YOU ARE LOOKING AT FINANCING A FRANCHISE – A FRANCHISEE BUSINESS PLAN... AND MORE!
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Purchasing and financing a franchise in Canada. Of course, you do, in fact, need a franchisee business plan to support that transaction, but it's safe to say you need to cover off a lot of the other basics also. Let's examine how your business plan works within your overall finance strategy to complete a franchise purchase in Canada. Oh, and by the way, that covers both a new purchase as well as buying an existing franchise from a current owner, in effect a 'resale.'
It is safe to say that many 'non-financial-oriented people find the basic request for a business plan somewhat of a challenge. How much time do they need to spend on such a document, and is there a perfect format that might guarantee a greater chance of purchase and financing success?
While we're quite confident that almost everyone these days can prepare some business plan (it could almost even be a strong executive summary), the reality is that if you omit some of the basics the lender is looking for, your overall purchase might, in fact, be temporarily at risk. That's not a good thing.
A good way to look at a franchisee business plan is to view it as a ' blueprint' or ' road map ' to franchising success. We remind clients that down the road, you can go back to the document and use it as a benchmark for how you are, in fact doing financially, as opposed to what you expected to do!
The other aspect of a business plan is a pretty fundamental one - it makes you think! Working your way through a plan forces you to address certain issues you may not have considered—things like profits, cash flow, debt repayment ability, etc.
There is no one perfect document that makes a franchise business plan. The basics are fairly common sense - it describes yourself, your proposed new franchise, it outlines management and staff. It provides a basic description of the industry and business model you have chosen to be a franchisee.
Typically you are preparing your business plan for a franchise lender, although we have seen in some cases that the franchisor itself asks you to present your plan in the context of purchasing their franchise. We would suspect they want to see if you know what you are doing!!
Franchise business plans is certainly key concerning the assessment of the document by your lender. A good advisor, banker, lender, etc., will typically work with you to point out any plan deficiencies.
Typically, your plan's financial portion comes from specific or general information you have received from your franchisor on revenue, profits, and potential challenges.
Canada's CSBF/BIL program is one of the largest, if not the largest, facilitator of franchise loans in Canada. In combination with your own equity or investment, that loan completes any franchise financing within the 350k cap of the program. It can benefit you because, in effect, the government becomes your co-signer on loan, guaranteeing to your financial institution a large part of the loan.
We would point out that you can have the perfect franchise picked, complete a solid business plan, and still encounter financing challenges simply because you are working with the wrong people. You want to ensure that you are working with a franchise funding or banking expert that will significantly fast-track your success.
So, you do, in fact, need a solid business plan for your franchise, but working with the right team and using your plan as a road map for success is a great working strategy. Speak to a trusted, credible and experienced Canadian business financing advisor to round out your finance success chances.
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Stan Prokop
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