As you look to obtain financing for a prospective franchise purchase, one crucial component a lender will require is a business plan. In your plan, you will set forth your projections and expectations for the franchise business and outline potential challenges and how you’ll meet them.
As the U.S. Small Business Administration notes, creating a business plan for a franchise may not be as difficult as creating one for an independent business startup (see our previous article on how to put together a fast food business plan). The franchisor should be able to assist with some components of the business plan, including whatever financial information is presented included in their Franchise Disclosure Document (FDD).
A good starting point is to follow this basic franchise business plan template.
1. Executive Summary
In this section of your franchise business plan, you will need to explain the goals of your business. You’ll describe what opportunities in the marketplace that are present , what challenges you’ll face and how you’ll address them, and what products or services you’ll offer. You will also find the business’ mission statement here.
2. Business Description
This part should be easy for you, as the prospective franchisee, because you can draw from Item 1 of the franchisor’s FDD, which provides the necessary information about the franchise offering. It will include background about the products and/or services the franchise offers, and a high-level analysis of the market (including competitors). This section should answer the question, “What are the competitive advantages that will make your business a success?”
3. Management and Sales Summary
Here, you will list your key management team members and outline their prior experience, talents, and skills relevant to the franchise business. You may also include their resumes.
4. Sales and Marketing
This section is another in which you can rely heavily on the background, existing plans and materials the franchisor can provide. If you’re awarded a franchise, the company will also provide strategic leadership, best operational practices and methods for sales and marketing.
You’ll use this part of the plan to discuss how you intend to attract new guests and what kinds of franchisor programs and support will help toward that end. If the franchisor allows franchisees any degree of local market autonomy, talk about your own plans here as well.
Advertising, social media, community events, competitive advantages — these should all be included in the sales and marketing section.
5. Financial Projections
In this section, you will set forth your projected profit and loss statement (P&L), balance sheet, and cash flow statement, much of which the franchisor can help you prepare.
Include estimates for how much operating capital you’ll need and when you will reach the break-even point, and then when you expect to become profitable.
Although much of the information you will need to create your franchise business plan is included in the FDD, such as initial investment costs, ongoing fees, etc., the Federal Trade Commission (FTC) does not require franchisors to publish financial projections. Found under Item 19 of the FDD when included, financial performance representations can make it easier to create this section of your plan, but there are still a variety of factors to take into account.
If the brand or concept you are evaluating does not include financial performance representations in the FDD, talk with the franchise representative you are working with about the best way to approach this section of your business plan. Additionally, there are online resources that can provide some insight and guidance.
In sum, the key to this section of your franchise business plan is to be conservative, but positive, in your projections. Remember, you’re trying to sell lenders on why your franchise business model’s chances for success are great.
6. Financing Needs
This section will actually contain the amount of money you need to borrow — building on the estimates you provided in the previous section regarding projected operating capital needs and how long until you turn a profit.
You should be able to use information from your franchisor’s FDD, including Items 5 through 7 pertaining to startup costs and estimated initial investment.
Many variables go into a business plan, and it’s impossible to foresee every contingency. Think through each element and use your business plan as a roadmap for this new venture. By doing your due diligence, research, and homework — with help from a franchisor such as Wayback Burgers — your franchise business plan should lay the groundwork for success and help secure the financing you need to make owning your own franchise business a reality.
For more information on how to get started, visit https://waybackburgers.com/franchising/.