Often times, the terms licensing and franchising are used interchangeably to define a similar business relationship. What is the difference between franchising and licensing? Why do some organizations choose licensing over franchising to define their expansion model?

The key comes down to control. A license agreement is essentially a “portion” of a franchise agreement.

Licensing refers to a relationship that licenses a name OR a system to a business partner who will have rights to distribute or do business with that system or trademark. Licensing is typically used in cases where technology is being sold through a distribution system. Software, hardware and other forms of technology are often sold through licensed resellers or distributors.

Licensing can also refer to a business relationship where only a name is licensed out to a business “partner” who then can do business using a trademark or servicemark. This could be a scenario where a company has developed a brand and would like to license the rights of just the name out. There cannot be a business system associated with these license rights, only the brand name.

Franchising is a combination of the name, brand or trademarks along with the business system. A franchise model requires the use of a UFDD, or Uniform Franchise Disclosure Document that clearly identifies and discloses the details of the business relationship and commitments required from both the franchisor and franchisee. Because franchise relationships include both the name and the business system, the franchisor retains the ability to control the operations and quality of service delivered by the franchisees who join the system.

Franchising is governed by the Federal Trade Commission in addition to local state laws and franchise regulations. A franchisor is held to strict processes and rules in how they may present a franchise and how franchise sales can be conducted. There is a significantly larger amount of regulation, process and cost associated with being a valid and compliant franchisor, so why do most organizations choose to develop a franchise system as opposed to a license model?

There are several reasons, but the most significant reason being control. Franchise expansion allows the franchisor to control the quality of the franchisee’s business and services delivered. This allows the franchise system to control when and how the brand is used in commerce. Franchisors have the ability to stop franchisees who are not representing the brand in a conduct that is deemed appropriate. A well written and defined UFDD allows for an efficient and effective business relationship that also provides legitimate control to the franchisor and the ability to shut down a franchisee who is not meeting the standards of the franchise organization.

If you are planning on seeking funding or investors for your daycare startup then a solid child care center business plan will be essential for proving the feasibility of your idea to them. There are also some other compelling reasons why you should take the time to prepare this important blueprint for business success. If you are going into business with a partner, a business plan will allow both of you to make sure that you are thinking along the same lines. And even if you are going it alone and have nobody to impress, a plan offers you a way of getting all your thoughts and research down on paper in one structured report.

A business plan allows you to see if your child care center is viable and helps you to set goals and benchmarks that you can later measure your progress against. Below we offer a child care center business plan template. The ideal way to put together a plan is to look at a few that have been done for other child care centers and then make adjustments to suit your unique situation. It can be an extensive report or something brief that fits onto one page.

What to Include in a Business Plan for a Child Care Center

1) Executive Summary

This is a summary of your daycare business plan and it should be written after the plan is complete. Detail the contents of your plan and declare some of the conclusions that you have made.

2) Company Mission

Put money aside for a minute and write a little about how you want to fit in with and impact your community in a positive way. Write about the importance of child care in society and your personal philosophies on early childhood development and daycare. What kind of image do your want to project?

3) Table of Contents and Introduction

Introduce the reader to your business plan and let them know what kind of daycare you have in mind. What is the basic concept? What services will you offer? What age groups will you care for?

Set out a contents page so that readers can easily navigate their way through the report.

4) Background

You should include some background on the child care industry to help readers to better understand the present state of the industry and how your business will fit into it. Personal backgrounds of yourself and other key players should also be included to let readers know who you are and what led you to the conclusion that you want to enter this industry. What skills, experience or attributes do you have that make you particularly well suited to setting up and managing a child care center? Attach any supporting documents such as your resume to the business plan as an appendix.

5) Objectives

Summarize your financial goals as well as any expansion plans that you have for the daycare over your first two or three years in business.

6) Startup Requirements and Financing

List out all anticipated startup costs and other hurdles that must be overcome before you open your doors to families. How you propose to finance the new business?

7) Business Structure and Legal Considerations

Will the child care center be a sole proprietorship, a partnership or a corporation? Include details on the daycare licensing process for the state in question as well as other local regulations that must be complied with such as zoning and building safety requirements. What insurance policies will be necessary to protect the business and its owners from property damage or liability claims?

Organization

How will your daycare be managed? Your daycare business plan should include information on the ownership structure (if there are other owners involved). Set out a plan for taking on and managing staff including hiring practices, necessary qualifications, wages and other policies. Outline job descriptions for each position and set out a clear hierarchy showing which managers are responsible for which employees.

9) Market Analysis

A good business plan will usually have an analysis of the local market. This is where you can present the findings of any market research that you have undertaken. Your market analysis should include information gained from surveys with prospective daycare clients in the area to find out more about them and about what they are looking for in a daycare service. You can include demographic data about your local market here and attempt to establish some typical customer profiles. Discuss your proposed location and why you think its location is strategically significant.

Look at a variety of niches within daycare such as infant care or after school care and decide on the niches that you will go after with your set up and your marketing. Give details on all local competitors and suggest ways that your daycare could offer unique services that differentiate it from these other market players. Look at their strengths and weaknesses and try to come up with the ideal service for your market that is an improvement on the services that are already available.

10) Marketing Plan

Put forward a marketing plan for gaining new customers. Outline a branding strategy, a pricing strategy and how you will consistently promote your daycare to local families. Try to identify precisely what advertising and marketing methods you would use to get leads and what sales approach you would use to turn prospective families into new clients. Write an online marketing plan discussing a proposed website for the child care center as well as a strategy for bringing targeted traffic to the site.

11) Financial Plan

Lastly, you should include some detailed financial forecasting. Estimate revenues and expenses over a period of two years and set these out in a spreadsheet. Profit or loss can then be projected based on these estimates. Put forward several different scenarios where for example costs are higher than expected or income is slower than expected. Identify the break even point or the point that the business becomes profitable.

A good child care business plan template along the lines of the one that we have outlined above will give you a clear direction of where you want to go, will help you to measure progress along the way and ultimately will help you to reach your personal and financial goals.

I have a friend and business partner who is probably the world’s foremost expert on buying businesses.

Over the past 50 years he has bought somewhere around 200 (he’s lost count) businesses, and still going strong today.

And one of the jokes he likes to make goes something like this:

“There are three things people are afraid of in life: death, taxes and business plans.”

In fact, from his experience, he says the business plan is the most dreaded part of the whole business-buying process.

And yet, it doesn’t have to be.

Here’s why:

While it’s true you do need a business plan if you want to get money from a bank, an investor or any other financing source…writing a business plan really isn’t all that complicated.

In fact, a business plan basically just a sales document with three main components:

1.) How much money you need.

2.) What you need the money for.

3.) How you’re going to pay the money back.

And that’s it.

See?

That’s not so complicated, is it?

All you need to know besides the above is how to structure a business plan (there are books in your local library that can help you with this free), and you’re ready to go.

Bottom line?

Don’t put off buying a business just because you’re afraid to write a business plan or don’t think you can afford to hire someone to do it for you.

If you simply educate yourself on the topic (again, go to any library and learn it free), you will be up and running with your own business in no time.