Franchise Business Plan: Your Guide To Getting Started

Did you know that the first person to franchise was a woman named Martha Matilda Harper?

She started her business in 1888 in Rochester, NY, eventually expanding to over 500 salons and training schools. One of the most remarkable aspects of Harper’s business was the business plan that she developed. She created many of the elements that are now a familiar part of franchising—a strong brand identity with branded products and services, initial and continuing training, an identified target market, and a process for doing business that was easy (and profitable!) to duplicate.

The Harper Method emphasized customer service, pampering women and providing them with a salon experience they couldn’t replicate at home. Using the first reclining salon chair (invented by none other than Martha Matilda Harper herself) and a sink with a circle cut out of it, clients could comfortably rest their heads and have their hair washed without fatigue or Harper’s secret tonic shampoo getting in their eyes. Her salons also offered childcare and evening hours, catering to the target audience of women.

When Harper landed on the idea to franchise, she had another unique perspective—she decided that only poor women could open the first 100 Harper salons, lending them money so that women without economic means could have a way to support themselves and their families. After all, the word “franchise” comes from a French word meaning “to free” with an original English meaning of “freedom from servitude or restraint.”

Harper’s legacy can be seen in many of today’s franchises. Let’s follow in this courageous and determined woman’s footsteps and learn more about franchise business plans and how you can get started on your own path to freedom.

What Is the Main Purpose of Franchising?

The main purpose of franchising is to allow businesses to grow and expand into different areas in a sustainable way. Rather than a corporate structure where one CEO is responsible for a sprawling entity, each franchise is independently owned and operated while still receiving support from the larger umbrella organization.

What Are the Benefits of Franchising?

Becoming a franchise owner comes with many potential benefits, some of which are reflected in the story of Harper’s franchising! For example:

• Minimal Up-Front Costs

  Just as Harper provided loans for her franchisees, many franchisors offer financing or help you secure financing. Additionally, there are some franchise concepts that cost under $50,000 to start.

• Education and Support

  Starting and operating a business is difficult! This is reflected in the fact that nearly 20% of small businesses fail in their first year, 30% fail in their second year, 50% fail after five years, and 70% fail after 10 years. Like Harper, who opened educational centers for her franchisees, most franchises will provide initial education on the practical aspects of running a business and franchise-specific instruction. This support typically doesn’t disappear after your first year, however. While corporate support will vary depending on the franchise, you’ll usually find ongoing education, training, and other types of support throughout your tenure as a franchisee. For example, Minuteman Press offers 28 regional support teams that will come out onsite to help with anything from management to marketing.

• Brand Awareness

  With the proven success of the Harper Method (and the innovative marketing tactics that Harper taught them), new franchisees were able to easily attract clientele and survive those first few years of business. With salons in business from 1888 to 2005, this franchise concept was viable for 117 years! When you became a “Harperite,” people knew what it meant—great products, excellent service, and a salon experience like no other. This is true for today’s franchises as well. When you buy into a concept, you’re coming into a world where customers already know your brand and what to expect. You are responsible for fulfilling and exceeding their expectations. However, this can potentially come with a downside: not all brand awareness is positive. It’s important to meet the challenge of amplifying your brand positively while trying to mitigate any former negative experiences.

What Are the 3 Basic Types of Franchising?

The three basic types of franchises are business format, product, and manufacturing. Let’s take a quick look at each to understand the similarities and differences.

1. What Is a Franchise Business Format?

The business format is the most common type of franchise and what most people are familiar with. The business format franchise may vary slightly, depending on the franchisor, but essentially you are purchasing the entire proven business model. Like any small business owner, you’re responsible for running the business on a daily basis. Remember the Harper Method? This is a perfect example of a business format franchise.

2. What Is a Product Franchise Format?

A product franchise is also sometimes called a distribution franchise. Like the name implies, franchisees purchase the right to distribute the branded products (or services).
Unlike business format, these types of franchises don’t usually include a proven process for how to run your company.

3. What Is a Manufacturing Franchise Format?

This type of franchise is similar to the product franchise. However, rather than just being able to distribute branded products, you are also purchasing the right to manufacture and sell them. Similarly, you are not provided with the complete business model.

What Is the Best Type of Franchise?

The best type of franchise is the one that works for you and your lifestyle. Most franchisees prefer the business format due to the many benefits that come with it. While product and manufacturing franchises can be a viable option, they often require specialized knowledge and/or a lot of previous business experience to operate them successfully.

When considering what type of franchise works best for you, ask questions like:

• Will this opportunity allow me to live the lifestyle I desire?
• How much free time will I have?
• Will I make enough money?
• How much control will I have over my work environment?
• What industries am I interested in?
• Is there enough market demand for this franchise in the area I want to work?

Investigating your own motivations for becoming a franchise owner will help you determine the best type of franchise for you.

What’s the Difference Between an LLC and a Franchise?

“Franchise” refers to the idea of an umbrella company with independently owned and operated businesses sharing the brand identity. As such, the term “franchise” does not typically refer to a specific legal structure. “LLC” stands for “Limited Liability Company” and is a legal definition.

An LLC, as the name implies, protects your personal assets in case the worst should happen. A franchise can be structured as sole proprietorship, a corporation, an LLC, or any of the common US business structures. It is considered a good idea to set up your franchise as an LLC as this legal structure gives you the most personal protection. However, every franchise is different and may be set up as one of the other legal structures, so it is important to inquire if that is something that you are passionate about. It’s also a great idea to speak with a business and/or tax advisor to determine the best structure for you and your franchise.

Do You Need a Business Plan To Start a Franchise?

Technically, no. However, a franchise is still a business and creating a business plan before you buy into a franchise is an excellent way to prepare. Having a solid business plan can also help you secure funding. In fact, most lenders will require a business plan when applying for a commercial loan. You may be able to have a very short business plan, but banks will usually want at least a general overview of your company.

While some franchisors may provide a business plan, it’s still a great exercise to create your own and see how yours stacks up! If your franchise opportunity doesn’t come with a business plan, you can definitely incorporate the processes and information that are provided to you into the business plan you create.

What Is a Franchise Business Plan?

So you’ve settled on the franchise business model and are ready to get started. What exactly is a business plan? Simply put, this is a document that outlines what your business is going to do and how you’re going to do it. Keep in mind that every franchise will vary, so your business plan may be slightly different. That being said, let’s take a look at what is included in a franchise business plan.

Franchise Business Plan Template: Free Resource

Typically you’ll see around nine sections in your business plan. These sections are:

1. 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.

2. Company Overview

This section is a more detailed look into the franchise concept. You could include the history of the franchise, short- and long-term objectives, achievements and obstacles, the products and services you’ll provide, and/or list the franchisee requirements.

3. Industry Analysis

This is where you will discuss the overall industry you’ll be operating in and how your franchise will fit into the big picture.

4. Customer Analysis

This piece of the business plan takes a deeper look at your target market. You can describe the current customer landscape, detail the growth potential, and other customer data points.

5. Competitive Analysis

This section is where you’ll analyze your competitors. You might list your closest competitors and identify strengths and weaknesses, as well as the advantages and disadvantages of your business compared to them.

6. Marketing Plan

This is an excellent place to incorporate marketing training and support from the franchisor. You can detail techniques, strategies, and tools that will be used to market your franchise.

7. Operations Plan

This section is where you spell out the finer details of your business operation. You might need to include things like major supplies, operating equipment that you’ll need to purchase or lease, quality control procedures, an organizational chart, etc.

8. Management Team

This is the place to highlight your management team’s strengths and weaknesses, as well as laying out your plan for growth and development. You could also include your succession plan in case yourself or a key employee is incapacitated.

9. Financial Plan

This is a crucial part of your business plan, especially if you are attempting to secure funding. You’ll want to include items like sales and profit trends, projected cash flow and operating statements, your strategy and timeline for obtaining funding, and any other financial documentation that provides compelling evidence for your plan.

Source: this template was developed and adapted from the DECA Franchise Business Plan exercise.

How Do I Write a Business Plan for a Franchise?

Writing a business plan can seem daunting at first, but these practical tips can help you craft your franchise masterpiece.

• Do Your Research

Like any writing project, it’s important to know your subject matter before you start. Researching “franchise business plan” or just reading about business plans in general are a great starting point. You can find many different examples online that can guide your writing.

In addition to this general research, you’ll want to do specific research as well. Learn about your chosen franchise, explore the industry it is in, dive into the competition and your target market…there’s a lot of information available and it will help inform your writing.

• Use a Template

You don’t need to reinvent the wheel! There are so many business plan templates out there (including the one above) that range from very simple to incredibly complex. We’d recommend choosing a simple one to start with and then adapting it to your needs.

• Think About the Reader

One of the reasons that Martha Matilda Harper was so successful was her understanding of her target market. She developed her product and services to fit seamlessly into the lives of the busy women who made up the core of her clientele. Just like Harper, you should spend time thinking about who you’re writing this business plan for.

Are you going to use this franchise business plan to secure funding? Will you be referring back to it during your first year of business? Is this meant to persuade someone to join you as a partner? Or perhaps this business plan needs to fulfill several of these purposes! Identifying your target audience and writing for them will make your business plan come alive.

• K.I.S.S. (Keep It Simple, Silly!)

This saying is a classic for a reason—it works. Don’t use fancy, long words or complicated sentences. Remember to keep it simple and clear. Your readers will thank you!

• Use Your Resources

There are many writing tools online, like Grammarly or Hemingway Editor, that will give you suggestions to improve your writing. They’ll catch misspellings or sentences that aren’t clear. In addition to these types of tools, it’s always a good idea to ask someone (or multiple people) to proofread your work. You’ll be surprised at what they’ll catch!

Fast Food Business Plan Example

Let’s take a quick look at a hypothetical business plan for a franchise restaurant journey. After many hours of googling questions like “how do I start a fast food business from scratch,” “how much does it cost to open a fast food shop,” and “is a fast food business profitable?”, Maya found a franchise concept called Bruster’s Real Ice Cream. As she researched, she found out that this franchise has been ranked by Entrepreneur Magazine as a top franchise for the last 20. The emphasis on excellence and bringing on the right franchisees appealed to Maya, as well as the idea of 160 ice cream recipes to choose from. Who doesn’t love ice cream?

Armed with all this info, Maya sat down to start writing a business plan. As she stared at the blank page, she realized that she needed to read more about this franchise. As she read about Bruster’s on Franchise.com, to her great surprise and delight, she found that she didn’t have to come up with something from scratch. Bruster’s actually offers both lending resources and business plan templates as a part of their franchisee support! Not to mention all the details about startup costs and company culture.

Find Your Franchise at Franchise.com

Here at Franchise.com, we’re proud to follow the example set by Martha Matilda Harper so many years ago. You’ll find many supportive, helpful franchisors (like Bruster’s Real Ice Cream) on our site who will help you take your franchise business plan and make it a reality. Explore our franchise concepts today, like the current top 25 franchises or low-cost franchises. Working on a franchise business plan? Check out our glossary of franchise terms to learn more about the language of franchising!