This lesson is part of our free Franchise 101 course.
When the time comes to launch your franchise outlet, you’re going to need money. That involves winning support from a lender, whether that’s a bank, private investors, or the franchisor’s own financial scheme. To win that support, you need the right business plan.
What are lenders looking for in that plan?
Clarity on the Business
First and most obviously, they’re looking for a clear, comprehensible explanation of the business. This includes what services it will provide, who its customer base will be, and how it will operate.
This tells the lender what the business will look like. It gives them the information to evaluate whether it’s realistic, and whether it’s the sort of business they want to support. It also demonstrates that there’s a market for your service, and that you’re in a position to profit off that market.
Details on the People
The business plan should give details of the people involved, their skills and their experience. This means information about you and anyone else you’re bringing in to help run the business.
This part tells the lender that you have the relevant skills needed for this specific business, and to manage a franchised business of your own. The experience part tells them how reliable you are. Remember, lenders want to know not only that you can run a business, but that you’re likely to stick with it.
Expectations for Repayment
Perhaps the most important part for any lender is when their money is likely to be repaid. By telling them when you’ll start making a profit and how much you’ll make, you can demonstrate when that will happen.
The lender is making an investment in you, just like you’re investing in your business, and like you, they want to plan for their financial future.
All together, the way you present this information shows the lender that you’ve got the skills to assess your circumstances, plan a business to fit them, and pitch that business to other people. Without those skills, you’re never going to make a success of your franchise, and so the lender wants to see those skills in action. A business plan is as much about what it shows as what it says.
The quality of your business plan will decide whether you get the finance you need, and so whether your franchise can go ahead. Take your time, do your research, and make sure that you have a good plan. That way, you can get the funds for the franchise you’ve been dreaming of.