Make sure you cover the following:
Set up costs
- Premises $$$$
- Store fit out $$
- Identification $
- Service Department fit out $$$
- Plant and equipment $$
- Parts inventory $
- Accessory inventory $$
- New bike floor plan security $$$$
- Used bike credit facility $$$
- Staff $$$$
- Dealer Management system with CRM $$
- Vehicles $
- Bank guarantee $$
Return on investment
- Break down target profit by business sector.
- New bikes.
- Used bikes
- Staff salaries/ training
- Franchise fees.
- Legal / accounting.
- Equipment maintenance.
- Franchisors contributions towards set up costs – store/identification/service division/ parts storage/ dealer management system.
- Franchisors contribution towards floor stock – particular attention to mandatory stock requirements, re-stocking process, and rebates on price altered models, discount structures, free floor plan period and refinancing opportunities.
- Franchisors commitment for staff (technical / sales and parts) training.
- Franchisors assistance during the term of the agreement. If the Franchisor will be sending their staff into your franchise, the quality of the staff and get clarity on what they will specifically do. You don’t want stock checkers or coffee drinkers wasting your time. You want assistance to create profit.
- ROI across each business sector. Must be discussed with the Franchisor. A refusal to discuss should be taken as a severe negative.
- Calculate where the risk lies. Franchisor %. Franchisee %.
- Make sure to address all points in the Franchisee manual ‘Start-up check list’
- The disclosure document must clearly identify and explain all of the Franchisors business systems that have the potential to impact return on investment (profit) Do not accept ‘it’s explained in the operational manual’. The purpose of the disclosure document is to enable franchisees to make an INFORMED decision about whether to proceed with the franchise.
- The Franchise Agreement. Special attention should be given to; the length of the term relative to the investment being made, the exclusivity of the area in which the franchise operates, performance criteria ( how you will be judged by the Franchisor) and what occurs at the end of the agreement (including termination)
CALCULATE YOUR TOTAL INVESTMENT FOR THE FRANCHISE. You must have absolute clarity on this if you are to compare the franchise potential profitability against other franchises or alternative investments.