages in length, including color charts and graphs, and consists of the following components:
*toggle each section below for a detail view.
Executive SummaryThe executive summary lists as the first document in a business plan. Its a one- to two-page brief overview of the most important components of the business plan. This might sound like one of the simplest components of the plan – and in some ways, it is. However, for the most part it’s only simple if all the other sections of the plan have been, because these are where the executive summary pulls its information from.
Financial objectivesThe main objective of financial analysis is to know the company and industries financial status, its debt, revenue, expenditure, equity, share price, and segmental revenue/expenditures. With Financial analysis we can know the present company, industry, and sector status' and can expect its future.
Repayment of debtThis is an amount owed to a person or organization for funds borrowed. Debt can be represented by a loan note, bond, mortgage or other form stating repayment terms and, if applicable, interest requirements. These different forms all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment terms.
Start-up or expansion summaryThis is the early stage in the life cycle of an company where the entrepreneur moves from the idea stage to securing financing, laying down the basis structure of the business, and initiating operations or trading.
Products or ServicesThese are your good, idea, method, information, object or service created as a result of a process and serves a need or satisfies a want. It has a combination of tangible and intangible attributes (benefits, features, functions, uses) that a seller offers a buyer for purchase. For example, a seller of a toothbrush not only offers the physical product but also the idea that the consumer will be improving the health of their teeth.
Market SizeThis is where you want to get real, both with the potential readers of your business plan and with yourself. Do your research and find out who and where your competitors are, and how much your customers spend annually on your product or service. How big is the potential market for your business?
Market segmentationThe process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment. Few companies are big enough to supply the needs of an entire market; most must breakdown the total demand into segments and choose those that the company is best equipped to handle.
LocationClients and customers who will buy a product in the region or area in which it is produced. For marketing purposes it is important to know who will buy the product, where they are located and how far they will travel to obtain the product. The local market includes customers located within the region the product or service is produced or made available.
Targeted demographicsYou’ll want to include demographics such as age, income, and location here. You’ll also need to dial into your customers’ psychographics as well. You should know what their interests and buying habits are, as well as be able to explain why you’re in the best position to meet their needs.
Market needsThis is where you’ll discuss the current state of your industry overall and where it’s headed. Relevant industry metrics like size, trends, life cycle, and projected growth should all be included here. This will let banks or investors see that you know what you’re doing, and have done your homework and come come prepared with the data to back up your business idea.
Marketing objectivesThe group of goals set by a business when promoting its products or services to potential consumers that should be achieved within a given time frame. A company's marketing objectives for a particular product might include increasing product awareness among targeted consumers, providing information about product features, and reducing consumer resistance to buying the product.
Marketing strategyAn organization's strategy that combines all of its marketing goals into one comprehensive plan. A good marketing strategy should be drawn from market research and focus on the right product mix in order to achieve the maximum profit potential and sustain the business. The marketing strategy is the foundation of a marketing plan.
Competitive analysisThis is the section in which you get to dissect your competitors, which is important for a couple of reasons. Obviously, it’s a good idea to know what you’re up against, but it also lets you spot the competition’s weaknesses. Are there customers out there being underserved? What can you offer that similar businesses aren’t offering?
Competitive advantagesA superiority gained by an organization when it can provide the same value as its competitors but at a lower price, or can charge higher prices by providing greater value through differentiation. Competitive advantage results from matching core competencies to the opportunities.
ManagementThe organization and coordination of the activities of a business in order to achieve defined objectives.
Keys to successThe combination of important facts that is required in order to accomplish one or more desirable business goals. For example, one of the key success factors in promoting animal food products might be to advertise them in a way that appeals to those consumers who love animals.
SWOT analysisSituation analysis in which internal strengths and weaknesses of an organization, and external opportunities and threats faced by it are closely examined to chart a strategy. SWOT stands for strengths, weaknesses, opportunities, and threats. See also PEST analysis.
Barriers to entryEconomic, procedural, regulatory, or technological factors that obstruct or restrict entry of new firms into an industry or market. Such barriers may take the form of (1) clear product differentiation, necessitating heavy advertising expenditure to introduce new products, (2) economies of scale, necessitating heavy investment in large plants to achieve competitive pricing, (3) restricted access to distribution channels, (4) collusion on pricing and other restrictive trade practices (such as full-line forcing) by the producers or suppliers, (5) well established brands, or (6) fierce competition.
MilestonesProject management: Scheduled event that indicates the completion of a major deliverable event (or a set thereof) of a project. Milestones are measurable and observable and serve as progress markers (flags) but, by definition, are independent of time (have zero durations) therefore no work or consumption of resources is associated with them.
Personnel forecastHuman resources forecasting involves projecting labor needs and the effects they’ll have on a business. An HR department forecasts both short- and long-term staffing needs based on projected sales, office growth, attrition and other factors that affect a company’s need for labor.
Revenue forecastA calculation of the amount of money that a company will receive from sales during a particular period: The internet hosting company revealed that it had missed revenue forecasts by 20%.
Break-even analysisStudy of the mathematical relationship between costs and sales revenue, under a given set of assumptions regarding the firm's fixed costs and variable costs. In this financial analysis, the objective is to determine (in manufacturing) number of products that must be sold at a given price to cover the costs, or (in project financing) number of months or years required by the forecasted total net cash flow to equal estimated total project cost. An integral part of financial planning, it is performed either by using a breakeven-formula or by drawing a breakeven graph.
Income statementsummary of a management's performance as reflected in the profitability (or lack of it) of an organization over a certain period. It itemizes the revenues and expenses of past that led to the current profit or loss, and indicates what may be done to improve the results.
Cash flow statementA summary of the actual or anticipated incomings and outgoings of cash in a firm over an accounting period (month, quarter, year). It answers the questions: Where the money came (will come) from? Where it went (will go)? Cash flow statements assess the amount, timing, and predictability of cash-inflows and cash-outflows, and are used as the basis for budgeting and business-planning.
Balance sheetA condensed statement that shows the financial position of an entity on a specified date (usually the last day of an accounting period). Among other items of information, a balance sheet states (1) what assets the entity owns, (2) how it paid for them, (3) what it owes (its liabilities), and (4) what is the amount left after satisfying the liabilities. Balance sheet data is based on a fundamental accounting equation (assets = liabilities + owners' equity), and is classified under subheadings such as current assets, fixed assets, current liabilities, Long-term Liabilities. With income statement and cash flow statement, it comprises the set of documents indispensable in running a business.
Sensitivity analysisSimulation analysis in which key quantitative assumptions and computations (underlying a decision, estimate, or project) are changed systematically to assess their effect on the final outcome. Employed commonly in evaluation of the overall risk or in identification of critical factors, it attempts to predict alternative outcomes of the same course of action. In comparison, contingency analysis uses qualitative assumptions to paint different scenarios. Also called what-if analysis.
Financial indicatorsThere are five types of markers that businesses use to measure performance in a variety of areas, from marketing to HR to finance. Keeping close tabs on your small business’ financial performance is essential to long-term success. These are gross profit margin, net profit, net profit margin, againg accounts receivable, and current ratio (Current ratio = current assets/current liabilities).
Financial assumptionsBusiness plans are required for all small businesses seeking loans or investors and financial assumptions and projections are critical components of all business plans. Three universal financial presentations are expected in all business plans. You must include a projected income statement, balance sheet and cash flow statement for the coming three to five years. Along with the numbers, include a narrative that explains your assumptions and how the line items were computed.
Franchise start up feesIntial Costs. You will pay an upfront franchising fee for any franchise, according to Gaebler. This typically ranges from $5,000 to $50,000. The franchise fee pays for the right to the company's trademark and business operating procedures.
Ongoing royalty feesAlmost all franchises have an ongoing monthly or weekly franchise fee (commonly referred to as a royalty fee). This fee is typically expressed as a percentage of the gross sales revenue of the business with its measurement period matching the timing of the payment obligation (with a slight lag to allow for processing).
Owner contributionThe owners contribution is treated as equity funds because the owner’s intent is to secure profits from the trading activities of the business
Management qualificationsYou need to have the management experience and skills that the franchise requires in order to be successful. By buying a franchise, you are contributing your time and talents to building that franchise business. Before you attempt to by the franchise, you should make sure that your skillset matches up well with the requirements of the franchisees.
* This an actual business plan but we have substituted client names and intellectual properties.