7 Key Elements of a Good Franchise Business Plan

Writing a business plan is essential for any entrepreneur. However, creating one for a franchise business is different from another business type. You have to be aware of the needs of the franchisee and the franchisor. Once you have signed the franchise agreement, the franchisor will provide you with a marketing plan and other related materials. Below are the seven essential elements of a successful franchise business plan.

1. Executive Summary

This section summarizes the entire franchise business plan, including the key points and objectives. As it explains your business, the executive summary should answer these questions:

• Which product, service, or need does your business provide? 
• Is your business unique? 
• How will you guarantee your company’s success? 
• What skills do you possess that will help you achieve your objectives?

As the first part of the plan, it should leave a positive impression of you and your business to your readers. In short, it’s a written version of your business pitch. That said, the executive summary section should clearly define your business and lay down everything that makes your business proposition unique. 

2. Franchise Description

The following section presents the description of the franchise business model. This section should contain the following:

• Company Structure
• Mission Statement
• History
• Fiscal Projections

Although you don’t need to provide detailed financial data, you should include an overview of your business, financial projections, and critical business facts. Likewise, you should share the goals and objectives for your business with your readers. Ensure your business goals are quantifiable and avoid vague terms that will only confuse your readers.

3. Market Analysis

The third section provides a detailed analysis of the industry and market trends. To analyze your competitors in the business, you need to do the following steps:

• Select ten direct and indirect competitors for comparison.
• Research their marketing strategies and product features.
• Compare the gathered details to business data. 

4. Marketing Strategy

You should also write a detailed marketing plan that includes market research, marketing goals, pricing strategies, advertising activities, and sales forecasts. This section will discuss your plan for implementing the said strategies and activities. You can use the information from the franchise training or the detailed information stated in Item 11 of the Franchise Disclosure Document.

5. Operations and Management

This section highlights your business’s strategy for maintaining a customer base and demand for your franchise business. You need to explain how you plan to advertise, your current advertising, and the background of your strategy. It also highlights the daily operation of your business. It covers the business operations and emphasizes the franchise owner’s responsibilities and tasks. This section also includes the company’s staffing, logistics, and solutions to potential challenges during the business operation. 

6. Financial Plan

The financial plan includes projected revenue, expenses, profits, and cash flow for the first few years of the franchise operation. If you’re starting your business with a franchisor, you can reference your Franchise Disclosure Document for this information. 

7. Pro Forma

You should also add a pro forma that focuses more on the three main accounting statements, such as the balance sheet, cash flow, and profit of loss. You can create your pro forma by following these steps:

• Create a chart of accounts.
• Calculate your business projected income.
• Project your liabilities and cost.
• Estimate cash flows

Consider talking to an accountant or financial advisor to confirm your estimates and validate your proposal to lenders or investors. 

Appendix (Optional)

Technically, the appendix is separate from the business plan but an additional section to present items that would enhance your document. Include items necessary to give the lender or investor a complete view of your franchise business. For example, you can include the resumes of management team members, tax returns, media clippings, etc.

Conclusion

A franchise business plan is a critical piece in accessing capital. A well-crafted business plan helps the franchise to clearly define the objectives, strategies, and techniques for a successful business operation. Also, this document allows entrepreneurs to identify potential risks and challenges associated with the franchise operation. It provides methods for mitigating or managing those risks. More importantly, this plan helps reduce the possibility of financial losses or other adverse outcomes for the franchisee. We hope this guide will inspire you to start drafting a detailed plan for the franchise business you have in mind now.  

Remember to continually update your business plan to reflect your business’s developing needs. At the minimum, it should be updated when something in your business changes.