Expenditure and Franchisor Fees Franchise Disclosure Document FDD document that describes the essential components of the firm such as the financial information, territory, training and competition is needed when starting a franchise business. The second most important thing that you need is a franchise business plan to guide you on how to run the business. Needless to say, if the business plan is not well written, you will end up making misinformed decisions that will spell doom for your business.
Lagorio Senior writer, Inc. Lagorio When Harland Sanders sold his first Kentucky Fried Chicken franchise inthe document he prepared for the first batch of franchisees was a mere two pages in length.
Things have changed a lot in the intervening years. Today, the extremely rigid Franchise Disclosure Document, which is proffered by a franchiser before any agreement is pursued, must contain a preordained list of 23 items.
Most franchise agreements run 75 pages or longer. Compared with these highly-formatted documents, a franchise business plan tends to be much shorter and focus on the dream. It is prepared by the franchisee as an introduction to and overview of a business opportunity and can therefore be more flexible, says Gary Castrogiovanni, a professor at Florida Atlantic University's Adams Center for Entrepreneurship.
Much like any traditional start-up business plan, a franchise plan should provide a company's vision, a financial analysis, and a marketing plan.
The main difference is that it must address in detail the economics of both the franchiser and the franchisees - and show how the parent and its affiliates will be able to make money together. Here's how to read a franchise business plan with a trained eye.
The Basics As with any business plan, you should expect to see several sections laid out in a franchise plan, including most vitally an introduction or abstracta management overview, a marketing strategy, detailed financial projections, and the financial requirements for investing in a purchasing a franchise.
Although it's easy to breeze through the first three sections, which lack financial projections or detail about your involvement as an investor, they can yield crucial information and you should spend time reviewing them.
First, you will want to see if any material on the franchisor's website differs from the material in the business plan. You also want to make sure many elements of the franchise's strategy match your company's culture and style. Keep an eye out for the business plan's description not only of the service and products involved, but the size and competitive nature of the business - and the challenges and risks involved.
The business plan should be frank, thorough, and in tune with any additional research you've done on the market. Next, you'll typically come to a description of the management roles in the franchise, including information on the people who fill those roles in biographical form.
Again, you might want to do additional research - even just spend a few minutes on Google - to learn more about and verify the backgrounds of everyone involved. Where you would normally find industry analysis in a business plan, most franchise business plans typically include a franchise overview, along with a description of the market the franchise would be entering - and its competition.
These should be thorough, and lead seamlessly into a marketing plan. The plan should specify how territories will be carved up, and how many locations per territory a franchisee will be allowed or expected to open.
Finally, a franchisor should convey a sense of culture and personality in his or her business plan. Look for a franchisor to display confidence and ambition as well as a sense of loyalty to the prospective franchisees in the proposal.
Will the Marketing Strategy Work?Writing the Franchise Business Plan The 5 main elements every franchise business plan should have Next Article since this is probably the first document any such financing source will ask you for.
As with any business plan, you should expect to see several sections laid out in a franchise plan, including most vitally an introduction (or abstract), a management overview, a marketing strategy. The Franchise Disclosure Document is a packet that has four major components to it: 1) the Franchise Disclosure; 2) set of exhibits; 3) Franchise Agreement; and 4) schedules (read this article to learn about "The Elements of a Franchise Disclosure Document").
This entire Franchise Disclosure Document is typically between pages in length. Every plan includes the support of our suite of professional services: You’ll receive a business plan document written in Microsoft Word, financials custom-built for your company in Microsoft Excel, and an eye-catching finished plan laid out in professional graphic programs by skilled designers.
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.
The Franchise Business Plan involves the development of a comprehensive business plan proposal to buy into an existing franchise. written document will account for 60 points, and the oral presentation will account for the remaining 40 of the total points.