Business well calculated
Only when the future owner will estimate revenue from operations and costs, it can calculate how long he will pay the investment.
Both business assuming the company based on our own concept, and those who want to take advantage of the franchise, should develop a business plan, which will assess the investment costs and potential revenue. However, it is not always easy. Depending on the industry should take into account various factors.
Those who want to join the franchise system usually have an easier task. This is due to the fact that a potential franchisee before it joins the system, it can count on the franchisor. Well positioned to develop a franchise network licenses donor develop on the basis of points of their own financial models, which then provide potential franchisees. So they can determine the amount that the future franchisee will have to invest joining the network and what revenues can be expected. Franchisee, as opposed to the person starting work alone, only needs to examine the assumptions presented to it and verify it on the basis of their news from the local market. But remember to never accept assumptions franchisor without critical evaluation.
To estimate the cost of the investment must first determine how the premises will be conducted activities: whether it be a commercial premises on the street, or perhaps at the mall? The difference in the amount of rent both types of premises is considerable. But if the city does not have the shopping streets and most of the inhabitants of supplies just in shopping malls, it can be estimated that despite the high cost of sales will be so high that it will be a local generating satisfactory revenue. It is clear that the institution you have to decorate and equip the equipment and furniture in accordance with the requirements of the franchisor. Therefore, it is important to get information from the franchisor how much it will cost and renovate point device and who bears the cost of preparing the architectural design of the premises. In gastronomy, apart from the interior design room, there is still drafting the technological kitchen, which further increases the cost of the project.
For capital expenditures we add also the first stocking up, or the purchase of goods in such quantity that is needed to fill the point on the opening day and a one-time initial franchise fee.
Running costs are incurred every month and usually have a fixed height. Expenditure which periodically recur and can predict their level for the whole year on the front can be easily estimated. For such costs include the fee for the lease of premises, electricity or telephone. Also, salaries, expenses associated with running a business bank account, and accounting services. In the case of a franchise business, there are also fixed franchise fees, which contributes the most frequently every month. You also can not forget about loads such as US.
At the expense of the current, which may be the beginning of difficult to estimate is the purchase of goods. Because apart from the first stocking-up must be kept complement selling point in the missing range. Purchase of goods for resale will also be accepted as a category of current expenses. But over time, as well you know the market more easily you can calculate expenditure on supply store.
You also can not forget about the cost of advertising and marketing activities undertaken by the franchisees. This can be both expenditure incurred for printing flyers, catalogs, issuing notices and advertisements, but also the purchase of packaging and bags business. The amounts allocated to this activity will not be the same each month, but on the basis of information obtained from the franchisor must make assumptions average monthly expenditure on promotional activities.
Yet another example of the cost of this can be eg. Maintenance van.
Costs which can not be seen
The fees, which were mentioned above are typical in conducting virtually any activity. However, there are also costs specific to individual industries, which usually do not inform the franchisor. Therefore, you should consider yourself to what other unexpected situations can happen in a given activity, with associated additional expenses.
For example, investing in grocery and catering industry to be expected from incurring losses in its products. In grocery stores, where the cold cuts and cheeses are sold on weight loss they arise eg. As a result of their obsychania. Therefore, you should talk with the franchisor and find out what it according to his experience and the amount of which amounts to be reckoned with.
In the case of running a restaurant or pub it is important to the integrity of employees, because it is easy to cheat on the sale of alcohol. Besides, each broken bottle is a loss for the owner. Also thefts that occur in any industry, should be assessed and counted against the cost of doing business.
Franchisees should also pay attention to whether the franchisor allows for the return of unsold goods (in clothing franchise networks is a rarity). If such a possibility does not exist, to be very rational supply store. Otherwise, you may find that the franchisee will be of unsold goods.
In determining the demand for the product or service should help the franchisor. He has experience with the functioning of even its own stores and can present their sales results. In contrast, the franchisee should, based on the information it received, independently verify and determine how many customers can expect a day and the amount you can estimate the average daily sales.
If the property which is to be conducted activities already exist, you can observe and determine what is the foot traffic in the vicinity of the premises, what kind of person it pass, or "fit" to the products or services that will be offered. For example, a shop "all for 2 gold" probably will not find clients in the affluent neighborhood of detached houses.
In the case of service points you have to also keep in mind that you can not handle more customers than it is to the resources, for example. Salon with three positions not handle more than three clients at a time.
Return on investment
When the future owner of the shop or the service technician knows what are the expected revenues from operations and established costs, you can calculate yourself how long he will pay the investment. If it turns out that the total initial investment (renovation, equipment and stocking up the first place), including the costs of current return in roughly half of the period for which the associated side of the franchise agreement, it can be assumed that the business model of the company is well-designed.