Franchise Business Plan in India

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With a proper business plan a franchise is able to receive some financing and it also helps the owner in achieving some much needed success. Experts opine that every company should have a proper business plan in order to be successful in the long run.

Need for a Franchise Business Plan

As has been said earlier the main benefit of a business plan for a franchisee owner is to get the initial funding from lenders such as the banks. These plans also get the investors understand what they are dealing with when they are putting their money in a company. The business plan also basically spells out the reasons for which a franchisee needs the money, as well as charting the course for expenditure of the same. It also mentions the ways in which the franchise will be paying the loan back.

The franchise business plans enable the owners to set goals that need to be accomplished in the short as well as the long term. The owners should always do thorough research before making any investment and there should also be a definite structure to the whole process. These plans help the owners to stay on track and make sure that the company is performing as the owner had envisioned it to.

Preparing a Franchise Business Plan

Initial part
The first part of the business plan should include the name and contact details of the franchisee owner, which will be used for business purposes. The owner also needs to include a statement of purpose that enumerates the reasons for formulating the plan. Consequently he or she needs to spell out what other areas will be included in the plan with a clearly written table of contents.

Management information
The business plan should mention the names of the major office bearers of the company and also state what roles they shall be performing in the company. Their educational qualifications should be mentioned as well. It is ideal if their resumes can be included and their relevance and usefulness vis-à-vis the company can be presented in details.

Marketing information
The business plan for a franchise should mention clearly the ways in which the organization will be attracting customers. For this the owners can include all the points of competitive advantage that they feel their company will enjoy in the business plan.

The plan should also highlight all the advertising and marketing plans that they are looking to put to use. For this purpose the owner can use the company brochure and website and get some idea of their preferred marketing modes and patterns.

Financial planning
When it comes to showing the prospective financial planning, the franchise business plan should include the following:
  • Income statement
  • Balance sheet
  • Cash flow statement
These statements will help both the investors and the company owners have a clear idea as to how the company will be performing finance-wise in the future. When these statements are being created, the owners should also think about the possible future challenges as well as delays.

If the owners are financing the business totally on their own then they would need to create a separate section on financing requirements. This will also indicate whether the operating costs will be covered in totality till some profit is made. It is better to take some financial planning material from the franchisors or talk to an accountant.

Buy franchise business in India

The first step in understanding whether one should buy a franchise or not is taken when both the parties communicate and the franchisor explains the various aspects of its business. During this part of communication the various capabilities and skills needed to succeed in the franchise’s structure are mentioned as well. It is at this juncture that the franchisee decides whether it would be possible for him or her to be included in the set up or not.

In the second stage the franchisor presents the financial requirements for operating the store, outlet or the other applicable mode of business. The main purpose is to make sure that the franchisee has the capability to operate in the financial model or not. It is better to communicate with the franchisor in an honest and open manner so that there is no confusion in this regard.

In the third phase the franchisee needs to review the terms and conditions mentioned in the Franchise Disclosure Documents. This is done to make sure that the franchisee is in agreement with the franchisor on every single point mentioned in the contract. The buyers can also employ franchise attorneys to go through the documents and make sure that there are no contentious issues.

Once the franchisee is done gathering the initial data and completing the first few stages of reaching an agreement with the franchisor, he or she needs to get further information regarding the franchisor from the other franchisees.

All this information will help the franchisee decide whether the business model followed by the franchisor has any profitability or not. This will also help them get a good idea of the lifestyle they can lead by operating with the said company.

Franchising is about building up connections with the franchisor and trusting them and following their lead. So it is better to visit the headquarters of the franchisor and get in touch directly with the decision makers in the company and interact with them. This will also help the franchisee owners understand what is being expected of them and what is required to make the whole set-up work.

How to Sell a Franchise

The first thing that decides to be looked at while becoming a franchisor is to check if the concept is really unique. It should be an appealing proposition for both future franchisees as well as customers. Also the business model should be easily repeatable so that others can reproduce the same quality and quantity easily.

The business model needs to be a successful one for it to be considered a salable one. Growth is always an important factor for willing investors. The owner also needs to do substantial market research about the profitability of his brand of product before making the all important decision. Important factors in this regard are consumer demand and scope for newer companies.

The franchisor should be ready to accept responsibilities that are completely different from the time when they operated as owners. They should also be prepared to accept the fact that the franchisee may not execute their concept in just the same way as they did.

There are some other alternatives that a prospective franchisor should consider before taking the plunge:
  • Debt financing
  • Taking partners
They should also consider the financial implications of their decision like the possibility that they shall not be entitled to all the profits earned by their brand and whether they have the financial strength to carry out the whole process.

The future franchisors should also contact legal personnel and authorities and make sure all the necessary procedures like incorporation and pre and post incorporation procedures are properly completed and the correct authorities are informed about the entity.

Following are some important factors that need to be looked into while becoming a franchisor:
  • Franchise fee
  • Whether equipments and products will be sold to the company
  • Royalty percentage
  • Required business experience of franchisees
  • Terms of agreement
  • Required net worth of franchisees
  • Size of territory to be given to each franchisee
  • Marketing methods
  • Geographic area where franchises will be offered
  • Type of ownership pattern for franchisees – area/master franchisees or owner operators
  • Length and type of training program
While completing the initial legal documents the franchisors should be prepared to face some level of criticism from the concerned authorities who can ask for further disclosures before permission to go ahead is provided. They also need to hire experienced and qualified professionals to oversee the increasing areas of their business operations. Once these processes are completed and the franchise is sold the franchisor should assist the franchisees to the best of their abilities.

Last Updated on 11/01/2012