Business Franchise June

85
fixtures and fittings you are buying are worth £32,000 then the goodwill ‘I’m a good cook,’ you think. ‘I could take to fast food franchising.’
premium is £22,000. Despite pygmies never wanting to dip their arrows in your chilli, it is
i
c
e
However, at best, this goodwill figure is only an estimate. The fixtures not enough reason to consider a food service franchise.
and fittings are always worth more as a going concern, than their scrap Fast food is about speed of preparation, and always having sufficient
value. The whole is worth more than the sum of the parts. stocks to meet demand. It’s about portion control, waste reduction,

a
d
v
At 1.5 times the assets, you are set to make a return of 66 per cent on and keeping strictly to hygiene standards. It’s all about staff control and
your investment. Broad smiles all around - but think on. management of assets. It’s about quality standards and customer service.
You have ignored your salary, or rather the salary you could expect if Fast food is not about cooking. A production engineer stands a better
you worked your socks off for someone else. chance than a chef, when it comes to franchised fast food.
£36,000 net profit - less your average So what’s the best way to find out which franchise suits you. Want to
f
r
a
n
c
h
i
s
e
salary of £21,000. You are now
making only £15,000 net profit. Borrow money at 8 per cent interest find out what it’s like to franchise a Burger Queen? Get a job behind the
and you could well be down to a negative return on your investment. counter and see if you enjoy it enough to carry on.
Survive this and repay your loan in three years, and your investment
once more returns to being a moneyspinner. MORE WORRIES?
Don’t be fooled by those who say: ‘You can sell this, and make a
DOES IT HANG TOGETHER? mark-up of 100 per cent.’ The prospective franchisee’s eyes open wide.
We all examine the sales turnover figures of the A frown creases their brow. ‘G.. G... G...Granville.
franchise to gain an idea of the value. Most of your Few businesses fail What’s a mark-up?’
customers will come from within 10 miles of your
through lack of
It’s simple. You buy the product for £5 – you mark
location, so it is a simple matter to calculate the it up by 100 per cent. The product now sells for £10.
potential population who are expected to provide
sales but through
But the margin – the bit you get is only 50 per cent.
you with a living.
lack of ﬁ nancial
Time to get a calculator.
Does it seem that every single resident will have
to buy from you to reach these figures? Do you and
control…
In the case of a product marked up from £1 to
£1.50 – a 50 per cent mark-up, but your margin is
your family purchase a similar amount? now down to 33 per cent.
The family income and expenditure survey available from H.M.
Stationary Office, or your local library will provide actual expenditure. FIDDLE FACTORS
Try and look at the accounts over a few years. Is the sales figure Cash flow forecasts are demanded by banks before allowing a business
being window dressed? Could it be that the prices have been lowered to loan. Taught on every new franchise course, and intended to show the
increase the turnover? There’s nothing that someone in the world cannot inflow and outflow of cash into the franchise. All too easy to simply
make a little worse, and sell a little cheaper. adjust the figures if there appears to be insufficient income to repay the
Many sellers hint that the true sales could be higher, or the potential loan. Once again ask to see actual audited figures from the last tax year.
is greater than the accounts show. Remember that put simply it is still
cheating, and that by accepting, you are party to fraud. Penalties will THE GOOD NEWS
exist for VAT and unpaid Tax. It should be apparent that a person is For most entrants franchising has an enviable track record. Successes
prepared to cheat once - may cheat again - and this time it could be you will continue to outweigh the small number of failures, but too many
on the receiving end. still arrive at the door of a franchising opportunity
Take the chance to look through the purchase side
Watson’s words of wisdom
without a clear understanding of what precisely
of the franchise. Unless the business is complicated
‘Proﬁ t is sanity, sales
they are buying with their investment.
the purchases are a guide to the sales. Purchases will Most common is the lack of understanding of
evidence if the sales are accurate. Usually a franchise
are vanity.’
financial information and operating ratios. Bankers
will be dealing with one main supplier (often the
richard watson
are also aware that the weakest area of business
franchisor) making the task easier.
is a Business Link advisor,
knowledge is control and operation of the money.
franchise trainer and
Few businesses fail through lack of sales - most
WANT TO GET A FRANCHISE OF YOUR OWN? consultant. Contact him fail through lack of financial control and budgeting.
Who doesn’t? The system works. But the most at: richard@quotabusiness.co.uk The day of the ‘bean counter’ has finally arrived.
difficult decision is which franchise to choose. The accountant will reign supreme. ■
Ad for Franchise Mag June 08 28/3/08 17:10 Page 1
C M Y CM MY CY CMY K
Composite
www.businessfranchise.com June 2008
Page 1 | Page 2 | Page 3 | Page 4 | Page 5 | Page 6 | Page 7 | Page 8 | Page 9 | Page 10 | Page 11 | Page 12 | Page 13 | Page 14 | Page 15 | Page 16 | Page 17 | Page 18 | Page 19 | Page 20 | Page 21 | Page 22 | Page 23 | Page 24 | Page 25 | Page 26 | Page 27 | Page 28 | Page 29 | Page 30 | Page 31 | Page 32 | Page 33 | Page 34 | Page 35 | Page 36 | Page 37 | Page 38 | Page 39 | Page 40 | Page 41 | Page 42 | Page 43 | Page 44 | Page 45 | Page 46 | Page 47 | Page 48 | Page 49 | Page 50 | Page 51 | Page 52 | Page 53 | Page 54 | Page 55 | Page 56 | Page 57 | Page 58 | Page 59 | Page 60 | Page 61 | Page 62 | Page 63 | Page 64 | Page 65 | Page 66 | Page 67 | Page 68 | Page 69 | Page 70 | Page 71 | Page 72 | Page 73 | Page 74 | Page 75 | Page 76 | Page 77 | Page 78 | Page 79 | Page 80 | Page 81 | Page 82 | Page 83 | Page 84 | Page 85 | Page 86 | Page 87 | Page 88 | Page 89 | Page 90 | Page 91 | Page 92 | Page 93 | Page 94 | Page 95 | Page 96 | Page 97 | Page 98 | Page 99 | Page 100 | Page 101 | Page 102 | Page 103 | Page 104 | Page 105 | Page 106 | Page 107 | Page 108 | Page 109 | Page 110 | Page 111 | Page 112 | Page 113 | Page 114 | Page 115 | Page 116 | Page 117 | Page 118 | Page 119 | Page 120 | Page 121