Why and how should I write a franchise business plan?

When starting out in franchising, one of the most important steps you’ll take is preparing a business plan. Not only does this document help you secure funding, but it also acts as a roadmap for how you’ll run and grow your business. So what do you need to know?

Why is a business plan so important for a franchise?

James Thomas, head of UK franchising at easyStorage, stresses that a plan isn’t just a box-ticking exercise. “Banks will insist on a well-researched business plan before agreeing to a loan/start-up capital for any new franchisee. This is regardless of the franchise opportunity you are interested in.

“In most instances, the franchisor will also request a plan to be completed too. This is because it indicates that you are familiar with the business model and have a keen understanding of the numbers required to make the business successful.”

But the purpose goes far beyond raising money. “Having a workable business plan, where the numbers add up, goes way beyond ticking a series of boxes. It provides a road map for activity moving forwards,” Thomas explains.

By modelling financial scenarios, you can calculate when you’ll reach break-even and ensure you don’t run out of cash at a critical moment.

A well-prepared franchise business plan also helps you adapt once trading begins. “As trading gets underway, comparing progress against the plan means any necessary adjustments can be made without exerting undue risk,” he adds.

Will a franchisor help me put a business plan together?

Support levels vary from franchise to franchise. According to Brian Duckett, former chairman of The Franchising Centre, “Most good franchisors will facilitate the process. However, the important word is ‘help’. It’s no use to anybody if they simply do it for you.”

He cautions that handing over a generic plan can backfire when a bank manager asks detailed questions that you can’t answer. Instead, “be sure to relate the plan to your outlet. Include accurate forecasts for the personal expenses you will have to meet while the business is growing.”

Vicky Wilkes, head of legal at Aston Villa Football Club, echoes that franchisors may provide tools or templates but not a finished product. “Some franchisors may have a specific business plan format its franchisees can use. If a franchisor is not able to directly assist you with developing a business plan, it may have informationyou can use to develop a business plan instead.”

There are also legal limits to how far a franchisor can go. “For example, it cannot help you compile projected earnings for inclusion in the business plan or approve your business plan,” Wilkes explains.

What should I include in my franchise business plan?

The content will depend on the audience. As Duckett notes: “What goes into your franchise business plan depends on its purpose and who you’re writing it for. Is it a plan to show the franchisor how you will operate and grow the business or a funding plan for a bank?”

What banks need

Banks, he explains, often focus on your personal circumstances as much as the franchise model. “This could include past work or business experience, other family income, dependents, personal assets and liabilities. Add turnover, profit and cash flow forecasts for the business to this, alongside some best-case and worst-case scenarios.”

What franchisors need

From a franchisor’s perspective, the plan should demonstrate how you’ll run the business day-to-day. Dr Hannah MacKechnie from Radfield Home Care Franchising says: “A franchise business plan should look at the opportunity in the area and how you’re planning to operate.

“It should set out your plans on how you will grow your business and attract clients, how you will operate your business and include financial projections for your business. It’s an important document which you will use to track your progress. Review it regularly with your franchise support team.”

James Thomas adds further detail on the financial side: “The plan needs to include every financial element attributed to running that business, from start-up loan repayments and asset finance to bills and marketing budgets.

“Including all these costings means it is possible to make realistic projections on income depending on various circumstances such as variable growth.”

How can I make sure my franchise business plan works in practice?

The consensus from all the experts is that a plan should not be treated as a one-off hurdle to clear, but as a living document.

Thomas recommends independent expertise if needed. “We often see people underestimate the financial support required to start a new franchise or those that simply don’t factor in every cost.

“Therefore, the best advice is to work with an independent organisation experienced in franchise business planning.”