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How franchise can be developed ? |
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HOW FRANCHISE CAN BE DEVELOPED ?
The major difference between a business plan for a traditional start-up and a business
Plan for a Franchise is that the latter must join essential items together from both sides;
The franchisor and the Franchisee.
In franchising it generally refers to the marketing and sales of Franchises Ideally it
should refer to the development of the strategic growth plan of the company including
formal goals and objectives, and an analysis of the human capital required to achieve
these goals. The development part is the people and strategy part, the marketing and
sales implementation and execution of the plan. |
I) PREPARE A PLAN:
Introduction
The initial portion of your business plan should contain a cover sheet listing the name
and contact information for the business.
Also, in the beginning portion of the business plan, prepare a statement of purpose
which highlights the reason for the plan. Following this statement should be a table of
contents listing all other portions of the business plan.
Business Description
The next step is to prepare a full description of the business, or business summary. This properly starts with an analysis of your capabilities and constraints and would cover
the kinds of Franchises to offer (start-ups, conversions, area development, subFranchises, etc.), target markets (both geographic and Franchisee prospect profiles),
speed of expansion, broad supply-chain and division-of-labor issues, financial hurdle rates, company-owned units, mergers and acquisitions, and exit strategies, etc. |
website.
A good deal of information is most likely available from the franchisor via the
company's brochure. |
Management
Next, provide an account of all the key players and their roles within the business. Their
qualifications should also be included. It is best to include resumes and explanations of
how their experience is relevant to the business. |
Marketing
The Franchise business plan also needs to include details on how you plan to obtain
customers for the business. List any competitive advantages you foresee the new
business having. Be sure to highlight marketing and advertising strategies you plan to
employ. Again, you may be able to reference
You should use both secondary and primary research to obtain necessary information.
Secondary research involves using the Freedom of Information Act as well as industry
publications and pertinent web sites. Based on this secondary research, interview guides
are prepared for conducting primary research. Primary research involves interviews with
industry insiders, publications, associations, competitors, Franchisees, common
suppliers, etc. Some of these sources may be more willing to talk to our interviewers
than to organizations perceived of as competitors. When the final analysis of this research is married with the results of an internal audit (see below) and company goals
and objectives, plans may be validated or more appropriate strategies and tactics developed and implemented. |
Financials
An estimate of the Franchisee's initial investment is a required disclosure in
franchising: it is usually expressed as a range. We would also want a typical
cash flow pro forma, to determine the parameters needed f or an attractive
offer. We would use this model to test various assumptions as we structure
the Franchise.
You will need to prepare an income statement, cash flow statement, and balance sheet
in order to demonstrate future performance projections. When compiling these
statements, it is important to take into consideration any possible delays or challenges
that may lie ahead.
You will also need a section on financing needs even if you are financing the business
entirely on your own. This will be a good indicator as to whether or not all operating
costs can be covered until profit is realized.
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II) STRUCTURE ALL RELATIONSHIPS.
It is advantageous not to have too many kinds of relationships requiring different
treatment, to avoid confusion and dissent. It is also a regulatory rule to treat similar
kinds of Franchises the same, as well as not to discriminate against protected classes.
Issues to cover include pre-opening, opening, and on-going training, assistance, and
support, site selection assistance, build-out assistance, territory and exclusivity definition, performance requirements, additional investment requirements use of
trademarks and other intellectual property, opening and participation requirements,
term, renewal, transfer, buy-back, and right-of-first-refusal provisions, local, regional,
co-op, and brand marketing requirements and contributions, use of proprietary
products, purchase from designated or approved suppliers, anticipated size and use of
GREAT INDIA
FRANCHISE
Empowering Entrepreneurs
http://www.greatindiafranchise.com
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III) PLAN THE FRANCHISOR ORGANIZATION.
In order to recruit Franchisees, leads must be generated and followed up and serious
candidates must be carefully selected. These functions are highly specialized, and their
execution largely determines the success of failure of the Franchise program. The initial
cost of this is part of your investment in the program, as it takes time for Franchise fees
to cover all recruitment and Franchisee set-up costs. Generally, a franchisor organization
needs both headquarters and field staff. Training and support may be a combined
function to start. A general manager may have to perform all management functions in
the beginning, adding specialists in chain marketing, real estate, finance, etc., over time,
and as needed. Overhead should be kept to a minimum, but it is important to establish an efficient and effective communications and management information system
immediately.
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IV) MODEL DEVELOPMENT SCHEDULES AND FRANCHISOR ECONOMICS.
Each Franchise will contribute to the chain economics at different rates depending on
when it opens. Similarly, when granting multiple unit developments, each Franchise
within that area will contribute at different rates. In addition, various kinds of Franchises
may be subject to different fees, royalty rates, product margins, and rebates. Many
franchisor expenses are proportional to the number of new or cumulative Franchisees, but economies of scale must also be taken into consideration. In order to gain an
understanding of the value of the Franchise program, a terminal value may be
projected, and the internal rate of return or net present value may be calculated. When
this model is tied into the unit model, many assumptions may be tested simultaneously. Go to "Implementing Your Franchise Program" for more detail.
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V) DOCUMENT YOUR FRANCHISE STRUCTURE.
Structural decisions should be documented in sufficient detail to allow all decision makers to sign off on it. This document could be amended in several directions: it could
be augmented as a feasibility study or it could be summarized as part of a business plan
This document will also be used as a blueprint for creating other Franchise documents,
such as contracts, disclosures, manuals, brochures, etc.
GREAT INDIA FRANCHISE
Empowering Entrepreneurs
http://www.greatindiafranchise.com |
VI) PLAN TRAINING MODULES:
Basic training would include any headquarters training, training at designated locations,
field training, and unit start-up assistance. Most Franchisees need both classroom and
on-the-job training. A typical day may include classroom instructions in the morning, on the-job training in the afternoon, and homework in the evening, and testing the
following morning before new instruction takes place. Gradually, the on-the-job part
takes over, and the Franchisees assume full management responsibilities of the training
facility, with the trainers acting more as coaches.
Because all training in any unit is expensive, every effort should be made to prepare for
that training. Such preparation could take many forms, from studying the operations
manual, to taking a part time job with an existing operator, to studying other forms of
training materials: CDs, web site, etc.
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