Step #3 - Start Your Franchise Analysis
July 19th, 2008
0 votes
So let’s review for a minute. By now, you’ve:
- Started discussions with your family and decided that you might be interested in owning your own business, and
- Accumulated a nice list of opportunities to consider.
Now we’re on Step #3. The analysis phase. I recommend starting with an Excel spreadsheet, each franchise disclosure document (FDD) and an old-fashioned pen and paper. Your spreadsheet should include the following columns (and maybe more):
- Company name
- City of available territory (if not your current city)
- Current number of open franchises
- Franchise fee
- Total initial investment
- Total investment
- Amount of cash you have available
- Royalty fee
- Advertising fee
- Other standard fees
- Lease fees (if necessary)
- Legal fees
- Potential salaries, overhead, etc
- Equipment cost
- Past litigation (if any)
This list is just the basics and will provide a good snapshot of the fees, time and other requirements to get started.
Next we’ll look at taking a snapshot of the competition, market potential and other important factors. Feel free to contact me directly with any questions!
September 10th, 2008 at 1:48 pm
good info about the things to cover
January 9th, 2009 at 9:24 pm
I think you missed a lot on the spreadsheet. For instance, it is Ok to look at a franchise that has a 6% Royalty and compare with one at 8%; but the real number is dependent on Sales for that franchise not just the percentage
8% of $300,000 is $24,000
6% of $500,000 is $30,000
So you see its the absolute number that should also be considered , not just the Royalty percentage. If you go even further, it is the cash flow after expenses and mandatory fees that is the all important number
For those who have difficulty finding Sales numbers and calculating such cash flows, I do this for many clients
http://www.mrfranchiseman.com