It certainly can’t be stressed enough how crucial this initial research and planning phase is for a prospective franchisee. To put it differently, failing woefully to plan effectively and under-capitalising the company from the outset will result in a slowing 12 of the bucks flow cycle, a brief fall in projected sales and limited return on investment. Once these factors come in to play, it’s an uphill battle to get the company back on a level ground.
Unless a franchisee has the capacity to finance the franchise with their own funds, a bank or financier must certanly be engaged to set up a loan. To be able to secure the financing required, a well researched, comprehensive business plan must be ready, including goals and objectives, market position, business strategies and projected turnover.
This document shouldn’t just be viewed as a means to secure financing. A business plan is just a blueprint for the company and should be described as a regularly updated working document that permits franchisees to identify the strengths and weakness of the business. The more in depth this course of action is and the more knowledgeable franchisees are of the selected system and store, the more likely they are to secure the financing they are seeking.
If the lender or financier agrees to lend only part of the requested amount, it is crucial to step back and reassess the viability of the whole business plan. You will have valid explanations why they are agreeing to only partial funding and it is crucial to understand what those are to make certain they are addressed and amended. Without making a solid case concerning the implications of under-funding to your banker or financier and simply ploughing ahead with too little initial capital, the likelihood of running into financial problems further down the road is practically guaranteed.
Also, continually be up-front along with your banker or lender. If the start a security company plan requires a loan of $250,000 for the franchise to succeed, either secure $250,000 or re-plan. Failure to do this will make a reasonably successful business look like a failing one in comparison back once again to its original business plan.
Another major factor to consider, and one that is frequently ignored, may be the exit strategy for the business. Franchise agreements are often for a specified fixed-term and having a plan about how to exit the company won’t only provide additional reassurance to the lender or financer that the company plan has been carefully considered, but additionally an exit plan of how and when to market the company will make sure that the eventual returns are maximised.
It is important to remember that buying in to a franchise system is just a lifestyle change and is going to be very different to a typical PAYE job. As the franchise typically features a finite endurance it is in the interest of the franchisee to consider all areas of the running of and ultimately the selling of the business. These not just include keeping a current and thorough group of financial records, but additionally giving some considered to not just where and once the franchisee will sell, but additionally how. It doesn’t must be fully scoped, but consideration of an exit strategy from the outset is strongly recommended.
Ultimately, reaping an excellent return on investment underpins the running of a franchise. With the proper due diligence and a well orchestrated and thorough business plan capturing the maximum amount of information as you possibly can about your website itself, goals and objectives, business strategies, projections and exit plans, prospective franchisees should have the ability to secure the mandatory funding and ultimately have the foundations to perform a prosperous business.
Franchise specialists is going to be vital throughout every phase of the create and a franchise specialist banker can help ease the process.