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What Is Franchisor?

Understanding franchisor, franchisor advantages, franchisor disadvantages.

  • Franchisor Example: Dunkin' Donuts

What Franchises Make the Most Money?

What are among the least expensive franchises.

  • Types of Corporations

What is a Franchisor? Definition, Pros, Cons, and Example

franchisor business plan

A franchisor sells the right to open stores and sell products or services using its brand, expertise, and intellectual property . It is the original or existing business that sells the right to use its name and idea. The small business owner who purchases these rights is called a franchisee and the branch business, itself, is called a franchise .

Key Takeaways

  • A franchisor sells the right to open stores and sell products or services using its brand, expertise, and intellectual property. 
  • A corporation often will use franchising as a way to expand its global presence because it enables them as franchisors to benefit from the local knowledge of their franchisees.
  • At a minimum, a franchisor should plan to spend on business development, a flagship store, legal document preparation, marketing, and packaging plans, and recruiting and training franchisees.
  • Franchises are regulated by state and federal laws that require a Franchise Disclosure Document (FDD) and other regulatory documents entailing an attorney's services.
  • Generally speaking, a franchise agreement usually won't protect franchisees if their franchisor declares bankruptcy.

The franchisor company generally receives an initial start-up fee, an annual fee, and a percentage of the branch’s profits. It may also charge for other services. Well-known corporate franchisors include Hertz ( HTZ ), Marriott International ( MAR ), McDonald's ( MCD ), and Subway ( privately held ).

Becoming a franchisor is generally a good business alternative, especially for large, already successful companies, though there are both advantages and disadvantages.

The relationship between a franchisee and franchisor is inherently one of advisee and advisor. The franchisor provides continual guidance and support concerning general business strategies such as hiring and training staff, setting up shop, advertising its products or services, sourcing its supply, and so on.

The franchisor's advisory role is not free, however; it is part of the entire package that the franchisee purchases. Even when the relationship is solidified, and the two have been working together successfully, the franchisor still acts as a mentor. A franchisor's parental role is an ongoing commitment. In fact, franchisors generally police their franchises constantly—albeit some more than others—to ensure that they are maintaining the parent company's standards, product quality, and brand values.

Some of the more common types of stores that franchisors can offer franchisees are:

  • Freestanding store: A retail location or restaurant, either newly constructed or an existing structure that does not share any common walls with a third party
  • Shopping center storefront: A retail location or restaurant that shares a common wall, or walls, with third parties
  • Gas/convenience restaurants: A gas station, often with a convenience store and restaurant that is a sub- or-shared tenancy within a gas/ convenience host environment
  • Special distribution opportunity (SDO): Cart or kiosk locations that are referred to as special distribution opportunities and may be located within another host establishment, such as a stadium or another retail facility
  • Online or e-commerce: Licensed branding to an online or e-commerce platform

A chain store is one of a series of stores owned by one company; if Starbucks ( SBUX ), for example, were to franchise some of its stores, then those would be owned by outside investors—not by the original company—and Starbucks would become a franchisor .

Generally speaking, a franchise agreement won't protect franchisees if their franchisor declares bankruptcy. In fact, franchisees are usually obligated to pay royalties and continue operating amid a franchisor's bankruptcy. When a franchisor files for bankruptcy, the court will immediately impose a stay of all actions against the franchisor. In other words, franchisees aren't allowed to take legal action against the franchisor.

The following steps in the process are determined by the type of bankruptcy the franchisor chooses to file for.

  • In a Chapter 7 bankruptcy , all of the franchisor's assets are liquidated to pay its creditors. Companies typically go this route because it's flat going out of business. In this situation, it's highly unlikely that the franchisor will be able to meet its franchise agreement obligations. Therefore, it's also unlikely that the franchisee will be able to stay in business.
  • In a Chapter 11 bankruptcy , a franchisor reorganizes its debt obligations and continues to operate as a going concern. Under this type of bankruptcy, the franchisor works with its creditors to create a reorganization plan while continuing to meet at least some of its franchise contract obligations. A reorganization plan sometimes takes months or years to complete.

In either case, a franchisor's bankruptcy will likely have a significant impact on its franchisees.

  • Expansion Opportunities : A corporation often will use franchising as a way to expand its global presence because it enables them as franchisors to benefit from the local knowledge of its franchisees. The franchisor company grants the franchisee the responsibility of expanding in an area or country and grants them the right to sub-franchise. In exchange, the franchisee assumes the financial burden of building a unit and pays the franchisor royalties for access to its time-tested business model, market power, and brand name.
  • Heightened Market Share : In addition to extending its geographical reach, franchising is a good way for a company to increase its market share while minimizing capital expenditures (CapEx) . Franchises can be more profitable than corporate-owned chains, because as business owners franchisees are motivated to maximize their outlets' profitability and are responsible for their own overhead, such as staff. Less overhead can make franchises more profitable than corporations, even when their outlets are less profitable than they would be if they were run as chain stores.
  • Scalability : Depending on a franchisor's needs, resources, and production goals, the company can customize its franchise agreement to focus on large-volume national growth or low-volume regional growth.
  • Additional Sources of Revenue : A franchisor receives additional income in the form of ongoing royalties paid by its franchisees. Royalties typically include a startup fee, a monthly fee that includes a percentage of the franchisee's gross sales, and may contain other payments depending on the franchise agreement.

Royalties paid to franchisors vary by industry, location, company size, and financial strength. That said, royalties paid to franchisors usually fall in the range of between 4.6% and 12.5%.

Some may think—partly because of the steep cash outlay—that franchisees assume more risk than franchisors. But there are potential disadvantages for franchisors, too.

  • Capital Investment : Establishing a franchise requires a large investment of both time and money. At a minimum, a franchisor should plan to spend on business development, a flagship store, legal document preparation, marketing, and packaging plans, and recruiting and training franchisees.
  • Franchise Failure : Even with scrupulous vetting on the part of the franchisor, a franchisee could turn out to be a poor choice—irresponsible, difficult to work with, or incapable of running a business for whatever reason. Or the franchise could become unprofitable for other reasons. Even with a proven business plan, there is no guarantee that a franchise will succeed.
  • Less Control : At the outset, franchisees will, of course, agree to follow their franchisors' training, deportment, and other instructions. But after the honeymoon is over, that might not be the reality. Franchisees are human beings with their own ideas and temperaments, so disagreements can always occur: a franchisee could become stubborn or difficult, or might not be able to effect changes as easily as the franchisor had hoped.
  • Costly Legal and Regulatory Fees : In the event that a franchisee refuses to cooperate, or proves to be a poor choice in other ways, legal action may be necessary; this can be both expensive as well as damaging to a franchisor's reputation among other franchisees. Moreover, franchises are regulated by state and federal laws that require a Franchise Disclosure Document (FDD) and other regulatory documents entailing an attorney's services.

Franchisor Example: Dunkin' Donuts

Dunkin’ Brands Group (DNKN) went private after it was bought out by Inspire Brands Inc. in late 2020. It used to be called Dunkin' Donuts , began operations in 1954, and has been franchising since 1955.

With more than 130 years of franchising experience, Dunkin' is home to two of the world's most recognized franchises: Dunkin' and Baskin-Robbins. According to Inspire Brands Inc.'s website, there are "11,300 Dunkin' restaurants worldwide – that's over 8,500 restaurants in 41 states across the U.S.A. and over 3,200 international restaurants across 36 countries." As a franchisor, Dunkin’ licenses stores and restaurants that sell Dunkin’ coffee, donuts, bagels, muffins, compatible bakery products, sandwiches, and other food items and beverages compatible with the franchisor’s concept.

Most companies that offer franchising opportunities post how-to information for prospective franchisees on their websites. Generally, this is comprehensive, voluminous, and often written in legalese or boilerplate . In its franchisor role, Dunkin's text speaks to its would-be franchisees clearly and understandably, as the following sample shows.

Training Overview

  • Franchisees must at all times manage their network with at least two individuals, one of whom must be the franchisee or another partner, shareholder, or a designated representative. But both must successfully complete the required training program.
  • It takes a minimum of 20 days to complete the classroom/instructional phases of the Dunkin’ Core Initial Training program—not including online training, in-restaurant practice, or travel time; this is offered a minimum of 25 times a year at Dunkin’ Brands University in Braintree, Massachusetts.
  • The classroom and in-restaurant time are based on 10-hour days. Some of the franchisor’s required classes are only offered on the internet and are referred to as online training. These classes will require approximately 65 hours to complete.

Obligations and Restrictions

  • Franchisees must devote continuous best efforts to the development, management, and operation of their business. This means devoting sufficient time and resources to ensure full and complete compliance with their obligations to the franchisor, their customers, and to others.
  • Franchisees may not conduct any other business or activity at the restaurant without the franchisor’s prior written approval. They may sell only products approved by the franchisor and they must offer for sale the full menu prescribed by the franchisor.
  • Franchisees are not permitted to sell or distribute goods or services via the Internet or other electronic communications.

Financial Assistance

Dunkin' typically does not offer to finance its franchisees. However, from time to time, it may, at its discretion, offer voluntary financing to existing franchisees for specific programs such as the purchase of specialized equipment or accelerated development in specified markets. The franchisor may facilitate certain third-party lending arrangements that may provide financing for qualified franchisees. The amount of financing and repayment period varies by program, circumstances, and creditworthiness of the applicant.

Estimated Initial Investment

Dunkin' estimates that the cost to open one of its franchises—not including real estate costs—is approximately $95,700 at the low end and $1,597,200 at the high end. More information, including a complete breakdown of the fee schedule, can be found on the franchisee page of their website .

Here are five of the biggest money-making franchises, and the initial investment required:

  • McDonald's ($1M-$2.2M): Iconic symbol of fast-food hamburgers, fries, chicken nuggets, breakfast sandwiches, and a wide variety of other signature food items. Operates more than 36,000 restaurants in more than 100 countries. Founded in 1954.
  • Dunkin' ($96K-$1.6M): World's leading baked goods and coffee chain, serving more than 3 million customers each day. Offers more than 50 varieties of donuts. Founded in 1950.
  • Sonic Drive-In ($1.2M-$3.5M): Currently owns and operates the largest chain of drive-in restaurants. They are primarily located in the south-central and southeastern United States. Founded in 1990.
  • 7-Eleven ($38K-$1.1M): Operators of more than 60,000 convenience stores, mainly in North America and Asia. Founded in 1927.
  • Popeyes ($383K-$2.6M): One of the world's largest quick-serve chicken restaurants, operating more than 2,700 restaurants in the United States and around the world.

Here are five lower-cost opportunities with strong brand power, and the initial investment required:

  • Kumon Math & Reading Centers: $64K-$140K
  • ServiceMaster: $77K-$275K
  • uBreakiFix: $98K-$303K
  • Jan-Pro: $4K-$56K
  • Cruise Planners: $2K-$24K

International Franchise Association. " Royalty Fee Requirement Definitions ," Page 1. Accessed June 4, 2021.

Dunkin'. "Dunkin'|About Us." Accessed Aug. 28, 2021

Hubspot. " The 39 Best Franchise Opportunities to Buy & Own in 2020 ." Accessed June 3, 2021.

McDonald's. " About Us ." Accessed June 4, 2021.

Dunkin'. " About Us ." Accessed June 4, 2021.

Sonic. " The Sonic Franchise Story ." Accessed June 4, 2021.

Britannica. " 7-Eleven ." Accessed June 4, 2021.

Popeyes. " About Popeyes Louisiana Chicken ." Accessed June 4, 2021.

Entrepreneur. " 2021 Franchise 500 Ranking ." Accessed June 3, 2021.

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Creating a Business Plan for Your Franchise: What to Prepare Before Asking for Money

by Franchise Direct

đź•’ Estimated Reading Time: ~8 minutes

Creating a Business Plan for Your Franchise

Congratulations! You’ve decided that owning a franchise is the right investment for you. You may have even already decided on the type of franchise, and maybe even the franchise brand you are going to pursue.

What’s next? Financing. Securing the funding needed to make your franchise dreams a reality. And unless you are one of the fortunate people that has enough money saved to cover costs, you will likely be seeking a lender to make up the difference between the amount of money you currently have to invest and amount of money needed to open and maintain your franchised business until you 'break even.' (Breaking even is the point in the lifespan of a business where the operation starts turning a profit.)

To convince lenders that you are worthy of their money, the creation of a business plan is crucial. Lenders use a business plan as a guide to assess whether the prospective franchisee is a on a path towards success and profitability.

To approve loans, lenders want to have a clear, straightforward account of the business to be opened, the principals involved, and—perhaps most importantly—perspective on when the borrowed money will likely be repaid.

It's helpful to prepare for the meeting with the lender like a college graduate student would prepare for a thesis defense presentation. In both instances, it is the goal of the person (or people) going into the meeting to have done the adequate level of research necessary to competently back up the stated claims for the desired result (be it the granting of a master's degree to the student or the gaining of a loan for the prospective franchisee).

Lenders use a business plan as a guide

Important note: the business plan isn’t just for getting money.

Not only does a business plan help in securing funding, it forces you to take a hard look at the investment you are about to make. It gives you a chance to anticipate the challenges that come with opening a business, and temper unrealistic expectations.

As time passes and you move further into franchise ownership, the business plan you’ve created should be updated and utilized as a guide in helping you reach your franchise goals.

Parts of a Business Plan

Creating a business plan doesn't have to be complicated.

There is no standardized length for a business plan, but no lender wants to read a novel-length presentation. The main thing is that the plan is thorough enough to cover all aspects of your individual franchise. You want to give the lender confidence that you are prepared to take on the managing of a business that will turn a profit in a reasonable amount of time.

The key is compiling the proper information to address the reservations of the lenders you will meet with. This is where opening a franchised business offers a notable advantage over an independent business.

The franchise disclosure document (FDD) provided by the franchisor of the system you are investing in contains a great deal of the information needed to complete a business plan.

This information includes the company’s corporate background, a description of the target market, the competitive advantage of the product/service, marketing initiatives, plus the start-up and ongoing costs. Some franchisors even offer assistance to franchisees in the preparation of the plan.

Common parts of a business plan include the following, according to the Small Business Administration  (a sample business plan is located at the end of this article):

Company description: A good place to look for the information for this section is Item 1 of the FDD. Provide an overview of the franchise and its history to the lender. You will also provide a brief outline of the franchise’s service/product (more detailed information will be given in the next section).

Service/product description: Describe in detail the service and/or product your franchise will provide to customers. This section can be combined with the company description. Again, Item 1 of the FDD is where you will find much of the information you need for this section. Item 16 will also be helpful in discussing what you will and will not be able to sell as a franchisee of a particular franchise system.

Common parts of a business plan include

Market analysis: Use this section to prove to the potential lender that you are not jumping into a business venture on a whim. Concentrate on the specific area (market) in which the franchised business will be located. The territory description in the FDD (Item 12) will help you to a point.

Give a brief discussion of the following:

  • How big is your market?
  • What kind of people (demographically and financially) make up this market?
  • Is the market under-served in regards to this service/product?
  • If there is competition, who are your competitors and what is your competitive advantage?
  • Discuss what experts are forecasting for the service/product in terms of trends and growth possibilities for your specific market (can include demographic, legislative or environmental factors).

Management structure: This section provides a look at the people who will be responsible for the day-to-day operation of the franchise, particularly you as the owner. Is this venture going to be a sole proprietorship or will there be multiple owners? Explain if you will be involved day-to-day with business operations, or will be acting as an absentee owner.

For yourself and all of the others with an ownership stake, if applicable, detail all business qualifications. Stress any and all experience (even if volunteer) that is relevant to being successful in the future with the franchise operation. Item 15 of the FDD will help with explaining the managerial obligations of the franchisee.

Marketing plan: 'How are you going to get customers?' is the main question you’re answering in this section. Use FDD Item 11 to your advantage here. It provides an overview of the franchisor’s advertising and marketing efforts. Also, it provides a description of the training you will complete before opening. Often marketing and sales courses are part of required training.

Financials: This is the meat of your business plan. In this section, don’t only ask for the money you need. Give the lender the big picture of your financial situation as well. Detail how you are going to obtain the entire initial investment. Often times, a lender will not be financing all of the franchise investment. Are you using a mix of personal savings, loans, credit, etc.?

In addition to the funding request, you will be doing some financial projection. Give a reasonable time frame when the lender can expect full repayment of the loan, and back up that claim with figures. Include graphs and charts detailing the start-up costs, projected profit and loss and projected sales forecast for the franchise.

The franchisor can be of significant help to you in completing this section (via Items 5 and 19 of the FDD, and in direct conversation). However, keep in mind the franchisor is restricted legally about making certain claims about projected earnings. Be conservative with the projections as unexpected delays and unforeseen circumstances do happen.

Appendix: The appendix technically isn’t a part of the business plan, but an additional section to present items that would enhance your presentation. Include items you feel would be necessary to giving the lender a complete picture of you and the franchise you are seeking financing for. Examples include: the resumes of management figures, tax returns, media clippings, etc.

The best outside source of information to complete your business plan is the franchisor

As previously mentioned, the best outside source of information to complete your business plan is the franchisor. No other outlet is going to know that franchise system better. 

Additional resources include online sites such as Bplans.com, which offers site visitors a substantial library of sample plans to review, as well as general business websites like the Small Business Administration. Prospective franchisees can also use a professional business plan writer, particularly for the review of a plan before sitting down with the lender.

Confidentiality agreement: Because business plans contain sensitive and confidential information, the content needs to be safeguarded against potential leaks. To do this, you will need to enter into a confidentiality agreement with the parties you allow to review your business plan.

The agreement will bind them not to disclose or reveal any confidential information they receive, without your written permission.

Sample Business Plan Confidentiality Agreement Template

Sample franchise business plan: Please note that the example business plan linked below is a sample of one way to format a business plan. There are several different acceptable formats, and the contents of business plan sections will vary significantly due to factors including the franchise system, the type and amount of loan sought, the franchisee’s background, etc.

Sample Business Plan

Suggested reading:

  • The Ultimate Guide to Franchising
  • What is Franchising?
  • The Benefits of Franchising
  • Choosing the Most Profitable Franchise for You
  • 11 Key Steps in Opening a Franchise
  • Franchises vs. Business Opportunities
  • The Cost to Start a Franchise and Financing Options
  • Basics of the Franchise Disclosure Document (FDD)
  • Creating a Business Plan for Your Franchise
  • Completing and Signing a Franchise Agreement

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Franchise Business Plan Template

Written by Dave Lavinsky

Franchise Business Plan Outline

  • Franchise Business Plan Home
  • 1. Executive Summary
  • 2. Company Overview
  • 3. Industry Analysis
  • 4. Customer Analysis
  • 5. Competitive Analysis
  • 6. Marketing Plan
  • 7. Operations Plan
  • 8. Management Team
  • 9. Financial Plan

Start Your Franchise Plan Here

Franchise Business Plan

You’ve come to the right place to create your business plan.

We have helped over 10,000 entrepreneurs and business owners with how to create a franchise business plan to start or grow their franchises.

How To Write a Franchise Business Plan & Sample

Below is are links to each section of a franchise business plan example to help you start your own franchise business:

  • Executive Summary – This section provides a high-level overview of your business plan. It should include your company’s mission statement, as well as information on the products or services you offer, your target market, and your business goals and objectives.
  • Company Overview – This section provides an in-depth look at your company, including information on your franchise’s history, franchise business model, ownership structure, and management team. You will also include a copy of your franchise agreement.
  • Industry Analysis – In this section, you will provide an overview of the industry in which your franchise will operate.
  • Customer Analysis – In this section, you will describe your target market and explain how you intend to reach them. You will also provide information on your customers’ needs and buying habits.
  • Competitive Analysis – This section will provide an overview of your competition, including their strengths and weaknesses. It will also discuss your competitive advantage and how you intend to differentiate your franchise from the competition.
  • Marketing Plan – In this section, you will detail your marketing strategy, including your marketing initiatives and promotion plans. You will also discuss your pricing strategy and how you intend to position your own business in the market.
  • Operations Plan – This section will provide an overview of your store’s operations, including your store layout, staff, and inventory management.
  • Management Team – In this section, you will provide information on your management team, their experience, and their roles in the company.
  • Financial Plan – This section includes your company’s financial statements (income statement, balance sheet, and cash flow statement). It also includes information on how much funding you require and the use of these funds.

Next Section: Executive Summary >

Franchise Business Plan FAQs

What is a franchise business plan.

A business plan is a plan to start and/or grow your franchise. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can  easily complete your business plan using our Franchise Business Plan Template here .

What Are the Main Types of a Franchise?

About any type of business can be franchised. Franchises are categorized according to different factors like investment level, franchisor’s strategy, business operations, and marketing and relationship models. The most common types of franchises are job franchise, product or distribution franchise, business format franchise, investment franchise, and conversion franchise.

What Are the Main Sources of Revenues and Expenses for a Franchise?

The main source of revenue for a business franchise are franchise fees and royalty fees. Some also earn from other fees like distribution fees, site assistance fees, training fees, technologies, and rebates.

The key expenses for franchises are inventory, payroll, marketing and advertising, rent and loans.

How Do You Get Funding for Your Franchise?

Among the most common sources of funding for a franchising business are commercial bank loans, Small Business Administration (SBA) loans, personal savings and friends and family loans/gifts. There are also lenders that can supplement other loans with equipment financing and business lines of credit for franchise businesses.

This is true for a business plan for a franchise restaurant, a business plan for franchise store, or any other franchise business plans.

Where Can I Get a Franchise Business Plan PDF?

You can download our free franchise business plan template PDF here . This is a sample franchise business plan template you can use in PDF format.

Explore our Solutions for territory planning, site selection, and targeted marketing

How to Build a Comprehensive Franchise Business Plan

The franchising industry has never been as diverse and dynamic as it is today. Millennial business leaders have charged into the sector, bringing creativity and strategic integrity along for the ride. While 44% of franchisors are Baby Boomers, innovative business technology has reinvented the way we think about franchising. Automation has not only changed the way franchisors do business with end users, but also the way brands connect with and train their franchisees. E-commerce has leaked into the sector, bringing globalized trade with it. Multi-unit structures still dominate, but fresh approaches to business models are adding some zest to the cocktail. Customer relationship management (CRM) and logistics systems are increasingly being used to streamline everything from marketing to warehousing. In the new decade, every inch of business movement will be measured, analyzed, and streamlined, and that leads to one thing: profits. CRM will get your business moving from the first letter of your franchise business plan until your ultimate exit.

Building a Franchise Business Plan that Assures You of Success

The brave new world of franchising demands more from your business plan than ever before. It’s not easy to set up a franchising model scalable enough to cover international markets and digital demographics. Your franchising model must cater to local and national markets without ruling out global ones. It must trade in the brick and mortar space, yet develop thrust in the digital marketplace as well. Your growth strategy needs to build a detailed route into your future, and your model is the foundation that will keep your path from crumbling as the decades pass. When you take your successful business into the franchising sector, you need to create a completely new business unit and plan.

In essence, franchising is a pivot from selling a product to selling a business concept. Your success no longer ends with you. You can only be profitable if your franchisees are profitable, but your fees, commissions, and structure weigh heavily on your revenue, too. How will you break even? How will you assure your recruits of grand success? How will you ensure that your product and brand remain consistent across thousands of units? Your franchise business plan will answer these questions.

Executive Summary

Your executive summary is a brief overview of your plan that’s intended to captivate funders and lenders. Think of it as a cross between a miniature business plan and a pitch deck. It should outline a clear business strategy through both data and substance.

Franchise Introduction

Your franchise introduction is potentially the last thing your potential investors will read about your franchise, so it needs to be compelling. It’s typically a three-page management overview of your franchise covering your business goals, description, and justifications for franchising your business. Include your profit milestones, competitive differentiation, and geographical considerations. The rest of your franchise business plan will pull apart all of these numbers in greater depth.

Franchise Description

This is your opportunity to express your vision. Your description includes your formation data, founders, markets, and location. If you’re franchising an existing business, your description should also outline your current pre-franchised business’ achievements.

SWOT Analysis

A franchise business plan isn’t just a dedication to everyone who might invest in your vision. It’s also an opportunity to tighten your own intentions. Your SWOT analysis will serve you more than it does your funders, but it’s integral to your competitive edge. It should include your brand’s strengths, weaknesses, opportunities, and threats, both in terms of your brand and whether franchising offers its best chance of success. Your SWOT positions you in the market alongside your rivals, so it will tell you if you need to pivot or diversify yourself before you launch. The market research you collect will unveil the fundamental problems that could annihilate your dream. 

Product or Service Description

While the product your franchise sells matters, don’t neglect your new product: your franchise concept. Your product description should outline your development stage, pricing strategy, and any research and development you intend to do in the near future.

Marketing Plan

Business concepts can’t grow legs without a marketing strategy . Odds are excellent you’ll need to redraft your marketing approach entirely when you franchise an existing business, including key market and industry analysis for both your brand and franchise concept. Automation and machine learning can generate the data that will fuel this part of your franchise business plan. It might be tempting to start fantasizing about grand creative campaigns at this point, but flights of fancy will lack weight if they aren’t hooked into information. Even the most rudimentary research costs an average of $20,000 , but there are two cheaper and more effective solutions: automation and machine learning. An AI-based CRM will send your forecasting to new heights, helping you to draft consumer profiles to fuel your ultimate marketing strategy.

Royalty Fees

Your royalty fee structure determines how sustainable your franchise will be. It covers your running fees while providing one of your core regular income sources. Your choice of fixed or percentage rates can mean the difference between firecracker profits and a monthly slog, but set it too high and you risk chasing away recruits. CRM software will do the number crunching on your behalf, running as many simulations as you need to find a reliable structure.

A Financial Forecast

The quality of your financial projections will determine how seriously your investors will take you, so make it count. Your franchise business plan is nothing more than a concept until you flesh out the forecasted numbers. This is the psychic of your plan, and it doesn’t always bring good news. It might convince you not to go into business at all. The deeper you dive, the more accuracy you’ll gain. Your forecast will include profit and loss, balance, and cash flow sheets, but don’t let those terms trap you in an accounting mentality. It’s intended to tell you where you’re going, not where you’ve been, so your calculations will be quite different. A forward-looking view defines your first and last moments as a franchisor. As such, it helps you to create your exit plan.

Planning for Your Exit

As important as it is, many entrepreneurs don’t have an exit strategy . If your franchise agreement and roll-out plan are the hors dóevres of your franchise business plan, your exit strategy is the dessert. This is your opportunity to reap rewards, but it’s a part of your meal and needs to be planned for from the beginning. No matter how tempting it is to reach beyond the “buy, build, sell” mentality, every investment needs to be parted with. Building in a way that supports an impressive valuation has its own rewards, and they arrive in cold, hard profits. Franchisors sell their franchises for many reasons. Retirement, fresh opportunities, and simple profit drive are three of the most common, and they may ultimately push you into a sale. Even so, it’s unwise to swim out into a lake if you don’t know its length, otherwise you risk drowning.

If you’re ready to leap into a great business opportunity from the beginning, you’ll gain control of the resale process. A formal exit plan is best drafted with the guidance of an attorney or accountant who is qualified to juggle the taxation issues relating to your sale and transfer of ownership. Your strategy should include a primary exit goal detailing who you expect to sell to and when. You needn’t make an absolute exit. Many franchisors take on an advisory role instead. Finally, you’ll need to list the actions you need to take to achieve your exit valuation. 

Building Multiple Franchise Units Simultaneously

When Ray Kroc transformed McDonald’s from a neighborhood store into a global legend, he had a thousand dreams about taking the concept to the entire world, but one dream ruled them all: the desire to create a burger recipe that could be repeated customer after hungry customer without losing any quality. Once he’d struck beefy gold, his next dream was to do it repeatedly across franchises. To achieve that, he decided to start small. He built uniform systems to cover everything from his first unit’s administration to its management style and trademark. Only once he’d achieved that did he roll his business out to franchisees, and his slow, steady work was the reason for its resounding success. Today, it’s also the reason new franchisors use the Ray Kroc roll-out strategy.

Your initial roll-out of franchise units is, in many ways, the toughest educational experience you’ll ever face. Your learning curve will be more of a vertical line than a slope, and no amount of research will teach you all you’ll need to learn. This is something you must learn in practice, and there are a myriad ways to approach the challenge. One of the simplest is to avoid it entirely by building a single flagship unit before attempting a wider roll-out. This way, you can flatten the curve and pay closer attention to the tiny details that will one day characterize your brand. It will also allow you to recruit potential franchisees through a living business concept—and nothing is quite as convincing to recruits as legitimate sales figures and a queue of passionate customers.

A slow network roll-out lets you nurture your first recruits and solidify their success. When you aren’t juggling 20 units at once, you have the time to turn your franchise business plan into a living, breathing organism with its own marketing materials, logistics strategies, and on-boarding tactics. Each of your first franchises will need to be within driving distance to one another, but when you’re working with a new brand, your client base won’t be large enough to warrant a unit on every street corner. Slow market penetration should, however, lead to fast diffusion and adoption, but no strategy is completely airtight. You’ll experience lower profit margins initially but will be less likely to shoot holes in your brand identity.

Synuma can increase your diffusion rates and ramp up your profit margins by automating the rollout process. Why do it the Ray Kroc way when you can enjoy all the benefits without the drawbacks? This intelligent software will improve your decision making and let you shrug off many of your responsibilities by handling repeatable tasks in a standardized way. It will support your initial franchisees and offer you a more hands-free management process.The Development and Operations Modules won’t require you to develop your own systems, but membership gives you access to potent development tools that will support your roll-out where it counts for you. This is, after all, a unique brand that should be guided by your own values and priorities. Nobody ever achieved grand dreams by fitting inside someone else’s cookie cutter. Your roll-out plans will be very different if you’ll be relying on CRM software, so bear it in mind when you write your franchise business plan.

Lead Qualification

Franchising is one of the best growth strategies in the business world, but it’s not fail-proof. Living on the cusp of your own growth curve requires a powerful lead qualification strategy that will identify the recruits who will serve your brand profitably. One bad choice and you can send your business into a PR crisis that travels halfway across the world in a day’s worth of social media posts. Every unit you open requires a considerable investment of time and money, but reps consider lead qualification to be their greatest challenge . CRM software has become innovative enough to tell you which leads are engaged, which are merely curious, and which fit your target market like a second skin. The days when you had to qualify your leads over the phone are over. Machine learning and automation will handle the process while you’re on the road to meet your first franchisee—no independent research necessary. CRM technology generates an average return of $8.71 per $1 spent : a growth rate that increases exponentially when you’re selling franchises rather than products. Factor it into your franchise business plan, and you’ll draw a far more compelling picture for your investors and potential recruits.

Avoiding Fraudulent Business Practices

In 2018, several franchisees took their Vision Express franchise to court for coercion. The claimants felt they had been pushed into signing their franchise agreements—a claim the court found to be credible. The case highlighted the fact that not all contractual exclusions are enforceable. The franchise sector marches in lock-step to a huge array of regulatory confusion, and both franchisors and franchisees must overcome it. Drafting a tight franchise agreement is no solution. Fairness and truth must prevail. Vision Express misrepresented their franchise in three areas :

The likely profits of each store

The ratio of eye tests and glasses sales

The overdraft repayment period

Ignorance is no excuse for misrepresentation, so the drafting of your agreement is one of the most complex tasks you’ll ever complete. In short, your projections, metrics, and other calculations need to be on point from your very first franchise business plan. Any sales process is weighted with risk, but franchising is particularly challenging. You can mitigate your risk through liability exclusions and boilerplate limitations, but inaccurate numbers will leave you floating out in space with no gravity to hold you down.

Not all sales fraud occurs after the point of purchase. Misrepresentation can sneak into the recruiting process as well. All in all, your FDD must cover several core facets under federal law. They are:

Background data about you as a franchisor

History of litigation

Clients and territories

Ongoing costs

Financial statements

Initial and long-term costs

Transparency and honesty are more than mere values. They’re required by law, but cost estimates are difficult to build if you’ve yet to open your first few units. This is where AI and machine learning come in. They can help you to flesh out the bare bones of your future in a transparent and reliable way.

Most businesses wait six years before rolling out their first franchise unit, but with the power of AI and automation, you can leap ahead of your own curve and tweak its growth to your own strategy. Once you’ve perfected your first roll-outs, machine learning will nudge it towards success one improvement at a time. Every franchise launch will be a learning process that makes the next launch smarter and more profitable thanks to data collection and analytics.

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How to Write a Franchise Business Plan + Template

A collage of burgers, fries, soda, and coffee cups laid out in multiple rows.

Elon Glucklich

8 min. read

Updated February 7, 2024

Free Download:  Sample Franchise Sandwich Shop Business Plan Template

Owning a franchise is an excellent way for business owners to gain instant brand recognition. 

By paying a franchise fee, you can own a fast-food restaurant like McDonald’s, Subway, or Kentucky Fried Chicken, a 7-Eleven convenience store, a gym chain, or even a hotel like a Marriott or Hilton. 

For franchises with fees between $25,000 and $100,000, recent research indicates that the 5-year business failure rate is about 5 percent , just one-tenth of the overall business failure rate. Put simply, you have a much higher chance of success opening a franchise than a traditional business.

But getting a proven brand name doesn’t guarantee success. You’ll need to ensure you understand the franchise’s business model and expectations. 

Plus, you need to determine if there’s a big enough market for your business to be successful, what potential customers expect from businesses like yours, and how many competitors you’ll face.

Fortunately, answering these questions are all part of writing a comprehensive business plan . Here are the steps to writing a franchise business plan that shows your business’s unique value—while answering critical financial and operational questions your franchisor or lender will want to know.

Ready to write your plan? Check out our selection of franchise business plan examples to inspire your own.

  • Why you need a business plan for your franchise business

Writing a detailed business plan is crucial for two reasons. 

First , it demonstrates to the franchisor that you understand how their business operates. 

Since the company sets your prices , controls your product inventory, and will likely tell you what marketing tactics you can use—the business plan puts in writing that you understand how their rules and guidelines affect your business.

Second , the plan also organizes all of your expectations, assumptions, and research about your business into one document that serves as a roadmap for success:

  • Business objectives
  • Franchisor requirements
  • Funding needs
  • Financial goals
  • Growth strategies

What’s your biggest business challenge right now?

How to write a business plan for your franchise , 1. understand your franchise business model.

Since the franchisor has already established the company’s business model, your business plan should focus on how you can adapt it to be successful in your chosen location .

Imagine you’re planning to open a fast food restaurant, chain hotel, or convenience store. How do these kinds of businesses operate successfully? Consider the business models of each:

Fast food restaurant: Standard menu, streamlined kitchen operations, marketing strategy leaning heavily on national advertising campaigns.

Hotel: Efficient room turnovers, maintaining cleanliness and amenities that the brand promises.

Convenience store: High foot traffic, quick inventory turnover, and flexible operating hours.

Each case presents different business dynamics – and considerations for your business plan. You should be able to show in your plan that you understand the revenue streams and direct costs of running this type of business, and what your customer acquisition costs might be.

2. Conduct a market and location analysis

Buying into a franchise gives you some marketing advantages. You have a widely recognized brand to attract customers, access to promotional materials, and maybe even some information about customer buying patterns from your franchisor.

But operating a franchise doesn’t take away the heavy lifting of market research . Each franchise has to consider local factors that could affect its profitability.

A good starting point is to conduct a SWOT analysis , documenting the strengths, weaknesses, opportunities, and threats facing your business. Here are some other key elements to consider:

Demographic study

  • Employment status

Understanding the demographics of the people most likely to visit your business could help you set operating hours or decide who to target with promotions.

Competitor analysis

  • Identify your competitors
  • Compare your product or service offerings with theirs
  • Compare price points
  • Compare marketing strategies
  • Define the competitive advantage of your business

Don’t just look at direct competitors that are similar to your franchise. If you’re opening a 24-hour 7-Eleven, you should also look at supermarkets, drugstores, or food delivery services in your area.

Geographic analysis

  • Neighborhood characteristics
  • Population trends

A chain restaurant in a busy downtown probably has different customers and peak times than the same restaurant in a shopping center near a residential area. So it’s essential to understand the characteristics of the neighborhood you’re operating in.

Consumer behavior patterns

  • Technology use

Understand what drives consumers interested in your business to make the choices they do. This is where you will want to do online research and, ideally, go out and talk to potential customers.

Franchise-specific research

You should also answer questions about the competitive positioning of the franchise – and franchises as a whole – in your area.

  • How do similar franchises perform in your area?
  • What is the brand perception of the franchise you intend to start?
  • Is there a large enough market in the area for your franchise?
  • What non-franchise options are available? What are the advantages or disadvantages for customers who shop there instead?

Be sure to examine what potential customers discuss on social media platforms and online message boards like Reddit to understand what they expect from businesses like yours.

3. Highlight your unique value proposition within the franchise

Even though you’re buying into a proven business model , you’ll still face competition. Your business plan gives you a chance to put on paper what gives you a competitive advantage. 

In the case of a franchise business , your franchisor may be the most important stakeholder to read your business plan. So the plan is to show them you can run a successful business under their name.

Maybe the 7-Eleven convenience store you want to open is in a location with a lot of foot traffic and no larger grocery stores nearby. Or maybe your restaurant offers late-night delivery in an area with few alternatives. 

By outlining your unique value proposition in your business plan—you can align your individual strengths and market opportunities with your franchisor’s proven business model.

Backing up your unique value proposition with any data or information about customers will be especially important if you’re operating in a crowded market with lots of competition.

4. Do your own financial projections and scenarios

The franchisor may provide some guidance, but this is your business.

That means your business plan should include the same financial details and projections as if you were starting a business from scratch. Your financial plan should include:

Start-up costs : The initial investment required to get your franchise off the ground. This should include the franchise fee, the cost of equipment, initial inventory, license fees, and any expenses related to your location.

Ongoing fees and operational costs: These are costs that recur monthly or annually. They include fixed costs like franchise royalties, lease payments, and staff salaries, and variable costs like utilities, inventory, maintenance costs, and marketing expenses.

Revenue projections : Detail how much revenue you expect to bring in monthly. Forecast revenues out into the future, and don’t be afraid to make projections several years out. 

Remember, good financial forecasts are meant to be adjusted as real numbers come in, and comparing your projections with actuals over time can help you make better business decisions.

Break-even analysis : This is where you calculate how long it will take for your franchise unit to cover its initial investment and start making a profit. Knowing your break-even point is essential not just for you but also for lenders.

5. Create an operational plan

Even though the franchise provides the business model, you must ensure it runs smoothly daily. Your business plan should provide a clear operational plan that outlines :

Staffing needs 

You should be specific about the staffing level your business needs . You’ll need cashiers, cooks, and delivery drivers if you’re running a fast-food franchise. List the skills and experience needed for each role, and outline your plans for training new hires.

Inventory management

While a franchise agreement might take some of the pressure off of sourcing your inventory, it’s still your responsibility to develop processes for managing it. 

You’ll need to understand if there are seasonal trends in your business, how often various products are returned, how long an item can sit on your shelves, and a variety of other factors that affect how much of a product you should order and when you should order it.

Quality control

Since you’re operating under a franchise agreement, you must comply with the standards the franchisor sets out for operating their business. Detail the quality control procedures you’ll put in place to meet those standards. 

Also, take some time in the business plan to address how you’ll stay compliant with local, state, and federal laws and the franchise’s policies.

6. Review and adjust your business plan

The business plan for your franchise should not be a static document . Market conditions evolve, consumer demands change, and new competitors emerge. Additionally, Franchisors often update their business models, add new products, or change their marketing strategies.

You may also be expected to periodically share financial reports or general updates about your business with the franchisor. (LivePlan lets you create and share visually engaging, professional reports using information from your business plan.)

Either way, your plan should outline how you’ll account for market shifts or franchise changes in your operations. Just as important, you should make it a habit to review your business plan periodically – many business owners review their plans quarterly or even monthly, especially when starting out. 

That way, they can adapt the plan as their business evolves.

  • Download your free sample business plan for a franchise business

If you need help getting your franchise business started, check out one of our free sample franchise business plans . You can download this document in Word form and customize it to get you started on your own business plan. 

It’s just one of 550+ sample business plans we’ve made available to download.

You can also review our step-by-step guide on how to write a business plan for a detailed look at how to write specific sections of a traditional business plan.

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See why 1.2 million entrepreneurs have written their business plans with LivePlan

Content Author: Elon Glucklich

Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

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  • How to write a business plan for your franchise 

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How to start a franchise

12 steps to franchising a business..

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In this guide

How to start a franchise business

How to buy a franchise with no money, buying a franchise vs. starting a business, bottom line, frequently asked questions.

Small business resources

Small business guides

Business formation

Opening a franchise allows you to flex your entrepreneurial skills without starting from scratch. You get a proven business model while still being your own boss. However, the startup fees can be pricey, and you must sign a contract committing to the franchisor’s playbook.

Starting a franchise can take three to four months from your initial research to the final purchase, according to the Small Business Administration (SBA) (1) .1 After you’ve signed the contract, it could take another two to six months until you’re ready to welcome customers.

That said, running your own franchise can be rewarding — and lucrative. These 12 steps can help guide you from conception to opening day.

1. List your top companies or businesses

When putting together a list of franchises you’d like to own, start by thinking about your favorite businesses. Consider your strengths, weaknesses and passions against what you think could make you money.

Franchises are available in nearly every industry:

  • Business services
  • Convenience stores
  • Real estate
  • Educational and learning
  • Entertainment
  • Specialty retailers
  • Travel agents
  • Health and fitness
  • Home healthcare

2. Research the franchise market

You can gather information about market conditions in your area, including demand and predictions for economic growth, through the SBA, the Census Bureau and private market firms to help you choose which franchise to open.

Take advantage of the resources at your local Small Business Development Center or a business school at a nearby college or university.

People who already own franchises can be invaluable resources. Ask about their experience and whether the process was worth it.

3. Evaluate investment and franchise costs

After you’ve pinpointed a market, research and compare the costs associated with your top picks. Franchise costs vary widely depending on the industry and business you choose to invest in, not to mention where you live or plan to do business. (2)

Note that some franchise owners — called franchisors — require a minimum net worth for franchisees.

When calculating the cost of starting your chosen franchise, look beyond upfront fees to costs that come with everyday business ownership.

4. Request a franchise disclosure statement

Reach out to the franchisor for a copy of its franchise disclosure document (FDD), which contains detailed legal information about its franchise group, along with financial data like the average gross revenue of its locations.

Sometimes you can find FDDs available for free from online databases around the web. Just make sure you obtain the most recent version, as franchisors release a new FDD every year.

Also, consider the retention rates for your chosen franchise. A retention rate is the percentage of locations that close each year. Section 20 of the FDD breaks down closures by state, so you can see how many have closed in your area compared to those in operation.

What else can I find in the franchise disclosure document?

An FDD covers more than 20 elements of buying a franchise, such as fee requirements, estimated initial investments and performance and revenue details.

It’s the legal information a franchisor is required to disclose to you, the franchisee, as part of due diligence before you invest.

The franchisor must provide you with the FDD at least 14 days before you sign a contract, though it’s a good idea to request a copy for your initial research. You can typically download a PDF of the FDD, though some franchisors might send you a hard copy.

5. Consider forming an LLC or corporation

Purchasing a franchise as a limited liability company (LLC) or corporation, rather than as a sole proprietor , provides financial and legal protection of your personal assets.

As an LLC or corporation, you aren’t held personally accountable for debt incurred by the franchise. If you remain a sole proprietor, you’re legally indistinguishable from your business — so you must cover business debt out of pocket, if necessary.

The same goes for lawsuits. As an LLC or corporation, your personal assets are covered if someone decides to sue your franchise.

6. Write a comprehensive business plan

A good business plan can help you analyze costs, predict sales and estimate profits before signing an agreement. Research what to expect in the months and years ahead to gather the information you need to take the next step — or pause if you’re not ready.

A successful business plan typically includes eight key components:

  • Executive summary
  • Company description
  • Market research
  • Organization structure
  • Product research
  • Financial analysis and funding needs
  • Financial projections

A business plan is necessary if you plan to apply for funding. Lenders want to see a viable plan for turning a profit and sustaining your business over the long haul, as it helps them evaluate if you’ll repay.

7. Get the financing you need.

If you don’t have the initial investment costs at the ready, you may need outside financing to launch or run your franchise. Many banks, the SBA and franchise-specific lenders offer financial help for would-be franchisees.

Other options include crowdfunding or lenders based entirely online. Online lenders like Kiva and Bluevine tend to leverage technology for more streamlined or automated approval processes. You could also use an online business marketplace like Lendio or Fundera to compare a network of funding options in one spot.

Some franchisors, like the UPS Store, Chem-Dry Carpet Cleaning and Cruise Planners, offer financing assistance, either through in-house programs or partnerships with third-party lenders. For example, Cruise Planners finances 50% of your franchise costs over the first 12 months, while Chem-Dry offers in-house financing for the initial licensing fee. This information is available in section 10 of the FDD.

8. Apply for the franchise and an interview

How you apply depends on the franchise you choose. For example, McDonald’s allows you to fill out an application online, while Chick-fil-A requires an expression of interest form to get the ball rolling.

Plan to attend interviews with the company, which allows time to parse through important details and determine if you’re a match for the franchise.

Expect questions that cover your plans, experience, finances and support, including your:

  • Goals, timeline and territory
  • Previous franchise and industry experience
  • Reasons for choosing the industry and franchise
  • Personal support system
  • Financial capital and business plan
  • Leadership experience
  • An exit strategy

9. Review and sign the franchise contract or agreement

If after your interview you and the franchisor decide it’s a good match, it’s time for the paperwork. You’re required to complete a franchise contract, which is a binding legal document that details:

  • Location and territory
  • Equipment and operations
  • Royalties and ongoing fees
  • Advertising and marketing
  • Trademarks, patents and signage
  • Training and ongoing support
  • Quality control and insurance
  • Dispute resolution
  • Renewal rights
  • Termination and cancellation policies
  • Exit strategies

Franchise contracts come with terms of five to 20 years. At the term’s end, you can often choose whether to renew the contract or discontinue your franchise.

At contract signing, you’ll likely need to also pay any upfront fees or initial investment expenses. Talk with the franchisor about preferred payment methods so you’re prepared.

10. Comply with state and local permit requirements

Most state and local governments require you to obtain licenses before launching your franchise — including health permits, occupational licenses, tax registrations and business licenses — or face fees.

While most states require the franchisor to apply for business licensing, a handful of states require a franchisee to register:

  • Connecticut
  • North Dakota
  • Rhode Island

You may also need to register for a license on a county or city level. Your franchisor should be able to help you anticipate permits required for your area and navigate the legal requirements. The SBA also provides information about franchise licenses that depend on your industry and state.

11. Build your location and assemble your team

The franchisor provides you with the essential elements of preparing your space — like signage, blueprints, fixtures and general decor — but you’re in charge of hiring contractors for the construction work.

You’re also responsible for hiring and training employees . Most franchisors provide training resources for franchisees, even sending a representative to help bring everyone up to speed about company branding, culture and expectations.

12. Stage a grand opening

In the days and weeks leading up to opening day, generate an awareness of your brand within the surrounding community. Most franchisors provide a marketing game plan and might even send a corporate team to help with your grand opening.

When preparing for your big day, a few tips can help make it a success:

  • Choose a date with high traffic to attract as many people as possible.
  • Send press releases to local media and advertise to your market.
  • Invite friends, family and city officials.
  • Decorate the store to attract attention and generate a festive feeling.
  • Organize exciting activities on opening day, like door prizes or giveaways.

If you’re short on cash, you aren’t disqualified from starting a franchise — but you’re going to need to explore funding and financing to get from planning to opening day.

  • Small business loan . Available amounts for small business loans range from $5,000 to $5 million, and rates start at around 5%.
  • Personal loan for business . A personal loan typically comes with fewer requirements. However, they often max out at $50,000, and expect rates from 4% to 36%.
  • SBA loan . Loans from the Small Business Administration (SBA) are known for low interest rates, but strict requirements and a lengthy application.
  • Home equity loan or HELOC . Consider borrowing against the equity in your home as a home equity loan or line of credit . But, because your financing is tied to your home, you risk losing your property.
  • Rollovers for business startups . A rollover for business startups — or ROBS — allows you to invest retirement funds into your business without paying taxes, fees or interest. However, this puts your retirement at risk.
  • Business partnership . Partners can assume part of the financial risk if you can’t fund the business alone. However, while you split the funding, you also split the profit.

When deciding between buying a franchise and starting your own business from scratch, a major difference is the initial investment compared to the ongoing fees. Buying a franchise usually costs more upfront, while the expense of starting your own business varies widely but is typically cheaper in the beginning. (3)

How important is autonomy to you? With a franchise, you’re buying into an existing business with limited control, as you’ll need to follow strict branding, marketing and legal guidelines. Starting your own business, on the other hand, offers more creative freedom. But, that comes with the challenge of building a customer base from nothing.

Overall, buying a franchise means you’re part of a proven system with more restrictions, but also with the benefit of brand recognition and corporate support. A new business means you’re building everything from the ground up, with more risk but also more freedom.

Case study : Opening a Critter Control franchise

Let’s say you want to open a Critter Control franchise in San Jose, California — a city with a population of about 1 million people. At an average of $582,828 gross revenue for that market, according to Critter Control, here’s what you could reasonably expect.

To estimate your profits in the first year of opening, you’d subtract the franchise fee, initial investment, operating costs and royalties from the average gross revenue.

Average gross revenue – (franchise fee + estimated initial investment) – operating costs – royalties

= First-year profit

$582,828 – ($70,100 + $116,550) – $326,384 – $46,626

Using this equation, you can expect to pocket about $23,168 after your first year in business. Because the franchise fee and initial investment are one-time fees, you should be able to make more money in the following year — some $209,818, assuming your average gross revenue stays about the same. As the business grows — and your gross sales increase — your profit is expected to increase over time, barring unforeseen circumstances in the market and industry.

Starting a franchise might be the right choice if you’ve got a solid game plan for raising funds and like the idea of following a tried-and-true business model. But if you’re still on the fence or want to research other options, browse our small business guides to starting, buying or growing a business.

How much money do you need to start a franchise?

The cost of buying a franchise depends on various factors, such as the location and industry. A restaurant in New York will cost significantly more than one in a small town — even just for the real estate alone. Startup costs can range from $10,000 to $5 million, with the average falling between $100,000 and $300,000, according to APD.2

How profitable is owning a franchise?

The profitability of a franchise varies significantly based on the brand’s strength, industry, startup costs and other factors. Data from 2017 shows that for food and beverage franchises, the median annual income is around $70,000 for two years or more in business and around $50,000 for startups. Only 34 percent earned more than $100,000, while many earned much less, according to a survey by the Franchise Business Review.3

How do franchise owners get paid?

Franchise owners and franchisors profit from the business’ success. Franchisors earn income through the royalties and fees paid by their franchisees, while franchise owners generate income from the net profits of sales and services, which is the remaining revenue after deducting overhead expenses. These overhead expenses include the cost of equipment, inventory, staffing and maintenance of a physical location, including utilities like electricity and internet.

  • “How long does it take to start a franchise?,” US Small Business Administration, September 6, 2018
  • “Franchise startup costs,” ADP
  • “How much do franchise owners make and is it profitable?,” Franchise Business Review, October 6, 2018

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Holly Jennings

Holly Jennings is an editor and updates writer at Finder, working with writers across all niches to deliver quality content to readers. She’s edited hundreds of financial articles ranging from credit cards to investments. With empathy at heart, she especially enjoys content that breaks down complex financial situations into easy-to-understand information. Prior to her role at Finder, she collaborated with dozens of small businesses to maximize the reach and impact of their blog posts, website copy and other content. In her spare time, she is an award-winning author for Penguin Random House, writing about virtual reality worlds, magical girls and lasers that go pew-pew.

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Franchise Business Plan Template

If you want to start a franchise business or expand your current one, you need a business plan.

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their franchise businesses.

Below are links to each section of your franchise business plan template:

Next Section: Executive Summary >

Franchise Business Plan FAQs

What is the easiest way to complete my franchise business plan.

Growthink's Ultimate Franchise Business Plan Template allows you to quickly and easily complete your Franchise Business Plan.

Where Can I Download a Franchise Business Plan PDF?

You can download our franchise business plan PDF template here . This is a business plan template that will help you with how to create a franchise business plan in PDF format.

What Is a Franchise Business Plan?

A business plan provides a snapshot of your franchise as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why Do You Need a Business Plan?

If you’re looking to start a franchise or grow your existing franchise you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your franchise in order to improve your chances of success.    Your franchise business plan is a living document that should be updated annually as your business grows and changes.

What Are the Sources of Funding for a Franchise?

Franchises are usually funded through small business loans, personal savings, credit card financing and/or angel investors.

FRANCHISE BUSINESS PLAN OUTLINE

  • Franchise Business Plan Home
  • 1. Executive Summary
  • 2. Company Overview
  • 3. Industry Analysis
  • 4. Customer Analysis
  • 5. Competitive Analysis
  • 6. Marketing Plan
  • 7. Operations Plan
  • 8. Management Team
  • 9. Financial Plan
  • 10. Appendix
  • Franchise Business Plan Summary

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Franchise Business Plan: How to Effectively Write One

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You’ve probably heard the saying, “If you fail to plan, you plan to fail.” If you are thinking about entering the world of franchising, you first need to craft a solid business plan.

A business plan is a formal written document that outlines your goals and describes how you plan to achieve them, while allowing for potential challenges you may encounter. In other words, your business plan acts as a GPS for your entrepreneurial journey, helping you anticipate roadblocks and detours as you move forward toward your destination.

How is a Franchise Plan Different?

A franchise business plan incorporates elements specific to the franchise model. This includes details about franchise fees, royalty payments, marketing and advertising support from the franchisor, training and operational guidelines provided by the franchisor, and the rights and obligations of both the franchisee and franchisor. Additionally, the franchise plan often references the franchisor’s track record, brand recognition, and established business model, leveraging these as strengths in the plan.

When Should I Write My Franchise Business Plan?

Once you’ve done your research and decided which franchise opportunity you’ve going to pursue, it’s time to write your plan. It’s important to have the plan in place before you sign the franchise agreement. At this stage in the game, a well-crafted plan shows the franchisor that you understand the business and are committed to operating the franchise successfully. If you intend to seek financing to buy your franchise, lenders will want to see the plan to assure them of your profit potential. Your plan needs to include the amount you want to borrow, how you’ll use the funds, and the preferred terms of the loans.

How to Craft an Effective Franchise Business Plan

Here are the elements you should include in your plan:

  • Executive summary: Begin with a concise overview of your franchise, including the business concept, financial features, and what sets your franchise apart.
  • Business description: Delve deeper into the specifics of the franchise. What services or products will you offer? Who’s your target market?
  • Market analysis: Research your industry, market size, and local competition. Understand the trends and growth patterns in your sector.
  • Management structure: Detail the organizational structure. Who will manage daily operations? How many employees do you plan to hire?
  • Marketing and sales strategies: How will you attract and retain customers? Outline your advertising, promotions, and sales tactics.
  • Financial projections: Provide a forecast for the next three to five years. Include projected income statements, balance sheets, cash flow statements, and capital expenditure budgets.

The U.S. Small Business Administration  has a more detailed list of items you might want to consider including in your business plan.

How Franchisors Can Help

Established franchisors can be an invaluable asset when it comes to writing your business plan. You can use them as a resource for data on market trends, customer demographics, and historical financial performance of existing franchise units. The franchisor may even provide you with a plan template tailored to their specific business model.  However, it’s essential to remember that while a franchisor can provide guidance, customizing the plan to your specific location, market conditions, and personal goals is your responsibility.

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In business for more than thirty years, Home Franchise Concepts knows the importance of a robust business plan and can guide you through the intricacies of creating one for any or our ten premier home services brands: Presently, Budget Blinds®, The Tailored Closet®, PremierGarage®, Concrete Craft®, AdvantaClean®, Kitchen Tune-Up®, Bath Tune-Up®, Two Maids®, Aussie Pet Mobile®, and Lightspeed Restoration™

We understand that many potential franchisees are new to the world of business, so we are happy to answer your questions about how to become a franchise owner .

Contact Home Franchise Concepts Today

Writing a business plan might seem daunting, but with the right support, it becomes a rewarding process. And with a partner like Home Franchise Concepts by your side, you’re equipped with the tools and insights to create a plan that not only impresses lenders but also sets you on a path to achieve your entrepreneurial dreams. To get started, simply contact Home Franchise Concepts today.

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How to create a franchise business plan

franchisor business plan

If you’re considering the purchase of a franchise, you’re probably exploring financing options. And an essential part of that process is the preparation of a franchise business plan. It’s likely the first thing a lender will ask you for. Take note that even if you’re not seeking outside funding, developing a plan is worthwhile. Here’s a look at what’s involved.

Readily available information and data

Preparing a franchise business plan is a lot easier than preparing a plan for an independent startup business. This is because you have easy access to much of the necessary information. During the sales process, the franchisor typically provides a great deal of verbiage you can use for the narrative sections of the plan. And you can find much of the required financial information in the earnings section of the Franchise Disclosure Document (FDD) .

In addition to the typical sections in any business plan, a franchise business plan will include a section outlining the track record of and support available from the franchise company. You may include items like the franchise company’s sales brochure or FDD as attachments to your plan. This additional information can give lenders a higher degree of confidence in your likelihood of success.

5 sections of the business plan

The format of a typical business plan, whether it’s for an independent business or franchise, usually includes the following 5 sections:

Introduction

This describes the business, including the products or services the business offers, the size and competitive aspect of the market, the operational approach that will be used, and the challenges and risks associated with start-up.

Management section

This section identifies and provides background information about the people in management roles. It might include their resumes or descriptions of relevant prior experience.  A franchise business plan also provides information about the franchisor’s direct support staff.

Marketing section

Here you define your target customers and how you plan to attract them to your business. This section explains the business’s competitive advantages and details marketing and advertising plans.

Pro forma financial projections

This section includes income statements, cash flow statements, and balance sheets that project the anticipated financial performance of the business. The statements should specify all material assumptions used to prepare the projections. Prepare these projections on a very conservative basis in case unexpected delays or challenges arise.

Financing needs

Even if you are self-funding the business, always prepare a section related to financing needs. This should include an analysis of all startup costs, including working capital to cover initial marketing plans and operating losses until you reach the projected break-even point. Even if you’re not borrowing from an outside source, the process of developing this section will prepare you for what’s to come in starting up the business.

You should be able to find much of the information you’ll need for the Introduction and Marketing sections on the franchisor’s website. The FDD will help you complete the Financing Needs portion of the report and, if the franchisor publishes a representation of earnings in Item 19 of the FDD , you may be well on your way to completing the Financial Projections section as well.

A helpful and worthwhile process

Some franchise companies require prospective franchisees to start and/or complete their franchise business plan prior to being approved. In any event, it’s a good idea to start thinking about your business plan early on. The process of preparing the plan is helpful in many ways. It forces you to consider options and formalize your projected course of action in the new business. You’ll typically identify questions during this process that may not have otherwise occurred to you. Contact the franchise company to get answers and make sure you have a clear understanding of the franchise prior to making a final decision to proceed.

Remember to update and finalize your business plan after completing the franchisor’s initial training. After training, you’ll have a far greater understanding of aspects like operational and marketing plans for the business. Most franchisors will also provide financial data that you can use to double-check, or even replace, the Financial Projections section of your business plan. Review your entire business plan based on your new knowledge, and you’ll be as prepared as possible to get your new franchise business up and running.

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How to Create a Franchise Business Plan

What Should a Franchise Business Plan Include?

A business plan is a document that outlines the goals, strategies, and operational plans of a business. In short, it is a roadmap to success . Not only is it an essential tool for an aspiring business owner to get started, but it serves as a benchmark for measuring progress and making adjustments as needed down the road.  

If you are planning to purchase a franchise, creating a thorough and effective business plan is essential to your success. Not only will it help you prepare for what lies ahead, but it is also a requirement if you are looking to secure financing. In fact, a well-written business plan can make the difference in whether a lending company approves your loan.    

Information You Need to Write a Compelling Business Plan  

A business plan is not something you can just jot down in a few minutes. Rather, you will need to spend intentional time compiling information and developing a strategy that will form the blueprint of your business. 

Here are several items you should consider including in your franchise business plan: 

  • Relevant work experience
  • Insights from existing franchisees 
  • Statistics within the industry 
  • Current industry news 
  • Updated data related to local economy 
  • Local marketing tactics  
  • Franchise Disclosure Document (FDD) 
  • Additional franchisor literature 
  • Necessary permits and licenses 
  • Market area map that includes all current and potential competitors

What Should Be Included in a Franchise Business Plan?  

Clearly, forming a business plan requires a diligent effort. However, if you are looking to own a franchise business, you won’t need to start from scratch since the franchisor has already compiled much of the information you will need. While you still need to work hard to put together a solid business plan, there are several templates available for guidance. No matter which template you choose, your business plan should include the following sections: 

Executive Summary 

This section will provide a mission statement for the business and then explain how your business will achieve its goals . Someone should be able to read the executive summary and know the purpose of your business and the potential it has in its given market. 

Business Description

The information provided here should be thorough. Fortunately, Item 1 in the Franchise Disclosure Document (FDD) will give an overview and history of the franchise you are seeking to buy . Furthermore, you should include details related to products and services, market and competition, business operations, and the potential challenges your business might face. 

Operations & Management Summary

This section will explain how things will get done in the business . It should outline the structure of the management team and include specific instructions related to the day-to-day operations of the business. Team members should be able to refer to the operations part of the business plan as they aim to implement the business’s strategies. 

Market & Industry Analysis

You will need to provide an analysis on the market that you are entering, which includes: 

  • A description of the marketplace
  • What your competitors are doing
  • Details that support your specific business strategy

Furthermore, you should also understand the industry along with its risks and opportunities, so that you can build strategies that take advantage of the opportunities while mitigating potential risks.

Competitive Analysis

You shouldn’t start a franchise business with your blinders on. It’s important to know what your competitors are doing and how they are performing . Evaluating your competitors is a way to validate the predictions you have for your business’s performance . By this point, you have probably already gathered all the information you need about your competitors. Ensure that you perform a thorough analysis of this information as it will guide you in your business decisions.  

Marketing & Sales Plan

What you include here is dependent on which franchisor you work with since you are obligated to use their sales and marketing tactics. You will want to know the process for targeting new customers and how much flexibility you have to implement your own marketing strategies . You should also provide specific information related to the initial marketing plan and what the ongoing marketing strategy will look like. Finally, it’s important to explain how the franchisor will support you in these efforts .

Financial Plan

This section should thoroughly outline the financial details of your business: where it has been, where it currently is, and where it’s going . The data will include: 

  • Business costs 
  • Current funding for the business 
  • Expected future financial needs  

While the actual financial performance of each franchise unit will vary, the Franchise Disclosure Document (FDD) provides information that is helpful for making financial projections. 

  • Item 19 includes the financial performance representations (FPR) for a prospective franchisee 
  • Items 5-7 have helpful financial information related to the initial fees and investment needed

Speaking with existing franchisees is also an integral part of this process. 

Pro forma is another part of the financial section, and it includes projections of future expenses and revenues , which you can corroborate with the following business information:  

  • Balance sheet
  • Profit or loss statement 

Perhaps it goes without saying, but be sure to update your business plan if something changes. It is not a document you should finish and then put away to gather dust. It is a valuable resource, and you should use it at every stage in your business if you want to be successful.  

Ready to Get Started With Your Franchise Business Plan?  

Creating a thoughtful and detailed business plan is key to each step of the franchising process. If you are ready to get started with owning a franchise business, then FranNet is here to help. Our franchise consultants will provide the resources, support, and guidance you need to make an informed buying decision. Schedule a free consultation today! 

Mar 17, 2023

Business Ownership , Buying a Franchise , Finance

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  • Franchise Buyers Guide :

Preparing a Franchisee Business Plan

Historically, a business plan is mostly a financial plan and analysis, specifically focusing on: "Why I need your money, what I will do with your money, how and when you will get your money back, and what a great guy I am and what a great business this is; or, why you should give me the money." It is usually a highly stylized presentation with numerous spreadsheets and exhibits.

This is a justifiable focus for most business start-ups since it is common knowledge, especially among lenders and investors, that many new businesses fail because they "run out of money." The available money usually dries up quite quickly, that is, during the start-up phase of the business. Owning a franchise will help prevent this from happening, thus the need for a different approach to the franchisee business plan.

What Should Go Into a Business Plan and Why

The franchisee business plan must be a total success plan, not just a financial plan. It will, of course, include the expected financial elements mentioned above. However, a great deal of the franchisor's vision, mission, philosophy, operating procedures and experiences must be blended in with and balanced by your firsthand knowledge of factors in the local marketplace. These elements are both needed to allow you to repeat the successes of other franchisees.

In the decision-making process of acquiring a franchise you will have already obtained the necessary local market knowledge for the plan:

  • Working experience in the type of franchise you are planning to acquire
  • Information from telephone calls with, and on-site visits to, currently operating franchisees
  • Comparative industry association statistics
  • Latest information from industry press and newsletters
  • Local economic data from your state industrial commission
  • Local press marketing information
  • Franchisor's FDD
  • Franchisor's literature
  • Other franchisor information such as preliminary plans
  • Population, household and income statistics for market area
  • Special permits and licenses needed
  • A map of the market area with numbered dots for each existing and anticipated competitor outlet
  • Each dot color-coded for independent, competing franchise-other, same franchise competitor
  • Table with a number for each dot with all obtainable information about each competitor:

Location characteristics:

  • Shopping strip
  • Mall, open or closed
  • Square feet of outlet
  • Length of time open
  • Number of employees
  • Location characteristics

Franchise Type

Your franchise opportunity research has outlined the various types of franchise arrangements you might consider:

Typical franchise types:

  • Single Unit
  • Multiple Units
  • Area Development

Less typical franchise types:

  • Sub-Franchisor
  • Fractional franchises
  • International

Your selection of franchise type will have a very significant impact on your franchisee business plan. For example, a single-unit, 1200-square-foot retail outlet franchise plan will be considerably easier to prepare than a franchise hotel development plan for an area development franchise with sub-franchise rights granted by an off-shore franchisor.

You Are the Planning Staff and More

It has probably become apparent to you by now that the preparation of the franchisee business plan, as well as your ultimate success as a franchisee, will be pretty much be the result of your own effort. In order to write a franchisee business plan that has credibility, it is imperative that you do all your own research. All the analyses need to be examined from both the macro and micro points of view, especially competitive analyses. Your personal support staff is limited at best. It is likely to be made up of your spouse and family, those you pay to prepare the document in its final form and your CPA and attorney.

Once you have signed a franchise agreement, you will find that your franchisor is in a position to provide the information you need from him in order to complete the plan. In some cases franchisors provide their franchisees with business plan formats on disks with blanks to fill in for a specific franchisee situation. These are usually handed out during the franchisor's training program. Since it is likely you will want this information prior to training, you will begin the delicate task (which will last the lifetime of the franchise) of obtaining from your franchisor what you need, when you need it, without impairing the franchise relationship.

Unless the corporate executive is willing to create a precise total success plan, he or she should make a lateral move to another organization in which demonstrated skills may be capitalized upon. The reason is that the decision to be a franchise owner is one from which there is only, at best, a very painful retreat, which is very likely to seriously impact both personal financial condition and ego. From the moment the franchise agreement is signed, personal negative cash flows begin and continue until the business reaches break even. A corporate executive should view his or her franchisee business plan as a set of personal "no retreat strategies." There are very few places of comfort to go back to, unless the franchisee business plan results in success.

Purposes of the Franchisee Business Plan

Quite often the franchisee business plan is undertaken to raise money for the business start-up. Even if the start-up is completely funded, the plan should still be written with the following audiences in mind:

  • Spouse and family
  • Advisors, CPA, banker and attorney
  • Public relations entities
  • The franchisor

The reasons for writing the franchisee business plan, other than raising funds, are to provide:

  • Decision confirmation
  • Self-direction and controls
  • Basis for reality checks
  • Personal expectations adjustor
  • Confidence builder
  • Basis for timely assistance solicitation
  • As a reference when obtaining input in areas of non expertise
  • Financial analysis, initial budget control
  • Basis for results measurements and evaluation
  • Control business development
  • Cash flow projections
  • Bail out signals
  • Exit and end game strategies

The steep negative cash flow which can occur from the point of franchise agreement signing to break even on operations is punctuated by a host of activities the typical corporate executive may never have undertaken or has long forgotten. The time between events in the start-up will feel especially short, since the franchisor has the formula down pat and is prepared to implement it swiftly. Unless you are obtaining a turn-key franchise, you can look forward to doing at least the following during start-up:

  • Business plan preparation
  • Determine, evaluate and provide resources
  • Site selection and approval
  • Site design, signage and zoning approvals
  • Site preparation
  • Build-out, orders, supervision and control
  • Franchisor training
  • Employee selection and training
  • Initial inventory or start-up package
  • Initial marketing
  • Grand opening
  • Operations refinements
  • Providing reports required by:
  • Bank and/or investors
  • Regulatory compliance issues, licenses

The primary purpose of your franchisee business plan is to see to it that you get through this critical start-up period successfully. Your franchisor can help, but in the last analysis you must do it. Plan well, for unless you do, there will be no tomorrow.

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9+ Franchise Business Plan Examples – PDF

Franchise Business Plan Examples

What is your initial plan when you have just franchised a business? Most people would find it absurd to immediately prepare a business plan for their franchise. Many would think that when you franchise, the franchisor would provide them the business plan apart from other elements necessary to operate the business. However, that is not the case. The task of creating a business plan for your franchise heavily falls on you. You have to note that developing a franchise business plan is not necessarily similar to the business plan of independent businesses.

  • 9+ Business Plan Profit and Loss Template Examples
  • 8+ Management Consulting Business Plan Examples

It is much simpler because, most likely, the franchisor can provide the answers to most of the questions that your business plan is seeking to address. Hence, creating a franchise business plan does not really require tough brainstorming, planning, and preparation. Although you still need to be specific in your goals as a franchise, the franchisor can provide you the information regarding your target market, the suitable location for your business, and many other basic information.You may also see  advertising and marketing business plan examples .

Franchise Marketing Plan Template

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  • Google Docs

Size: A4, US

Do not be too overwhelmed with the thought of creating a successful business plan and instead focus on what you can do and what you can ask from your franchisor. Moreover, the examples of franchise business plan displayed below can surely help you in your start-up.

Banking Franchise Business Plan Example

banking franchise business plan example1

Size: 2.6 MB

Basics in Franchise Business Plan Example

basics in franchise business plan example1

Size: 279.5 KB

Company Franchise Business Plan Example

company franchise business plan example1

Franchise Definition

By the book, a franchise is a method of parceling out goods or service. It is a type of business where the franchisee agrees to pay certain fees as well as follow certain business franchise rules in order to acquire the right to sell the goods or services of the franchisor, the company who established the company. The franchisee can also benefit from its business methods, trade secrets, goodwill, professional training, as well as operating assistance.You may also see company plan examples .

Popular Franchises

As we all know, many people love franchising business because the franchisor does not need to do hands-on on the operations because it has a lot of franchisees who can do the actual selling. Although they can operate a business on their own, they do not bear the hassle of opening branches to the different parts of the world. In fact, it is the franchisee’s task to disseminate the business in different areas.You may also see  restaurant operational plan examples

On the other hand, it would be less bothersome for the franchisees to open up a business when they do franchising because they already have the basic requirements for a start-up from the franchisor. They only need to pay the fees, get some professional training, and adhere to the rules and immediately operate. The risk of losing is also low.You may also see  business proposal letter examples

Hence, no wonder why there are a lot of franchising businesses today which are evidenced by the following companies:

1. McDonald’s

3. Burger King

4. Pizza Hut

5. 7 Eleven

6. Marriott International

8. Dunkin’ Donuts

9. InterContinental Hotels and Resorts

10. SUBWAY®

11. Baskin-Robbins

12. Domino’s Pizza

13. Taco Bell

14. Ace Hardware Corporation

15. Jani-King Commercial Cleaning Services

16. Wyndham Hotels and Resorts

18. Carrefour

19. Europcar

20. Choice Hotels

Comprehensive Franchise Business Plan Example

comprehensive franchise business plan example1

Size: 3.4 MB

Detailed Franchise Business Plan Example

detailed franchise business plan example1

Size: 179.5 KB

Entrepreneurship Business Plan Example

entrepreneurship business plan example1

Size: 147.7 KB

Elements of a Franchise

A franchise, for it to operate legally, consists of the following three elements: trademark, fee, and control or assistance.

Under the trademark of the franchisor, the franchisee must operate his business in providing goods or services. For example, when you are franchising Ace Hardware Corporation, you do not need to make your own company name as you are adopting the company name of the franchisor. Hence, in your operations, you must bear the name Ace Hardware Corporation.You may also see  restaurant strategic plan examples

There are certain franchise fees associated to the franchise which is a requirement and a condition for you to obtain the franchise and begin the operation. While the franchise fees are payment for the trademark and other benefits that a franchisee acquire from the franchisor, some franchisors would use the fee to aid in the start-up materials and tools of the franchisee.

Control or Assistance

Another element of a franchise is that, although the franchisee is running the business through his or her own operations, the franchisee is still subject to various requirements that are imposed by the franchisor. These include requirements regarding the location of the business, the design of the site as well as the appearance of the store, hours of operation, sales methods, marketing, as well as management systems.You may also see  business plan guidelines examples

Key Considerations

If you are still new to franchise, you need to know and understand the basics in franchising for you to easily perform franchising operations. There are some points to consider when you are in a franchise business, and these are as follows:

1. Business Suitability

One of the critical factors that you must consider is the suitability of your business. This includes your personal aims, your objectives, as well as your ability and will to manage this type of business—franchising.

2. Benefits

Another thing that you must consider in franchising is the benefit that you can acquire from the franchise. Although most of the franchise have a low risk of not being profitable, there are some franchise that would provide you very less returns.You may also see  tutoring business plan examples

3. The Downside

You must also consider the downside of franchising. For the franchisor, he or she must carefully assess the franchisee regarding the ways they can be trained and controlled. For the franchisee, he or she must scrutinize the legitimacy of the business.

4. Franchisor’s Life

Know that if you are a franchisor, it is your responsibility to manage the initial period of the franchise as well as to train the franchisee. He or she must also ensure to keep the franchisee interested in their business through launching and introducing new products and services.You may also see  farm business plan examples

5. Corporate Image

Franchisees can benefit from a strong corporate image of the franchisor. The franchisor must be legal and registered, and if the franchisor has a trademark, it must be registered with the Patent Office.

6. Legal Agreement

There must be an agreement signed before the commencement of the franchise or start of the franchise operations. There must also be an agreement as to who will shoulder the legal costs, whether it may be the franchisor or the franchisee. For this, you might want to take a look at franchise agreements .

7. Financial Matters

Another important consideration is the financial aspect of the franchisor. The franchisee would normally expect that there is transparency in the financial statements of the franchisor and that the accounting records involve positive amounts.

The franchise products or services must be carefully tested in the market with a pilot franchise and an independent franchisee for a certain period of time, usually over a minimum of twelve months to ensure that the franchise is not a failure.You may also see risk plan examples .

9. Operating Areas

In order to find the optimum area of the franchise, where it is conducive to the target market, a research must be carried out to define a certain location that will support the business based on the number of people, number of households, number of businesses, number of cars, etc. You might also be interested in rental property business plan .

10. Franchise Package

The franchise must provide the franchisor the benefit of the franchise even at the commencement of the franchise through providing a package of a fair amount of initial stock, training, manuals, accounting system, and other necessities for a start-up. For reference, you can check out tech startup business plans .

11. Brand Security

As has been said above, the patent or trademark of the franchisor must be registered with the Patent Office. This will cover the protection for the business name and the logo of the business . This will also ensure the franchisee that the business he or she is into is not only credible but also safe and secured.

12. Company Structure

The structure of the company who serves as a franchisor must also be taken into consideration. This will enable the franchisee to understand more about the business that he or she is into.You may also see  convenience store business plan examples

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Sections of a Franchise Business Plan

If you have already started in your franchise, one of the first things that you must have is a business plan . Although you might think that the resources and basic provided by the franchisor is enough, well, it is really not. You must have your own business plan that will detail your plans as well as the detailed steps in achieving those plans.

In your business plan, you must include these important section for it to be comprehensive and detailed:

1. Operational Plan

In your operational plan , it must contain information demonstrating your understanding of the nature of the business, the products and services for sales, the systems and methods used in selling, as well as the processes engaged to operate the business.

Operational plan is important in order to demonstrate how the business is executed. Also include your ways in interacting the customers, the delivery of the products or services, the systems for communication, execution timetables, among others.

2. Marketing Plan

In this section of your business plan, you must illustrate the company’s blueprint in order to create interest not only in the company but also its products. Normally, the franchisor would provide you advertising materials for your marketing. However, you may also need to develop additional advertising materials that better suits in the area where you are doing business.

The importance of marketing plan is that it is used to map out how to engage the market and sustain customer flow. You must include in your marketing plan the description of your target market, the channels for communication, marketing strategies, and many other plans related to marketing.

3. Management Plan

In your management plan, you must include the management—the people who set the strategies, oversee and execute, allocate the resources, and make the decisions—as well as the company’s vision and philosophy. Normally, the franchisor already has this in their company documents, but you can contribute in enhancing and improving their management plan through creating your own relevant management plan. This is integrating your own vision for your franchise to the management plan that they have already created.

This is important because it provides evidence of competency and management systems. Hence, relevant sections from the franchise management manual, tactical positions, strategic principles, and prevailing business models must also be included in this section of your business plan.

4. Financial Plan

Your financial plan is your method of proving how your operations can make money in doing what it is supposed to do. You may include in your plan the financial successes of other franchises and of the franchisor’s own operations. This is to demonstrate your anticipated success in your franchise.

A financial plan is important in order to show the key elements of the company’s operation. Hence, it is recommended that you will include in your financial plan your operational budget, the funds that you need and expect to raise of borrow, as well as the anticipated costs and revenues in the form of projections.

If you are contemplating on venturing into franchise business, it is better that you start immediately and enjoy the benefits from your franchise. The earlier, the better. Remember, a franchising business provides lesser risk and you are assured of the return, especially when you are franchising a business that already established its name in the industry, for example, McDonald’s.You may also see lean business plan examples .

So what are you waiting for? Make the wise decision now, and use the examples of franchise business plan provided above to help you in your start-up. If you got to start some time, why not now?

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Franchising Strategy: Strategic Business Plan Development

Aug 27, 2021 | How to start a franchise

Franchising Strategy: Strategic Business Plan Development

Thriving franchises tend to share some aspects, including well-designed franchising strategies and business plans. Get more information on how to develop your own Strategic Business Plan , and find out how to lay the foundation for a potential franchise.

Find out how “one size fits all” can be a recipe for disaster for possible franchisors, and discover the techniques for ensuring that you build a solid franchise with the needed structure to help them attract customers and grow.

This look at business plans and strategies for franchises help to give you the tools to possibly start your own franchise conversion process.

All too often, inadequate planning and development of a franchise business structure before offering franchises is reason why newcomers to franchising will fail.

The importance of a Strategic Business Plan

Sometimes, they will just ask their lawyer for input.  But while good franchise lawyers are invaluable when it comes to legal issues, they are unlikely to have the business experience, education, or expertise to develop sophisticated cash flow models and the organizational development plans that should accompany them.  Instead, they must provide their input based on “what they have seen” in the marketplace.  In fact, many franchisors will make the mistake of simply copying the franchise structure of their competitors when entering into the complex world of franchising.  The rationale is that “if it worked for them, it should work for me.”

The problems with this approach are threefold.

First , this approach assumes that the new franchisor’s franchise offering should be similar to the offerings of their competitors.  Unfortunately, “me too” is not a strategy.  Often, it is a recipe for disaster.  A new franchisor must distinguish itself from their competitors in order to attract a franchise buyer who has a choice between them and their more established rival.  This difference can come in the form of the consumer offer, franchise marketing, franchisee support and training, or franchise structure.  And all of these will have implications for the way in which the franchise offer is crafted.

Second,  this approach assumes that even if a similar strategy is implemented, that the resources of both organizations are similar.  Every organization comes to franchising from a different starting point – with different strengths and weaknesses.  Competing with an established franchisor by going head-to-head in an area of their strengths can be a huge mistake.

Third,  this approach assumes that a new franchisor’s competitors did it right in the first place.  What if they simply made decisions at random?  Often, it may take years for a franchisor to realize that an early decision is resulting in diminished profitability.

A mistake of a  single percentage point on a franchise royalty can easily cost you millions of dollars.   How?

Consider the following example:

A franchisor expects that the average unit revenues of their prospective franchisees will be $500,000 and hopes to sell 100 franchises in the first year.  But instead of charging a 6% royalty, they opted for 5%.

It does not seem like a big mistake, when accounting for a single franchisee.  It simply means that the franchisor will make $5,000 less in royalty revenues.  But in franchising, we are talking about growth on steroids, and this mistake might be multiplied 100 times or more.  And, since there are no expenses associated with this $5,000, this mistake comes right off the bottom line.

So do the math:

And an incorrect royalty is only one of a number of different business decisions that a new franchisor will make early in the process that could impact long-term profitability.  Just a few of the many others include:

  • Advertising fees
  • Technology fees
  • Product margins
  • Type of franchise offered (individual, area development, area representative, etc.)
  • Organizational structure
  • Compensation structure
  • Geographic growth strategy
  • Territorial rights provided to franchisees
  • Reservations of rights for the franchisor

In order to best position new franchisors for success, the iFranchise Group will often take a six-step approach to the development of your franchising strategy and business plan:

  • Initial discovery – we immerse ourselves in your business and organizational structure to better understand how you should position the concept.
  • Competitive benchmarking – we then gain a detailed understanding of the business decisions made by your competitors, understand competitive strengths and weaknesses, and how to best position the concept against them.
  • Organizational gap analysis – we gain an understanding of your internal capabilities, your needs to fill certain “gaps” when delivering services to your franchisees, and the resources you can call on to do so, in order to plan your organizational development.
  • Initial strategy development – we use your goals and your unique strengths and weaknesses to develop a preliminary franchise structure, subject to further financial analysis.
  • Financial modeling – we then develop a complex cash flow model (often 16 pages or more) that allows us to test various business decisions for both the franchisee and the franchisor simultaneously.
  • Financial sensitivity analysis – we then test various alternative scenarios to determine the impact that each might have on both the franchisee and the franchisor before making the recommendations that will allow you to finalize your business decisions.

By following the steps outlined above, the business structure and franchising strategy that we ultimately recommend for our clients is based not only on best-practices in franchising and within the client’s industry, but also on a close examination of our client’s culture, goals, business economics, and the resources available to implement a franchise program.

To learn more about how this franchising strategy and business planning process can help provide you with your best chance of success in franchising,  contact us . Email us at  [email protected] , or call one of our consultants at  708-957-2300.   And be sure to  request our free video on How to Franchise Your Business  – which will go into greater detail on this important topic.

About The Author

Franchise Word Team

Franchise Word Team

Is a seasoned franchise consultant and business strategist with a knack for uncovering lucrative franchise opportunities. With a rich network within the franchising community and a keen eye on market trends. We are trusted guide for entrepreneurs seeking top franchise opportunities. Providing timely updates on trends across various sectors including restaurants, fitness, retail, healthcare, and more. Franchise Word aims to help you make informed, profitable decisions in the evolving world of franchising.

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3 Tips for Building an Investor-Ready Franchise Business

F ranchises offer entrepreneurs a proven business model, product or service and marketing strategy. However, they also come with a price tag ― sometimes a hefty one. In addition to a franchise fee, which typically ranges from $25,000 to $50,000, franchisees often have to pony up contractor and professional fees as well as costs associated with signage and inventory. As with any other business, they must also raise sufficient working capital to pay to get launched and running. 

As a result, franchisees must always be on the lookout for funding opportunities to help with some of these costs. Because of the highly competitive nature of business funding, it pays to build a business that will not only get loan approvals from banks and other traditional lenders but also attract independent investors, including private equity firms with more favorable lending terms.

Did you know? One way to get started with limited funding is to open a franchise with low startup costs . However, keep in mind that a cheap cost to entry doesn't necessarily guarantee affordable operating costs. 

How to build an investor-ready franchise

Here are a few tips to help you build an investor-friendly franchise business.

1. Cover all your legal bases.

When you're looking to bring investors into your franchise business, remember that you'll be adding another independent party, the investor, into an already complex web of interactions. To ensure things run smoothly, it's crucial to take up the services of a franchise attorney from the get-go, who will help with things like the franchise agreement, the franchise disclosure document and issues of liability that often carry severe implications for franchise businesses.

Liability issues can weigh heavily on any business, making potential investors shy away from a partnership. Some companies have lost millions of dollars in product liability settlements. This happens even when the business in the suit did not develop the product in question. For franchisees with several units, such liability issues can create a loss-making, highly flammable business environment that potential investors won't want to touch.

In addition to addressing any liability issues and helping with the necessary franchising documentation, a franchise attorney can be helpful when it comes to selecting a business entity, such as a limited liability company or C corporation, which in itself is a critical step that determines taxation regimes and legal rights associated with your business. 

2. Create a solid business and marketing plan.

One common misconception among entrepreneurs venturing into a franchise business is that their role as franchisees will be limited to cashing checks and lounging behind an executive office desk. While the franchisor will often require the franchisee to stick by the original business model, an investor will only come on board if you have a business plan detailing your franchise business's strategic vision and goals, financial projections and comprehensive business background.

Plus, despite the fact the franchisor will also have a marketing strategy in place ― usually complete with logos, banner designs and ad campaigns ― it is vital you develop and integrate your own marketing strategy with the franchisor's marketing plan. Potential investors will often need to see how your establishment plans to interact with potential customers , something that will significantly influence how they assess the profitability of your venture.

To that end, invest in every practical marketing tool a typical business uses to find and close leads. Marketing strategies, such as email and social media marketing , can be quite effective for franchisee operators just starting out, thanks to the 58 percent of potential leads who check their emails every morning. To add to this pool of potential leads, you can use localized ad campaigns and promotion programs that target customers around your area of operation, ensuring your franchisor approves each element of your marketing strategy to avoid branding and trademark issues later on.

FYI: Creating a marketing plan that appeals to your investors is essential. Here are four marketing hacks to help you attract the right investors .

3. Streamline your franchisee's finances.

One of the biggest turnoffs for investors is a franchisee ― or any business, for that matter ― whose finances don't make sense, even when the franchisor is a well-known, profit-making brand. While it is standard for single franchisee units to employ basic accounting systems around the office, franchisees with multiple business units might have difficulty managing finances via simple financial software. This situation often makes the business look bad in the eyes of potential investors.

To remedy this problem, utilize a top accounting system that links up with all your business units, ensuring that any new software or hardware you introduce meets the standards set by the franchisor, if any. Your system should be able to produce comprehensive financial and accounting reports at a moment's notice in any of the locations under your franchise business.

Additionally, be highly selective with the bank you partner with, making sure it understands your business as a franchisee and your intentions to bring an investor on board . A good bank will grow with you by dishing out financial advice and support without interfering in the relationship between your franchisee and your investors.

Investors vs. bank loans for franchises

Generally speaking, the most significant difference between an investor and a lender is that investors tend to lend money to startup businesses, whereas banks prefer to lend money to proven, existing businesses. Here are a few things investors and bank lenders evaluate before working with your business: 

What investors look for in startups

Investors often look for startup features like a product pitch, return on investment potential and equity offer:

  • Your pitch: First and foremost, investors want to know what your big-picture pitch is. Rather than diving right into your financials, investors want to understand your market analysis and how your product or services solve a problem. In other words, an investor wants to see a thorough plan to bring your idea to fruition.
  • Your potential: Investors, more than anything, are looking for a significant return on their investments. Therefore, they want to invest in startups they believe have the potential to be the next big, publicly traded company. One of the primary indicators of a startup's potential is its ability to scale and grow as the market demand increases.
  • Your equity offer: Finally, investors don't charge interest on the money they invest in a company. Instead, they look for a share of the startup's equity. [Related article: How to Know an Investor Is Offering You a Good Deal ]

What banks look for in small businesses

Banks tend to look for proof of concept features like reliable cash flow, collateral and business experience:

  • Cash flow: Banks like lending money to established businesses with a steady, reliable income to minimize risk. To assess this, banks and other lenders will evaluate your revenue streams, profit and loss statements and credit history to ensure you have enough money left over after expenses to repay the loan.
  • Collateral: Additionally, lenders often look for a secondary source to repay a loan if a business cannot generate enough capital. Banks will consider real estate, vehicles, business equipment or other valuable assets to offset their risk. 
  • Experience: Finally, banks and lenders want to know what your business is and if you have enough experience to ensure your venture is successful. They will also review your business plan and financial projections to see how well you know the market and if your past projections have proven accurate.

Where to find investors

Today, finding investors is relatively easy. The trick is making your startup or small business attractive to investors. Here are a few places where you can find investors for your business :

  • Online fundraising platforms: Over the past decade, online fundraising platforms have grown in popularity and many accredited individual investors use them to find promising companies. A few popular equity crowdfunding platforms include Wellfound (previously AngelList Talent), StartEngine (which now also owns SeedInvest ), MicroVentures and Wefunder .
  • Social media: Social media platforms are a great channel to connect with your audience, establish your brand and market your product or services, but it is also an excellent resource to find potential investors. LinkedIn, in particular, is a great place to cold pitch or make strong connections, but you can also use platforms, such as Facebook and Twitter, to foster relationships and have thoughtful conversations.
  • Blogging: One of the best long-term strategies to develop an inbound audience is to start a blog that shares your story, states your goals and illustrates your progress. You can also track down potential investors and read their blogs for insights into what they look for before investing in a young company.

Additional reporting by Skye Schooley and Sean Peek.

Franchises offer entrepreneurs a proven business model, product or service and marketing strategy. However, they also co

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  1. Creating a Franchise Business Plan

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    Franchise Business Plan You've come to the right place to create your business plan. We have helped over 10,000 entrepreneurs and business owners with how to create a franchise business plan to start or grow their franchises.

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  9. Developing a Business Plan for Your Franchise: When and How to Do it

    Look to any earnings representations in the franchisor's disclosure documents to find the financial information you need. 5 Key Sections to Include in Any Business Plan. Each business plan is unique to the particular business it describes. Nonetheless, there are several sections common to any business plan.

  10. How to Write a Franchise Business Plan + Template

    1. Understand your franchise business model Since the franchisor has already established the company's business model, your business plan should focus on how you can adapt it to be successful in your chosen location. Imagine you're planning to open a fast food restaurant, chain hotel, or convenience store.

  11. How Do I Write a Business Plan for a Franchise?

    Executive Summary: Describe the franchise's model and list successes that it has achieved. For example, you might include how locations have exceeded $1 million in average gross sales when writing a plan for NĂ©kter Juice Bar. Company Overview: Give details about the company's past performance and future plans.

  12. How to Start a Franchise: A 12-Step Guide

    6. Write a comprehensive business plan. A good business plan can help you analyze costs, predict sales and estimate profits before signing an agreement. Research what to expect in the months and years ahead to gather the information you need to take the next step — or pause if you're not ready. A successful business plan typically includes ...

  13. Five Reasons Why A Franchise Business Plan Is Still Essential

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  14. How to Create a Franchise Business Plan

    There are a variety of templates available for developing a business plan, but here we outline the top six sections that should be included: 1. Executive Summary. The Executive Summary portion of your franchise business plan should describe your business's purpose and goals. Begin with a short description of your product or service and list ...

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    The franchisor may even provide you with a plan template tailored to their specific business model. However, it's essential to remember that while a franchisor can provide guidance, customizing the plan to your specific location, market conditions, and personal goals is your responsibility.

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    The franchisor typically has a great deal of verbiage readily available to include in the narrative portions of the business plan, and also includes much of the financial information you'll need ...

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    A franchise business plan also provides information about the franchisor's direct support staff. Marketing section Here you define your target customers and how you plan to attract them to your business. This section explains the business's competitive advantages and details marketing and advertising plans. Pro forma financial projections

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    Franchise Business Plan Template: Free Resource. Typically you'll see around nine sections in your business plan. These sections are: Executive Summary. This is a description of the business model. For a franchisee, this is where you can incorporate information about the proven business process you're buying into.

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