Creating a franchise business plan is a crucial step in determining whether or not you’re going to ‘make it’ as a franchisee. Many potential franchisees think of this step as an ‘entrance exam;’ a test to see if your planning skills are up to snuff. This is more-or-less exactly the wrong way to think about it: it’s not a test — it’s an opportunity for you to actually sit down and think hard about what assets you have on your side, what challenges you can expect to face, and how you’ll overcome them and achieve a steady profit flow.
Each section of the business plan introduces a new area of opportunity for you to plan out:
- Introduction: Asks you to identify your primary products and/or services, the level of competition in your local market, the operational techniques used to achieve success, and a broad-strokes description of your key risks and challenges. This is your chance to fully assess the competition and ask yourself fundamental questions about the nature of the challenges ahead of you — a key part of addressing those challenges (later in the plan.)
- Management: Asks you to identify the key management roles in your enterprise and introduce the people who will be filling those roles. With each person, in addition to stressing generic qualifications, ask yourself if the individual has a skillset or other attributes that can help you tackle your main challenges or mitigate your main risks. Describe those attributes and explain why they’re valuable to you!
- Marketing: Asks you to describe how you’re going to attract new customers to your franchise, including explaining the competitive advantages you have over local business in the same industry. Also asks you to describe how your product or service provides value to your customers, and how your initial marketing push will drive you toward profitability. This is where you should be sitting down and honestly asking yourself about who you expect to be marketing to — essentially, who you consider your ‘core audience.’ This decision should guide a significant portion of your business decisions and also point you toward certain answers for your key challenges.
- Financial Projections: The most important part of the franchise business plan from the number-crunchers’ perspective: the cash flow statements, balance sheets, cost projections, and other numbers that will ultimately lead to a projected “time-to-net-profit” (which should be somewhere between 1-3 years.) Prepare these as conservatively as possible, because a new business — franchise or not — will always encounter unforeseen problems and issues. The more ‘wiggle room’ you give yourself by preparing conservative projections, the more likely you are to survive until profitability and thus achieve the goal of having a steady income stream.
- Financing Needs: No matter how you’re financing your venture — even if the answer is “it’s all coming from my savings account” — always provide a complete analysis of all of your startup costs, from your initial marketing surge to all of the projected operating losses you’ll accrue until you achieve profitability. This process will give you even more insight into what stumbling blocks you might encounter as well as inspire you to awareness of alternative financing sources should you turn out to need them.
One of the great rules you will do very well to remember as a franchisee is that every problem is an opportunity in disguise; including this first, fundamental challenge of writing your franchise business plan. Take it on, make it the opportunity it can be, and learn everything you can by doing the best job you’re able, and you’ll be far more ready and able to deal with the challenges of creating a profitable business.