How Do I Write a Franchise Business Plan?

After thorough research and investigation, you will hopefully be rewarded by the identification of a franchise brand which aligns your personal and professional goals. The next step is to map out how your selected business franchise will become a success. To do this, you must construct a franchise business plan.
Whether you intend to fund your business via debt or equity, a strong franchise business plan can help you position your venture as a promising investment. The purpose of the business plan is to tell would-be lenders and investors what the business is, why it’s a sound investment, how the business will be operated, when you expect it to be profitable, and how you will pay back the loan or the investment.
Not sure where to begin? Here’s a basic outline to follow as you craft a plan that speaks to your business’ true potential:

I. Summary
The executive summary gives lending officers and potential partners the first – and perhaps the only – impression of your proposed business. Using the FDD as your guide, captivate readers with the most salient background information about the franchisor, including details about products and services, the company’s number of years in business, and the number of units to-date. It also helps to feature a brief overview of the industry and forecasts for growth.

Wrap up your one – to two-page summary with the information every potential lender wants to know: how much capital you need, how you intend to use it, and when/how you will pay it back.

II. Management
Highlight the franchisor’s credentials and accolades to assure potential lenders that your franchise business is on the path to success. You can include professional resumes here, as well as any details you can gather from the FDD about the management team’s expertise. If you’re applying for a bank loan or government-backed loan, you’ll want to provide your personal financial statements for their reference, as well as your business and management experience.

III. Business Description
The content here depends largely upon which business formation you choose: sole proprietorship, a partnership, or a corporation. If you plan to do business as a corporation, include the names and addresses of the shareholders, directors and officers. For a partnership, you’ll want to list the name and address of each partner.

This is also a space to include supporting images and product/service information, as well as a more in-depth industry overview. Don’t tell them about market potential; show them with thorough and relevant data.

IV. Marketing Plan
Walk the reader through your plan for marketing and selling the product or service in your particular location or territory. Outline your target demographic and locale, explaining your rationale for site selection and how you will operate a successful business there. You’ll also want to note your plans for local advertising and promotion and highlight some of your competitive advantages in this section.

V. Financial Forecast
Provide three types of financial statements here: a balance sheet beginning at start-up through the end of the second year, a two-year projected cash flow statement and a two-year projected profit and loss statement. Because your business has not yet launched, your financial data here will be “pro forma” – or hypothetical – predicting income and expenses in a future period.

VI. Loan or Investment Request
Include, in precise terms, what your loan or investment needs are and how you will use these funds. You’ll also need to indicate what your personal cash investment is and spell out the terms for either the loan or investment.

VII. Other Documentation
You may want to provide some additional materials, depending upon the nature of your business, including the following: a copy of your franchise agreement, a copy of your real estate lease agreement, a copy of a leasing agreement for equipment or furniture, or a list of the insurance you carry.
Beyond its professional value, the exercise of writing a franchise business plan can spark a strong sense of fulfillment. If you invest sufficient time and effort into crafting a thorough plan, it can serve as a valuable tool for assessing goals during your first few years in business.

Peter Thompson
Plutus Consulting Group

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