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Should franchisors help you with your business plan?

Written by Frank Milner on Tuesday, 17 October 2017. Posted in Insight

When it comes to raising funds, be aware that banks love it when a business plan comes together

Should franchisors help you with your business plan?

Business planning forms an important part of your research before starting a new business. Any bank will require sight of a business plan before they lend to you but, even if you’re not seeking funding, it’s important to have one. Banks use business plans to assess whether the investment that they are making in a business is likely to be a sound one. And you as a franchisee should view them in exactly the same way. But who should write the business plan, how personal should it be and who owns it?

One of the many advantages of franchising is that your chosen franchisor will have information on the previous success of the business. Why does that matter? Well, if you were starting your own business, alone, you’d have to guess at the potential turnover, profitability and working capital that you’d need. Information from the franchisor about their own success or, better still, that of other franchisees, can help you make an educated guess at where your business could go. These figures form an important part of the business plan.

A word of warning. Because franchisors can issue these illustrative trading figures, they can be tempted to get involved in providing other information that is needed for the business plan too, such as local-market knowledge and industry trends, staffing requirements and competitive analysis. However, the risk is that before too long the plan is all but written by the franchisor. Some franchisors go further still and provide a franchisee with a ready-made plan for them to change the name and location on.

This is dangerous for both parties. For the franchisor, they risk potential legal action from a franchisee if the details in the plan aren’t realised over time. But there is far more at stake for the franchisee.

The business planning process is an important part of your due diligence. It forces the franchisee to think through the business issues. If someone else did the local-market assessment what do you actually understand about the opportunity or the competitive situation in your area? Moreover, if you have not completed your own independent business plan, how do you know whether the illustrative projections issued by the franchisor are accurate at all?

It’s your business and the plan should be personal to you, your finances and your locality. The business plan also has a life after you start the franchise as a barometer for your success. It is a vital management tool and if someone else wrote it, how useful can it be?

Naturally, franchisors want to make the business planning process easy for a franchisee because it can be daunting to write a plan for the first time. But, ultimately, a good, ethical franchisor will view the hardship that you go through to write your plan partly as a measure of your potential as a successful franchisee. After all, if you find writing about the business in a plan too difficult, it’s surely going to be the case that running the business will be too challenging. Bottom line is that it’s your business so it should be your plan.

About the Author

Frank Milner

Frank Milner

Having worked as a stock broker, built a successful insurance business, acted as a sales coach and then taken on a vice president role at WSI, the digital marketing franchise, Milner has an impressive and varied background in business, franchising, sales and marketing. In his current role as CEO of Tutor Doctor, the private tutoring franchise, he's seen the company grow globally to include 500 franchisees spread across the world, including the UK.

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