The business plan is the financial translation of the franchise project, its economic model. It’s an indispensable document that allows you to validate the economic viability of the future franchisee’s business, as well as convincing financial partners to inject funds.
For the franchise entrepreneur, the business plan, or business model, is a bête noire. Yet this document is essential. It allows the entrepreneur to test different hypotheses, and forces him to make sure that his intuition is not only right, but also viable.
Writing a business plan takes time and can’t be done in two hours. We work on it, rework it, adjust it over and over again before arriving at a final document worthy of presentation to bankers or investors.
When to do it?
The business plan should be drawn up before the company is officially created and once the contract has been signed with the franchise network. At this stage, the chain must have provided the franchisee with a DIP containing a certain amount of information on the market, the competition and the history of the franchise…. These elements are useful for drawing up the business plan and presenting the project in detail.
What is its purpose?
As well as helping the franchisee to formalize his idea in writing, in a logical and rigorous way, the business plan helps him to obtain bank financing. It is a reference tool for bankers, who insist on consulting it before granting credit. They look closely at financing plans, because they want to know what the investments are intended for, and make sure they’re financing something concrete.
Cash flow is also one of the financial elements studied carefully. This is a crucial point, as the franchisee will need funds to cover expenses until the business takes off. The best way to assess them is to visit other franchisees in the network and ask them about their current expenses.
How to build it?
It consists of two parts: an editorial section and a financial section.
In the first, you present your franchise project. The analysis must address the following questions: network history and health, market situation, franchisee sales, products or services offered, typical clientele, catchment area, etc.
A competitive analysis should also be included in this section. Explain how your offer is different, complementary or new. You will then outline your strategy: the pricing policy adopted, the development processes envisaged by the franchisor, desirable recruitment. If you’ve followed the market research stage, you shouldn’t have any particular difficulty with this part, as all the answers are in your market research report.
The idea here is to be clear and concise. There’s no need to go into too much detail: twenty or so pages are usually enough. Note: a summary of the project’s strengths and weaknesses, to be included on the first page of the business plan, may prove useful. It allows financial partners to see all the major elements at a glance.
The second part of the business plan is the financial translation of all these choices. This numerical analysis is obviously essential, and it’s the one that most interests financiers. It consists of four forecast tables:
- the initial financing plan: this determines the financing required to launch the project;
- projected income statement: this is used to draw up financial forecasts and to determine whether the business will be able to generate sufficient income to cover the costs incurred by the human, material and financial resources deployed;
- cash flow plan: highlights any imbalances between cash inflows and outflows;
- the three-year financing plan: this enables us to check whether the new company’s financial performance is being maintained, or even improved.
How can I get help?
All kinds of professionals are available to provide their expertise on the more technical aspects, particularly the financial side. This may include a chartered accountant or a business start-up support network. But under no circumstances should you delegate responsibility for the job as a whole. As a new franchisee, you’ll have to defend each of these points yourself when the time comes, which means mastering every detail.
