franchisees said the fee was small in comparison to the set up costs – which for many start at around £100,000. This isn’t surprising when you consider all that has to go into a sandwich bar.
“Kitting out my premises has been by far the most expensive part of setting up the franchise,” says Simon Dilkes of O’Brien’s in Birmingham. “After a £15,000 franchise fee, the total set up cost was £110,000.”
But this does include everything from premises down to the cash till. For strongly branded franchises, the look and feel of a store has to be strongly defined. That way, the regular customer knows instantly where they are and what to expect and the new one will quickly feel at home.
Working with the franchisor
As such each area of the setting up process is carefully monitored by the franchisor and exactly priced. For example Subway divides the country into the 18 TV regions – Granada, Anglia, Carlton and so on – and has support offices in each one to help with such things as negotiating the lease, ordering equipment and store construction.
And it recommends a certain type of point of sale system ($4500/£3100) or outside signs ($3500-$10,500/£2400-£7250) having calculated the overall approximate cost before it starts.
The franchisor has a lot of control over where your business will be based. It has to approve both its location and size but these don’t have to be limited to the high street. Where these are high cost and desirable properties, however, you will benefit from the backing of a larger organisation.
Mr Bagel’s is currently very keen on locations such as food courts in shopping malls. They offer potentially high volumes of staff and tend to be cheaper then high street or secondary locations. For example you might pay £20,800 a year in rent rather than £33,800.
Another main expenditure is staff. Again, you probably won’t know in advance what you’ll need but will have to work out if you aren’t paying out for enough staff when your current ones are run off their feet. It’s fairly obvious that you have to keep them happy as well as making a profit.
For example, a small Mr Bagel’s franchisee with annual turnover of £312,000 might be paying £62,400 in labour costs including a management salary as well as full and part time staff. In a larger business this figure rises to £96,200 but so too, significantly, does the turnover, estimated at £520,000.