How to Start a Franchise, Part 2: Creating a Business Plan
Learning how to start a franchise can be an exciting and rewarding experience. After all, you’re beginning a new chapter of your life. However, it’s not something that happens overnight. There are some crucial steps to take before you’re running an empire of profitable franchises. In a previous post, the process of finding franchise funding was discussed. Another vital component of getting your business off the ground is putting together a strong business plan, and it’s not as hard as you probably think!
1. Executive Summary
This is where you’ll give potential lenders and investors an overview of the business plan. You want to show them that you’ve done your due diligence and understand how to start a franchise. This section should have a full explanation of the franchise including details of the brand’s history, and the products and services that are being offered to consumers. Fortunately, the best franchises will have a good amount of this information available on their company website or in the Franchise Disclosure Document. It’s worth noting that it may be easier to write up the Executive Summary last.
2. The Market
This will address the current state of the market you’re competing in. Research your niche/industry and find out how the most profitable franchises are doing. Having a grasp on trends is key in showing that you know how to start a franchise. Here are the questions that you should make sure to answer in this section:
- What is the size of your market?
- What is the demographic and financial makeup of your consumer, and who are you targeting?
- Who are the main competitors in your space and how are you different/what is your competitive edge?
- What are the expert forecasts regarding your market and product/service? Is growth expected?
A lender will want to see that you have a great staff who will contribute to the success of the franchise. After all, a business is only as good as the team behind it. In this section, you’re proving that you comprehend how to start a franchise by describing who your key employees are. This is probably going to be your managers since profitable franchises typically have very strong management teams. Talk about the managers’ backgrounds and experience and provide copies of resumes.
A previous section explained the market you’re trying to target as well as who the best franchises are. Now, it’s time to show how you plan to attract customers and compete in this market. Include a description of any advertising and marketing strategies that you plan to use. In many cases, a franchisor will assist with marketing and promotions, so make sure to gather information from them and include it in this section.
5. Financial Projections
Anyone who has mastered how to start a franchise will probably tell you this is a critical section to pay attention to. Here, you want to conservatively detail all your startup expenses including operating capital. You should include a pro forma financial statement that will have a statement of cash flows, and an income statement and balance sheet. Lenders will want to see when you anticipate reaching your breakeven point. In other words, they want an idea of how long it will take you to join the ranks of profitable franchises. If you need additional help, the Small Business Administration provides a good breakdown of the information you should include in financial projections.
Keep in mind that this isn’t necessarily an all-encompassing list. There is no exact right way to put together a business plan, and you may feel you need to include more details. However, this has been the basic information that your business plan should contain.
At Best in Class, we work with franchisees to make sure they have the tools necessary to establish and operate lucrative educational centers. This includes connecting them with third-party lending sources who assist with startup costs, inventory, and equipment. Additionally, in providing training, set-up assistance, proprietary curriculum, and marketing and advertising support, we help prospective owners show lenders that success and profit are possible. If you’re interested in finding out more about what Best in Class Education Center can do for you, get in touch with us today!