Business plan

Four Reasons to Have a Franchise Business Plan

Four Reasons to Have a Franchise Business Plan

Business collaborations only succeed when they benefit the parties involved. Franchising is also a form of commercial collaboration.

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DUBAI, DUBAI, DUBAI, Oct. 1, 2022 / — It only succeeds when both franchisor and franchisee profit from it. And when we say gain in business, it is normally in financial terms or profitability. No franchisor or franchisee will ever choose to pursue a loss-making collaboration. But to realize the anticipated profitability, they must first plan and assess whether the expected or desired returns are achievable or not. This is done through a franchise business plan. It is a detailed and comprehensive assessment of business activities and performance in financial terms. And if this assessment is to be accurate, then no detail can be omitted. There could be no room for the omission of an important element. Estimates should be accurate and based on realistic data. Having a flawed franchise business plan could be just as taxing as not having one.

The importance of developing a solid business plan in a franchise business is elaborated in this blog in four simple and intuitive points. Here, we are not answering how to write a franchise business plan but why.

Avoid financial stress

The potential to produce expected returns and profitability is the thriving foundation of a business idea. Otherwise, there’s no point in doing it. Experienced franchise business plan writers know that it is too risky for the franchisor and franchisee to go into franchising without sound financial projections and planning. This requires a good franchise business plan; a plan that is free from any half based assessment. Inaccurate or incorrect projections become a serious cause of financial stress at later stages. When the cows have started coming home, then it becomes difficult for the franchisor and franchisee to find the time and space to mend the snowball of financial difficulties that beset them. By then, it’s usually too late to seek help from outside franchise business plan consultants. A positive performance beyond planning does not hurt. But when the numbers head south, it becomes cause for concern.

Financial control

When there is a business plan, it becomes easier for the franchisor and franchisee to stay on top of the financial course the business should maintain. This may even include some of the routine but important financial decisions. A business plan covers financial forecasting and decision making regarding payment of wages and salaries, credit cycle to be followed, inventory purchases, provision for debts, working capital management, fund building and supplies, etc. better control of cash inflows and outflows. This makes companies more disciplined in making financial decisions. With planned and disciplined adherence to these plans, franchise businesses can keep expenses within budget and meet financial commitments on time. Of course, many unforeseen expenses crop up from time to time. But with planning, provisions for these expenses could also be made.

Without a solid franchise business plan in place, it can be difficult to control expenses. The same ideology applies to tracking and monitoring planned revenue generation. If revenues are below target, then there is room to improvise and perform better in the next quarter or fiscal year. All of these ups and downs can be brainstormed in a franchise business plan presentation.

Amortize the business with funds and provisions

Both certainties and uncertainties are part of the future. Although certainties can be foreseen, it is not possible to fathom all the uncertainties that lurk in the future. The 2020 pandemic and its impact on the business world is a good example here. Within a month or two, economies and businesses suddenly came to a halt. He stressed the importance of having funds and provisions in businesses to meet certain expenses for a period of time in order to keep the business afloat. Funds and provisions are also useful as part of regular financial management. For example, provisions for bad debts help businesses write off bad debts that have been on the books for a long time and the chances of collection are low. We can also look at sinking funds that help companies replace old assets on the verge of failure. Funds and provisions act as a cushion for businesses by mitigating financial aberrations. Such financial preparation also helps them to keep their routine operations intact or seek outside financial assistance. Accounting for funds and provisions to manage expected and predictable expenses are essential parts of a business plan.

Accounting for inflationary trends and escalating costs

Inflation or general rise in price level is a common feature of any economy. For businesses, this affects the cost of production and service delivery. This increase is partially or totally passed on to customers. There are many direct and indirect expenses that businesses incur in the form of raw materials, wages and salaries, office supplies and equipment, purchased services, and more. These inputs are subject to inflation. Businesses can do nothing to prevent inflation except prepare for it. Even a minor change in inflation could mean big on a business level. For example, if a supplier increases the price of an input by 5% per unit, the total invoice increases by the corresponding amount. If a company decides not to pass this burden on to its customers, this increase will have to be absorbed internally. Prudent financial planning requires franchise businesses to factor escalating costs and the impact of inflation into their business plan.

Running a franchise business is a mutual responsibility between franchisor and franchisee. Funding is one of the biggest reasons franchises fail. But with proper planning, this reason can be linked and used as a tool to leverage the business. From avoiding financial stress to becoming financially planned and prepared for franchise management, a franchise business plan is a source of tremendous financial guidance and discipline.

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