FEASIBILITY STUDY OF A FRANCHISE PROJECT

In general, studying the economic feasibility of your franchise project means having a clear idea of the initial costs you will have to bear and also the main sources of revenue.

Let’s start from the cost item, what will be at the beginning of your business?

• The consultants to be paid: we talk about franchise consultants, network developers, lawyers for contract management, the creation of an operating manual, business plan, etc;
• The marketing campaigns: in the costs of economic feasibility you will have to take into account the expenses to be made to attract potential affiliates in your network;
• The costs of finalizing the lead: attracting a potential affiliate is just part of the job. Other costs will be then in finalizing that lead, those of an external commercial that must open and conclude a negotiation in exchange for a success fee, or the costs of employment of your internal collaborator in this activity.

Now comes the more pleasant notes that regards the revenue item. Typically a franchisor can generate money from:

• Entry fees: represent the economic consideration that the franchisee will have to pay you to be part of your network and enjoy the services you offer;
• Set-up services: this is the case when you and a partner will offer materials to set up the franchisee’s store;
• Marketing services (when they are centralized): in this case, you will make available to your affiliates graphics, packaging, a social media marketing plan etc;
• Royalties: unlike fees, which are paid once by the franchisee to the franchisor, royalties are paid periodically and generally calculated as a percentage of the turnover of the franchisees;
• Resale of raw materials: However, this is not a source of income that applies to all types of franchises. If fashion, for example, is a custom, the same source of revenue can not exist, for example, in a franchise of services.