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#franchise #margin #grossprofit #cogs
If you are thinking of buying a patisserie coffee shop you should have the financial figures reviewed before you buy. This is because you need to be sure the numbers stack up. Buying a business is a big decision and needs to be given due respect. There can be significant financial consequences from making a poor decision
With COVID causing an increased awareness of health issues and consumers conscious of what they’re eating, we see steady inquiries from people looking at health food franchises.
Location is key – will it be high street or shopping centre?
What incentives will the landlord provide?
What is the foot traffic, or passing trade?
What will the rent be?
Expected timeframe to open?
Expected up-front costs – total?
Will you need finance?
If so, can you get it and how much?
Expected ongoing costs, operational and franchise fees?
What will Cost of Goods Sold % be?
Staffing numbers and wages costs?
What marketing assistance will be provided?
How will the franchisor help you grow your business?
What are the demographics of the local area?
Do they represent your target client?
How much money do you want to make?
Can this franchise business model allow you to make that?
What is the expected payback on your investment?
Are you excited about this opportunity?
Is this the best option for you right now?
Buying a franchise is a big decision and will have big financial consequences on your life. So, get a pre purchase review before you fall in love with it!
Send me a message via Contact Us and we’ll get straight back to you to get started.
Peter
Do you buy products then add a flat fee to get your sale price?
If so, you might be hurting your business. Consider this example.
Say you buy an item, like tyres for $55.00 each.
Then you simply add $70 on top.
Your sale price is now $125.00
This means your Gross Profit is $70 and your Margin is 56%
But say you buy a tyre for $200 and add your flat fee of $70 on top.
Your sale price is $270.
Your Gross Profit is still $70,
But your Margin has dropped through the floor and is now only 26%!
Your margin dropped so dramatically because your ‘mark-up’ (the amount you add on) is for a fixed amount, not a percentage of your sale price.
There may be times when this is a good idea. Such as:
Convenience - fast and simple to work out
Price pressure, or
Maybe you just like it
But you’re hurting your business and likely not earning enough margin.
Take the time to work out your Margin on product costs as it can lead to some important insights into your business. It might allow you to revise your pricing, or highlight where you should be focusing your attention.
