Joseph, Director at Wise Business Plans, has overseen 15K written business plans, raising over $1Bn in funding in more than 400 industries.
Owning a franchise can be a dream come true for more entrepreneurs who have grown up dreaming of becoming a part of the brands they know and love.
But one of the biggest misconceptions with approaching the franchising process is the parent company does all the work to get things started.
Sure, some franchise companies make things simpler than others, from building a location to providing advertising templates. But becoming a franchise owner and running a successful location that benefits the overall brand for years to come still takes work, commitment and, yes – planning.
Here are five reasons why having a franchise business plan is vital to succeeding as a franchisee and entrepreneur.
1. Banks and investors will need to see a plan to give you funding.
The costs of owning and managing a franchise will differ depending upon the brand, but all will have startup costs that the franchisee must pay. In many cases, the parent company will require that the business owner looking to buy franchising rights already have a certain amount of cash on hand.
Like any other small business owner, you’ll need to approach investors, family or, most often, a banking institution to get the necessary funding. Your business plan will show banks and other potential funders the essential information needed to decide if your franchise will be a good risk to take. This information will include why a location in your chosen market will thrive, how you plan to use the funds you receive and who your leadership team will be.
Providing a neat, engaging and professional business plan — no matter who you’re approaching about funding your business — is an important part of building trust and showcases your ability to manage processes competently and professionally.
2. You still need to convince the parent company that you’re the right person for the job.
Owning a franchise is different from starting a business from scratch in many ways, but one of the first and most integral is that you are just attaching yourself to a brand, not managing the brand itself. You are essentially marrying into an important corporate family, and their good name must be preserved.
Whereas creating a startup means sharing your own vision with the world and controlling your brand’s image and voice, being a franchisee means learning to speak with the voice and message of the company you are joining.
One of the first and most effective ways to show respect for the parent brand is to create a business plan that showcases your understanding of their needs, processes, successes and structure. A franchise business plan considers the franchiser’s marketing structure and existing locations while carefully and clearly showing how your company fits into — and adds something valuable to — the whole.
If you’re applying for a franchise in a location that is ripe for the kind of expansion you’re proposing, chances are you’re not the only one who noticed that need. You may be competing with other would-be business owners for the franchise you want to own. Coming to the table without a high-quality business plan will put you behind the better-prepared competition.
3. Your business plan is like an instructional guide for your franchise location.
Many people think of a business plan as a necessary evil that they must forge their way through to jump the hoops and hurdles successfully that they face on the way toward owning a franchise. But your business plan is more valuable to you than anyone else in the long run.
As you plan for future challenges and successes, including an outline of needed employees, a roundup of future marketing needs and detailed financial projections, you also create for yourself a guidebook that you can return to again and again during the life of your franchise. Your plan will be specific to your own location, so your business plan is your own unique toolkit, even though the parent company will provide documentation, support and guidance.
Business plans often grow, change and expand along with the business. Like any other manual or textbook, your plan is something you can consult and add to as needed during the life of your franchise. Plus, when it comes time to renew your ownership rights, you’ll have your business plan ready, with most of the work already completed and ready to be updated.
4. The Small Business Administration works with franchisees and a business plan can help secure funding.
Small Business Administration funding resources are part of the vital framework supporting companies across the U.S. As a franchisee, you can take advantage of the resources and funding options provided by the SBA.
A formal business plan for franchisees’ loans is provided via banks, not directly from the SBA. And those banks (you guessed it) will almost certainly want to see a well-thought-out, carefully prepared business plan before handing over any money.
In addition to general-purpose funding, the SBA provides specific funding for buying “major fixed assets,” such as kitchen equipment or other machinery. This can be especially useful to franchise owners.
5. A business plan can build your confidence and provide direction.
Taking the time to research, write, review and understand your business plan makes you an expert on your location — and the franchising brand — in a way that nothing else can. While working day-to-day will provide a depth to your knowledge that few things can match, the overarching view and multi-dimensional data points provided by your plan create a knowledge base that will give you more confidence when speaking to investors and your market.
The bottom line is that anyone starting a business, whether or not they have the backing of a larger company, needs a business plan. But when it comes to franchising, taking the extra time to create a plan that showcases your strengths as a leader and business owner will benefit your franchise — and your parent company — for years to come.