What Is a Franchise Proposal?

A franchise proposal is a written proposal that is part of the application process of a business franchise. Aspiring or potential franchisees would first need to have a comprehensive and compelling proposal approved before they can begin operating a franchise.

According to an online article by LinkedIn, there are four types of franchise opportunities aspiring entrepreneurs can apply for. These are product or distribution franchise; business format franchise; management franchise; and manufacturing franchise. Distribution franchise is essentially a situation where the franchisor authorizes and supplies the franchisee with the products or services to sell. A business format franchise grants the franchisee the licenses, trademark, and such from the franchisor. Management franchise is typically service-oriented and operates in a business to business format. Lastly, manufacturing franchise is basically the franchisor giving the franchisee permission and rights to production under the former’s trade name. 

Benefits of a Franchise Business

A lot of lucrative businesses are franchises. From educational institutes to fast food chains, there is potentially a lot to gain from a franchise investment. The following examples below are just some well-known benefits of operating a franchise business:  

There is an existing market: If you purchase the rights of a trademark, especially of a well-known brand, you are riding on the benefit of having a ready market to serve. You already have the advantage of loyal patrons and customers that trust the brand enough. You do not have to go to great lengths to sell and prove the effectiveness of a product or service because of the existence of a captured market. However, this does not give you an excuse not to work hard. As franchisee, you still need to ensure that you deliver quality that meets customer expectation and satisfaction. Still, opening up new markets may be a good way to expand business; but having an established following and steady customer base offers some form of predictability and certainty in your business. It’s cost-effective: Relatively, you can save more if you purchase a franchise instead of building a business entirely from the ground up. And depending on your contract agreement with the franchisor, everything from equipment to personnel training can even be provided by the parent company. In most cases, there is backing and support from the parent company in terms of materials, supply, and even marketing. It is because when you are a franchisee, you essentially purchase the rights to use a brand and make a profit out of it. Apart from the licensing and initial fees, you could end up saving more on capital. There is the advantage of an established brand: There are, certainly, several advantages of carrying a famous and well-established brand. Name recall and brand familiarity are two of the most important ones. Just like having a captured market, using a brand name that many people patronize is like skipping a step and obtaining the benefits almost immediately. When customers support a particular brand, it usually does not matter if it’s the parent company or a franchisee, for as long as the customer is able to get the same benefits and quality. Familiarity and consistency is key when it comes to franchise brands. If you are mulling over the business idea of putting up a franchise, you want a brand that is worth investing in. For example, fast food chains are popular business options for those who have the desire to own a business but are unwilling to invest the time or effort in creating a totally new product or service. It is in these particular situations that brand recognition duly applies. Global brands like McDonald’s, Burger King or 7-Eleven are franchise magnets because of their worldwide recognition. It’s time-saving: Operating a franchise does not come without challenges, of course. But when it comes to time and effort, you cannot help but compare it with the challenges of starting a business from scratch. Creating an entirely new business demands resources, capital, excessive planning and preparation, and even a greater element of risk. With a franchise business, it is essentially skipping several steps. You do not need an extensive business plan because you are legally purchasing someone else’s business ideas. There is no need to create a business model because you are essentially just replicating the parent’s company’s model and strategies. Thus, a lot of time and energy is saved in the process. To build a business from the ground up is, no doubt, challenging and risky. But riding on the momentum of a brand, particularly if it is a popular consumer brand, may minimize that risk to some extent.

How to Create a Franchise Proposal

A good franchise proposal needs to be both comprehensive and compelling. Crafting one can be a rather tedious and time-consuming process. The more convenient option would be to build on an existing template and modify it to one’s needs. In addition to the template, you can use the step-by-step instructions below to guide you:  

Step 1: Executive Summary

Similar to a research proposal, it is best to start with an executive summary that offers an overview of your franchise proposal. Make sure to incorporate only the key points and major details of your proposal. An executive summary should be brief and should give just enough general background of the franchise proposition.  

Step 2: Experience and Company Background

This section should answer the question regarding the capacity of the franchisee to replicate and operate the business. It should explain and address the qualifications of the franchisee. In a way, it can be likened to a sales pitch for a job. It is about marketing yourself as to why the parent company should hand over rights to you to propagate their business. It helps to give a rundown of your business acumen and relevant experience, much like you would enumerate achievements in your resume.  

Step 3: Market Analysis and Plan

A market analysis is a crucial part of your franchise proposal. It should address the question on how feasible and realistic the business will be, given all the factors. A detailed and comprehensive market analysis looks into everything from customer profiles, geographical strategy, action plans, marketing techniques, opportunities, success rate, market trends, competition, and even external threats. It tries to answer the question of whether or not a franchise would be a success given all aforementioned circumstances.

Step 4: Management Structure

A business will not be able to run without the right people behind it. Your franchise proposal should be able to introduce the team members or the proposed organizational structure. A good team is needed to reassure franchisors that the business can be handled and managed properly. You need to make the argument of how capable your team is and how each role can contribute to the success of the franchise business.  

Step 5: Financial Projection 

Lastly, every business proposal needs a section dedicated to explaining the financial side of things. You need to be able to come up with relevant figures and projections on the costs, revenue, profit, as well as potential losses. Your franchise proposal should be able to offer a financial forecast that is sound, grounded in realistic circumstances, and backed by supporting facts.   

FAQs

How do you write a franchise proposal?

To write a franchise proposal, you need to gather a significant amount of data and information. In other words, make sure to do your research. Some of the key elements in your proposal ought to include extensive market research and analysis, a sound marketing plan, financial projections, an overview of the company and its management structure, and other relevant information that could help your case.

What are the 4 types of franchising?

According to consultant firm Franchise Wizards, the four types of franchise business arrangements are: single unit, multi-unit, area developer, and master franchise.

How do you request a franchise?

The standard protocol in most scenarios is that a potential franchisee submits a franchise application to the parent company. The former may be asked to prepare a formal proposal or in other cases, the franchisor may request a letter of intent.

Operating a franchise can be the ultimate business goal for some people. There are people who just don’t want to go through the tedious process of creating a business model or crafting a business plan. If you want to run your own business with the added benefits that come with a franchise, then creating a winning proposal is a step in the right direction. Browse the sample templates above to customize your own franchise proposal today!