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Advisory 2009-12-04

Simplicity is the best policy

The concept of franchising is slowly and steadily gaining its popularity across the globe. But what goes behind running a successful franchise often goes unnoticed. Lay out of a simple business plan often does the trick of giving the franchise an instant

By Abha Garyali Sub Editor

One major reason for the failure of any new franchise system is the complexity of the business plan. It is often believed that a complex and intricate business plan will benefit the franchisors and franchisees with better business deals.   As said by Donald D. Boroian, Chairman and CEO, Francorp USA, “It’s always a good idea to have a simplified business plan for expansion. The business should be simple so that the franchisees get the hold of it.” Let us first discuss a franchise business plan.

Franchise plan

A business plan is a must for every franchise agreement.  The business plan is a kind of forecast by the franchisor. It includes the key points of the business as how to run it successfully, its aims and objectives etc.  It also clearly defines the goals that need to be achieved over a span of time. Therefore the clearer the plan is, the better it will be for both the parties.

Significance of a franchise business plan

Franchise experts always guide all franchisors as well as franchisees to have a franchise business plan before the agreement. The notable significance of franchise business plans is as follows:

  • Business plan helps to comprehend the plans and ideas of the deal.
  • The plan helps in shaping the vision of the business giving it a more practical outlook.  
  • The franchise plan also measures the progress of the deal along the way. It gives direction to the business deal.
  • A franchise plan helps in getting bank loans and investors. Moreover, it adds to the confidence of the franchisor as it makes him thorough with his ideas and makes it easier to translate them into achievable steps.

Simple and lucid language is the only way to ensure the benefits of a business plan. The franchisor may have a great franchise model but it will be of no use if it’s not understandable to his franchisees. For this he needs a simpler plan so that the franchisees become aware of what is expected from them to run the business successfully. Below mentioned are a few aspects a franchisor must take care of while drafting a franchise plan -

Avoid ambiguity: Sometimes the franchisor’s plan can be quite intricate due to some terms and words used and cause ambiguity. In such a case the franchisees may not really understand and this can be the cause of their failure. Franchisors should always use simple language to express their ideas.

Steer clear of complexity: Having a simplified plan makes it easier for the franchisor to explain it to the aspiring franchisees or entrepreneurs. On the other hand if the franchise plan is difficult to understand for those who have no idea about franchising (aspiring franchisees) then they will not be interested in partnering with the franchisor. Therefore opting for a simpler plan is always better.

Avoid impractical goals: If the franchisor in his franchise plan has set unrealistic goals and profits, then it will surely lead to frustrations when he is unable to achieve them. Therefore it should be remembered to set achievable goals in the beginning.

To conclude it can be said that all aspiring and new franchisors should be geared up with a perfect franchise plan which is simple and easy to understand with realistic goals.

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