Example (practice numbers, one outlet, one month)
| Line | No fees | Royalty 6% + ad fund 2% | Royalty 10% + ad fund 3% |
|---|
| Sales | 40,000 | 40,000 | 40,000 |
| Cost of goods (30%) | 12,000 | 12,000 | 12,000 |
| Fixed costs incl. a fair owner wage | 20,000 | 20,000 | 20,000 |
| Royalty | 0 | 2,400 | 4,000 |
| Advertising fund | 0 | 800 | 1,200 |
| Left before loan and tax | 8,000 | 4,800 | 2,800 |
Check the maths: 40,000 − 12,000 − 20,000 − 2,400 − 800 = 4,800. With a loan payment of 2,500 in the middle column, only 2,300 is left. Fees that look small as percentages can take a large share of what the owner keeps.
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I'm learning "Franchisor Foundations: build and run a franchise system" on The Future Market. Lesson 1: "Before this course, and is the business ready to franchise?".
What the lesson teaches:
- Before this course: Franchise Due Diligence: reading FDDs and contracts (course 2.27.3), which builds on Franchising: buying or starting a franchise (course 2.27) and Franchise Basics: what franchising is (course 2.27.1). You should already know the fees, disclosure documents, earnings claims, turnover, the franchisee's money model, the key agreement clauses and franchisee calls. This course does not repeat them. It turns around and asks: what must a franchisor build so that a careful buyer would say yes, and so that franchisees can succeed?
- Business format franchising: the franchisor licenses its brand and its whole way of doing business (systems, training, support), and the franchisee pays an initial fee and ongoing fees.
- Readiness test (answer every question with evidence, not hope):
- Proven: has the business made money for long enough, and in more than one location, so success is not just you or one lucky site?
- Teachable: can a trained person with no special talent run it from written systems?
- Distinct: is there a brand and a method customers choose, not just a common product?
- Fair for the franchisee: after royalty, advertising fund, rent, wages and a fair pay for the owner, is there still a return on their investment?
The exercise I'm working on:
Run the readiness test and the one-outlet model for a business you know, real or practice. Write your verdict and the first thing that must change.
I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
I'm a parent helping my child (about 8 years old) with a lesson called "Before this course, and is the business ready to franchise?" from the course "Franchisor Foundations: build and run a franchise system".
Here's what the lesson says:
A recipe works in your kitchen because you are there. To sell the recipe to others, it has to work in their kitchens without you, and still taste good and make them a fair living. Franchising starts with that test.
The activity:
Run the readiness test and the one-outlet model for a business you know, real or practice. Write your verdict and the first thing that must change.
Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.