Franchise Business Plan

Objective

The underlying objective behind this service program is to help franchisors and franchisees correctly assess their financial vision and performance going into the franchise deal. The franchise must yield the necessary financial returns to both parties. And to achieve that, they must make careful, correct, and comprehensive assessments of all the relevant financial considerations. From assessing capital requirements to achieving the intended profitability and ROI from the franchise business, they must have a common financial vision laid out in front of them.

A common question from many franchisors and franchisees is – how to write a franchise business plan that could answer if the franchise business will be profitable? In this service program, DFX will develop the franchise business plan for both franchisors and franchisees aiming for business growth and expansion via the franchising mode.

Why franchising for expansion?

Striving for growth and expansion is one of the best approaches to survive in business. Companies that do not aim to become big either remain stagnant or falter in the course of time. It is the success stories that become popular. Countless franchise businesses fail to survive. And one of the main reasons for this is the lack of proper assessments and planning. The ‘why franchising’ is the foundation. The right decision taken for the wrong reasons eventually makes the decision wrong. So, both the franchisors and franchisees must make strong business sense for why they are opting to go the franchise route.

Coming to strategies for growth and expansion in business, there are primarily two approaches – organic and inorganic. However, a blend of both approaches is something that has worked wonders for some companies to go global and exert dominance in their respective industries. So much so that some of them are an industry in themselves or are in the race to be so.

In the organic approach, businesses seek to grow by extending their branches and operations with absolute control and under their own name. Businesses do not have to go for any major internal restructurings and have greater autonomy in decision-making and functioning. The organic approach is more stable as compared to the inorganic approach. Businesses can take their time and remain in control of their growth and expansion planning and activities. However, they might have to go for external funding, expand their workforce, spend on building the IT systems, provide training and development to employees, invest in real estate, etc.

In the inorganic approach, companies go for mergers, acquisitions, joint ventures, amalgamations, strategic alliances, etc. to fuel their ambitions of growth and expansion. This is a more fierce and competitive approach and brings quicker results. Companies gain expertise and experience, supply chain and logistics, customer base, human resources, etc. Companies like Facebook, Amazon, Wal-Mart, Google and many others use this approach along with organic efforts to grow internally. And there is no doubt that these companies have grown so fast and so big in a time span of two decades or so.

Franchising is an inorganic approach for growth and expansion. It has a fairly successful track record in the world of business across all verticals. Brands like Nike, KFC, PepsiCo, 7-Eleven, Baskin-Robbins, and hundreds of others have turned into global giants via the franchising model. Franchising can take place even at the local and domestic level. In your country, you might have seen brands that have a presence across different states. And it is extremely likely that they too are operating on franchising. Good examples here are supermarkets or departmental stores, fashion brands, restaurant chains, educational institutions, medical care services, gyms and fitness centres, etc.

Of all the inorganic routes, franchising is the most flexible option. Another business entity might not be interested in going for a joint venture or a merger. There may be no business case for them to consider such propositions. Another company might not be interested in selling their business. In franchising, both the franchisor and franchisee are already looking forward to reaping mutual benefits. Franchisors gain in terms of risk optimization, access to new markets, localization, reduced operational costs, etc. Franchisees get to use the brand name of the franchisor. Depending on the type of franchising, franchisees may also get access to franchisors’ knowledge and expertise, advance business management systems and technologies, operational support, and sometimes, the entire business format.

Franchising offers a win-win model for both the franchisor and franchisee. But if the planning is not done right, the chances of failing at franchising are as good as gravity. And one such critical area is financial planning which is sometimes also referred to as the business plan. A business plan becomes even more important in franchising because there are two or more business entities involved and the franchisors and franchisees pledge their commitments of the necessary financial performance.

Why develop a Franchise Business Plan?

A franchise arrangement works fine as long as both the franchisor and franchisee profit from it as they had intended. And to achieve the expected returns, they must first assess whether such returns are achievable or not. That calls for a Franchise Business Plan. And such planning must be done with comprehensiveness and practical accuracy. There is no room for omission of any critical consideration or incorrect estimations. A faulty franchise business plan could be as burdensome as not having one. Also, as mentioned earlier, franchisors and franchisees pledge their commitments to achieve the agreed business performance which eventually boils down to numbers.

Here is an elaboration on the need for developing a solid franchise business plan:

1. Avoiding financial stress
   A business idea thrives on its ability to generate the expected returns and profitability. Otherwise, what is the point of doing it? And with that consideration in mind, to get into franchising without sound financial planning is risky for both the franchisor and franchisee. This calls for a good franchise business plan without any half-based assessments. Inaccurate projections and estimations could become a big cause of financial stress later on. With both feet into the water, the franchisor and franchisee may struggle for time and space to mend and renegotiate business. Extra revenue does not hurt but extra costing and ugly differences in addressing financial priorities definitely hurt.
2. Staying on track and within budget
   With a business plan, both franchisor and franchisee can remain cognizant of its financial course of action in carrying out business operations and making any big financial decision. A business plan makes projections of inventory purchases, payment of wages and salaries, working capital requirements, provision for debts, credit cycle to be followed, accounting for depreciation, etc. With planned inflow and outflow of funds, businesses are more likely to be disciplined in making their financial decisions. This in turn helps them to stay within the budget barring any unexpected expenditures provisions for which can still be made. Without a franchise business plan, neither the franchisor nor its franchisees will have a clear roadmap on expenditures to be made and an assessment of whether the expected revenue is being generated in the franchise or not.
3. Staying prepared with funds and provisions.
   Future consists of both certainties and uncertainties. While uncertainties cannot be fathomed, there can be planning for the certainties and to some extent, for the uncertainties. Pandemic-like situations are an apt example here. Franchisors and franchisees must always create and maintain funds and provisions for expenditures that are foreseeable, can happen, and can be planned. Bad debts and depreciation would be good examples here. Such provisions act as a cushion for businesses in absorbing financial shocks and prevent them from affecting routine business operations or going for external funding assistance. A good business plan must account for funds and provisions to manage foreseeable and planned expenditure.
4. Accounting for inflationary trends and cost escalation
   The general rise in the price level, also known as inflation, affects the cost of production and service delivery and the prices charged from customers. Various direct and indirect expenses like the cost of raw materials, office supplies and equipment repair, taxes, wages and salaries, charges of third-party service providers, etc. are almost certain to increase. There is nothing much businesses can do about it. The degree of this change might be small but at the company level, even a hike of 1-5% will mean a significant weight on the financial statements. Therefore, as part of prudent financial planning, franchises must take into consideration the element of cost escalation in their business plan.

Why DFX to develop Franchise Business Plan?

DFX (Digital Finance Experts) helps franchisors and franchisees envision the financial performance of their franchise business before they embark on their journey. Our expert franchise business plan writers carry out a comprehensive and systematic assessment of all the necessary financial considerations for a healthy franchise business over a stretch of time. In franchise business financial forecast and franchise business plan presentation, we cover capital and initial investment planning, estimation of margins and sales turnover, purchase planning and inventory calculations, costing, profit and loss projections, ROI, break-even analysis, etc. If you have any service-related query, drop us a message and our team of franchise business plan consultants shall be happy to reach out to you.

Visioning

In the visioning exercise, the objective is to lend clarity and comprehension to the business idea under consideration. It often leads to discovery of potential bottlenecks as well as better ideas and inputs. The idea behind conducting a SWOT analysis is to identify the existing strengths and weaknesses in the light of the business vision for formulating effective planning and strategies later on.

Business Strategy

Ecommerce business need to function and move ahead as one organized unit. In this module, our experts shall define the internal organisation structure of the proposed business entity. We will also map the scope of work and functioning of the external stakeholders (i.e. agencies, consultants, vendors, suppliers, etc.). IT system strategy shall also be defined which shall cover the assessment of the IT and software requirements of the business spanning across various line and staff functions. The timeline for implementation of every software application shall also be done to ensure that business operations are initiated as per schedule. Process Strategy shall be a part of business strategy wherein you will learn about how to make your startup business enterprise more process-driven and less people-dependent. You will uncover tools and strategies critical to achieve the same. The module will cover how business processes and operations are defined and how they can be improved and improvised in a planned and systematic manner.

Sales Strategy

Marketing begins with the idea of ecommerce business or a product/service itself. Everything that places a business enterprise in the right spot at the right time is mostly about marketing decisions and strategies. DFX experts shall work closely with your business and devise “Go-to-Market” and “Business Launch” marketing budgets and strategies so that your business starts off with the right note. Your advertising and promotional efforts would be meaningless if you fail to generate the targeted sales levels, consistently and efficiently. Managing and controlling sales can cover a wide range of factors including data analysis, goal-setting, feedback and reporting, skill training, defining workflow, leaderships and monitoring, time management, incentives, etc. In this model, you will learn about formulating a robust sales operations strategy for your business.

Financial Strategy

It is important to let the ‘numbers’ validate your business model before taking a deep dive into it. In this section, DFX experts shall help you assess the financial requirements and commercial viability of your business project.

Good budgeting ensures that you are spending your investments and revenues judiciously. If you go spending unplanned, you are almost certain to deviate from your profitability goals. Budget allocation serves as a business’s expenditure roadmap. As a part of the business financial strategy, this module will cover the approaches and guidelines for effective budget allocation.

Action Plan

By determining the action plan, we arrive at the implementation plan with duration of the project. It maps the sequence of tasks that must be completed on time; otherwise the project will get delayed. In this module, you will learn to map the critical path that leads to the launch of your business on time. It will help you channelize your focus and efforts on priority basis and help you stay organized during the entire process.

Do’s & Don’ts are well-defined within implementation plan to avoid anticipated road-blocks during startup business setup