Thursday, June 9, 2011

Franchising

Today,I would like to talk about Franchise. Franchising is the Practice of using another person firm SUCCESSFUL business model.

Today in Malaysia,they is a lot of successful franchise business and to acquire the franchise from the original owner is not cheap.The franchise business is such that if the business is good ,the payback period for the capital investment could be in 6 months but if the business is bad,the person who took the franchise could lose millions in a few months.

Example of franchise business together with the initial capital investment(ICI) and the monthly royalties which is a percentage of the gross revenue (GR) is as follows:-

Name--------Business-----------------ICI----------Royalties % of GR

1.Overtime----PUB------------------1,000,000------10%

2.Papa Rich---Cafe------------------1,000,000------8%

3.OldTown-----Cafe--------------------850,000------8%

4.Station ONE-Cafe--------------------550,000------6%

5.7 ELEVEN----Convenient Store---250,000------5%

6.Macdonalds--Fast Food-----------3,500,000-----RM 12,000 per month.

In addition,the Franchise owner will supply all the goods and services that are needed by the outlet as stated in the franchise agreement.The franchise owner will provide training to the outlet owner and staff before operation begins.

Recently,I attended the opening ceremony of the new Overtime pub at Tesco Scott Garden at Old Klang Road. Business was so good that the pub ran out of the Starker beer by 11pm and they have to request for the beer from Overtime in Puchong.In fact,the owner who is my friend told me to stop ordering beer in order to allow his other friends and associates who came late to order the beer.

It is estimated that if the business is good and consistent,this pub will BREAK EVEN WITHIN 6 months and after that it is home run all the way.

By the way,most of this franchise outlet is always located in the corner of any place as this business require a big and visible place.

2 comments:

iphone said...

Thank you George for your well rounded information. I happen to be interested in your findings and I cant help but to notice that the owner of the recently opened Overtime at the Old Klang Road is a friend of yours?

May I know how he has come about to acquire the franchise? And is Overtime franchises still available? I am keen to own a franchise of my own and i foresee that Overtime will have a great potential in the future.

If it is not too much trouble I humbly request to know about your friends acquisition of this franchise.

Looking forward to hear from you soon.

Thank you

Warren WR How
Deputy Chief Operating Officer of Pak Chun Group

Mac said...

There are so many business ideas that are out there waiting for enterprising individuals to exploit. Although franchises are common with retail businesses they however do exist in many industries and markets including manufacturing.





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