Many individuals find themselves in a position where self-employment becomes an attractive proposition in a difficult employment landscape whilst others may have redundancy payouts they want to use to set up on their own.
Franchising plays an increasingly important role in supporting enterprising individuals who are setting up their own business, as it provides them with the reassurance of a proven model as well as initial training and ongoing support.
Most people starting their own business for the first time will have never prepared a business plan before and wouldn’t know how to start writing one.
Banks will require a business plan to set up a bank account and consider financial support for a business. Any lender will want a potential franchisee to demonstrate that they understand their chosen market and that they will be able to meet the financial commitment they are taking on.
Most banks will be able to provide a business plan template detailing what information should be included in the document however support from the franchisor is essential in developing an effective business plan.
The business plan should be punchy and a common mistake is to make it too detailed. Ensure that it grabs the bank manager’s interest. Presentation of the plan is important to create a positive impression and the franchisee should practice delivery of their plan beforehand so that they come across professionally.
Let the bank manager have a copy of the business plan in advance so they can prepare for the meeting. Expect the plan to be challenged and the franchisee should be able to confidently answer questions about the operational and financial aspects of their plan. This is where the franchisor can really add value by preparing their new franchisees so they know what to expect.
It is often assumed that a business plan is needed just to secure funding. Whilst this is an important benefit of producing a business plan it can also assist with the management of the business such as monitoring the ongoing performance against the original benchmarks and identifying areas for development and potential risk. The plan is a working document and should be regularly reviewed and updated as the business develops.
A good business plan will cover the following areas:
- Executive Summary
- Personal details (Contact details, Age, Martial status, Dependants)
- Franchisee’s experience, skills and attributes
- Objectives / Mission Statement
- Overview of the franchise
- Local market (Research, Location, Customers, Competitors)
- Business operation (Premises, IT, Vehicles, Equipment)
- Key Personnel / Management team
- Marketing strategy
- Borrowing requirements
- Capital stake and Security
- Personal Assets, Liabilities, Income and Expenditure statement
- Financial Projections (Cashflow and Profit & Loss forecasts)
- Financial Assumptions
- 3 years Financial Accounts (Existing businesses only)
- SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
- Exit strategy
When looking to finance a franchise business it is best to approach a franchise specialist bank. The bank’s franchise departments regularly evaluate franchises and monitor the ongoing performance of franchisees.
The level of finance available from a bank will depend upon the strength of the franchise system as well as the business plan. Typically for well established franchises the bank will lend up to 70 per cent of the total set up costs including working capital. For newer, less established franchise systems the amount of finance available maybe lower.
The bank will probably require security for the loan which commonly will be a legal charge over a residential property with sufficient equity. Don’t be put off they isn’t any security to offer the bank. The Government backed Enterprise Finance Guarantee Scheme maybe available for those who have a strong business proposal, but who lack security that the banks usually require.
It is sensible to have a contingency reserve fund to fall back on in case the business takes longer to get off the ground than originally anticipated.
Lloyds Bank remains at the forefront of the expansion of the franchise market through its provision of banking services and finance to encourage new franchise ownership. We have trained franchise managers located across the UK, ensuring a true ‘on the ground’ presence.
