Nearly half a million new businesses were registered in the UK in 2020, according to recent data from Companies House and many of the new businesses started were as a result of the COVID-19 pandemic. According to HMRC, early 10 million jobs were furloughed between April and December last year and the UK unemployment rate has risen to 5%, according to the Office for National Statistics.
This has led to higher numbers of people looking to start something new. Franchising has been a key focus for many aiming to explore new routes for their future, due to its tried and tested format and support structure,
There is a lot to consider before taking the plunge but once you have narrowed down your choices, doing your research and planning will help you to properly assess the franchise opportunity you are considering.
Part of the process of buying a franchise will involve writing a business plan which might be something you haven’t had to do in the past. Although you may have been involved in preparing business plans in your corporate life previously, a plan to cover a new franchise will be very different.
At Revive! we encourage prospective franchisees to start preparing their business plan as they do their research into their territory and provide a set of templates to start them off. Your chosen franchisor might do the same but if not, most of the high street banks should have templates you can download.
The plan should demonstrate the viability of the new venture, summarise your market and product research and support your financial forecasts.
A bank will always want to see a business plan from you, in order to assess your request for finance. The franchisor will often want to see your business plan before agreeing to sell you a franchise. And you need to have a strong business plan to guide you as you start your franchise, helping you to keep on track and meet your initial objectives.
What should the plan include?
Talk about you:
Describe your career background to date and what transferable skills you bring to this new business. You can include your CV but it helps to bring your plan to life if you talk about what your experience will bring to the new venture. Confirm how you are funding your stake as you will need to put in 30-50% of the total start-up costs depending on the franchise.
Talk about the franchise:
Your franchisor will probably have background information you can include, covering the business sector. Currently it will be useful for this section to include some details of how the network has coped with the pandemic lockdowns and restrictions. It should also include details of the franchise package, initial start up costs and what is included in the fee.
The next section of the plan is where your research into the territory and business opportunity comes in. As part of your due diligence and research into the franchise, it is important that you understand your local market and the sales opportunities within your territory. Think about your area/territory – will you be based at home or from premises? You should identify potential customers and understand the number of local competitors you may have as well as how good they are. Doing a bit of ‘mystery shopping’ to test out your future competitors can give you a great insight into their customer service as well as pricing. How much competition is there, what do you know about them and how can you stand out if it is a crowded market?
This will all depend on the type of franchise and business sector you are joining but some of the aspects to identify could include population or households, the affluent areas to target, how many competitor sites are in your area and where they are.
Your franchisor should help you with many of these aspects, but you will need to understand and ‘own’ your business plan.
Your plan should also include some short and longer term goals and even an exit plan for the future.
The plan should back up your projections and this is an area I will cover in more detail in my next article.
Preparing your business plan as you go through your research will help you to focus on the gaps you still need to fill in your knowledge about your chosen franchise and your territory. This will ensure that by the time you come to present it to a bank for finance, you will have the answers to any questions at your fingertips!
