Franchisors should consider introducing calculator tools for prospective franchisees to determine initial profit estimates, an expert says, following in the footsteps of bed franchise Bedshed.
In a bid to stand out from its competitors in the franchise sector, Bedshed has introduced a calculator tool, designed to help prospective franchisees better evaluate the franchise system.
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The online tool calculates figures, including the marketing fee, royalty fee, sales, gross margin and expenses, to provide an initial profit estimate and a long-term estimated profit projection.
According to Bedshed chief operating officer Gavin Culmsee, the calculator was introduced to address “a real gap” in the information available to potential franchisees.
“Of course, this is designed purely as a guide because the real numbers will depend on a range of variable factors,” Culmsee told Franchise.net.au.
“The Bedshed Franchise Calculator helps people compare apples with apples before they start spending money on accountants and financial advisors.”
“We think Bedshed will compare well to any other franchise people might be considering and we’re willing to put ourselves to the test [for the benefit of] potential franchisees.”
Jason Gehrke, director of the Franchise Advisory Council, says Bedshed’s franchise calculator is unique and something he hasn’t seen in the industry before.
“It does challenge conventional wisdom in franchisee recruitment, which generally suggests that you don’t provide projections to potential franchisees,” Gehrke says.
“In this instance, franchisees are creating projections for themselves. That therefore [challenges franchisors, who are wary] of creating a misleading representation.”
“An eternal challenge [for franchisors] is when a prospective franchisee asks how much they can expect to make, as they go through the recruitment process.”
“Many franchisors won’t respond to that question for fear of creating a misleading representation…. When litigation does occur in franchising, that is a common reason.”
“On the flipside, why would anyone invest in a business if they didn’t have an idea of how much money they might make?”
Gehrke says Bedshed allows the franchisee to find this out for themselves, rather than relying solely on the information provided by the franchisor.
“This approach is fairly unique and I wouldn’t be surprised if other franchisors take a good look at it,” he says.
“But at the end of the day, every potential franchisee must put together a business plan that satisfies them that they will get a return on investment for the money they put into the franchise.”
“They themselves must be accountable for that business plan.”