What are the 3 Most Important Steps in Creating A Franchise Business Plan?

Creating a business plan for your franchise requires you to first ensure: 1)your business is ready to operate, 2) you have committed to your market research and positioning, and; 3) the actual draft outline of your plan.

It is rare for a business to succeed, and yet when it does, everything can seem like it is at your fingertips. There are so many ways that you can expand, too. You can sign up quality and premium stockists to sell your products around the world, or you can take it one step further and franchise your business and open up locations around the country or even around the world to increase sales and your brand image.

Before you get ahead of yourself, however, it is important to remember that it is challenging to franchise a company successfully. You need to find the ideal locations, franchisee owners, and attempt to recreate your success from scratch every single time. You might also need to take out a commercial loan to fund your endeavors. Once you get the ball rolling, and your brand is notorious around the country or around the world, you will find it easy to open up new branches.

1. Ensure Your Business is Ready

The first step to creating a thriving franchise is to ensure that your own branch and your brand is ready. If you are successful enough to afford it and have a healthy enough customer base to reasonably expect your success to be recreated elsewhere, then you might be ready. There are things to consider before you contact a lawyer, and they are:

Are You Organized?

Your business’ data, policies and accounting must be entirely in order and in a system that can easily be expanded on as needed. If it isn’t, then you must first invest in this necessary infrastructure before you go about encouraging others to adopt it.

Can You Easily Expand Operations?

Another question to ask yourself is whether or not you would feasibly be able to open another branch on your own. If you don’t think you could succeed in doing this, then you cannot ask another business owner to do the same. Only once you are sure your operations can be recreated should you consider franchising your business.

Do You Have a Code of Conduct to Follow?

You need to know what you want your franchisee owners to do before you begin. If you don’t, you are merely selling your brand name, without ensuring your brand’s reputation is copied over.

2. Commit Market Research

When it comes to creating a business plan for your franchise, this step is critical. You need it not only when you need to get business loans, but to encourage businesspeople to invest in your franchise and to buy a location off you. To ensure that your business loan is comprehensive, compelling, and helpful, you will want to follow these steps:

Learn Where Your Demographic Lives

Your business has a demographic. If you have been running your company successfully up until now, you should have quite a clear understanding of who that demographic is, where they are, and how to market to them. Go to your city’s planning office to obtain the demographic information they have on hand to determine where a new branch would be most welcome. Do note this new branch might need to be located in another city or state. Save expanding globally until later, as this comes with a lot of red tape.

Make a Note of Locations Franchises Could Open In

On top of learning which communities a new branch should do well in, you also need to make a note of locations. An old restaurant that went out of business could be the perfect location for your brand to move in, as it should already have all the necessary amenities needed, as opposed to building an entirely new restaurant from scratch.

You will also want to weigh the pros and cons of your restaurant’s location. Being located in a busy mall could be beneficial, but the rent astronomical. Better locations include being near businesses or commercial buildings, where well-paid business people can go out to lunch with you.

Create a Full Cost Analysis for Franchisees

Next, it is time to put together a full cost analysis for potential franchisee owners. As you are just starting out you won’t be able to loan them the money they will need to get started. Instead, you will need them to acquire acquisition loans to cover costs. As you are just starting out, you should apply for this jointly, to provide your franchisee owner some peace of mind and your proposal more weight.

Your cost analysis should include:

  1. Cost of rent
  2. Cost of overhead
  3. Cost of food and drink
  4. Cost of using your brand name
  5. Cost of marketing

No sound-minded person will sign on without a clear understanding of the costs they will need to cover. To convince them, however, provide your own provide margins as an example of the type of money they will make and what they can expect from dividends.

Know What You Are Looking for in Franchisee Owners

Finally, make a note of what you personally want to look for in a franchisee owner. These owners should be vetted so that your brand can stay true to your intentions and the business can succeed.

3. Create Your Franchise Business Plan

Last but not least, it is time to put all of that together and create your business plan. Once you have that, you will want to:

Get a Loan

When you first start out, it could be beneficial to open up your own branch and then put it up for sale so that someone else can run and manage it for you, and you get a piece of the pie. This will mean financing a business acquisition by yourself, but if potential franchisee owners see all the hard work is done for them already, and that you believe another branch can work, they will be more willing to sign on.

Hire a Lawyer to Draw up a Franchise Disclosure Agreement

Before you sign anyone on, however, you will need to hire a lawyer to create a Franchise Disclosure Agreement or FDD. This will outline what you expect from your franchisees and what they can expect from you.

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