Free Essay

Owning a Franchise

In: Business and Management

Submitted By kream83
Words 1099
Pages 5
Background and Benefits
Sonic boasts one of the lowest turnover ratios in quick-service restaurant franchises. Customers can park under a shady canopy and order food through the curbside speakers. A friendly Carhop delivers orders out to the car where patrons can eat it or take it home. The concept cuts down on busy drive through lines and presents a unique eating experience to customers. A standard store layout with 24 to 36 stalls requires approximately ¾ of an acre for build out. Sonic Food is made-to-order with unique menu items not offered at other Quick Service Restaurant's. Sonic maintains strong sales growth, with remarkable customer frequency statistics and continued high returns for stockholders.
The franchise fee is $45,000 with a total investment for a traditional SONIC ranging from $1.1MM to $3.3MM. SONIC is Small Business Administration (SBA) approved. The term of a traditional SONIC franchise is 20 years, plus a 10 year renewal.
Non-traditional franchises start with a 10-year term, a 5-year renewal, and a $22,500 franchise fee. The total initial investment ranges from $434,000 to $545,000, excluding land costs. Other non-traditional locations start with a manageable investment of $107,000 to $221,000. In addition, you must have prior or current successful restaurant experience and/or strong entrepreneurial skills. Sonic offers a 12-week training program that includes eight weeks of restaurant training, three weeks at new store openings and one week of classroom training. *Sonic opportunities are not available in every state.
Pros
* Unit Sales - Average unit sales have increased each year since 1987. * Conceptualized Marketing - The Happy Hour concept drives traffic and sales throughout the system.
Cons
* No One-Hit-Wonders - Sonic only accepting franchisees qualified to open 2 or more drive-ins.

Sonic Drive In Restaurants Franchise Information
Business Established: 1953
Franchising Since: 1956
Franchise Fee: $22,500 to 45,000
Total Investment (US): $107,000 to $3 million depending on store type

Sonic Franchise Process
Qualification/Approval
Attend a Sonic Discovery Day
Development Agreement/Award Franchise
Training Program
Site Selection
Construction
License Agreement

Franchise Offer: Sonic offers the franchisee the opportunity to use its trademarks under the Sonic name, at a single location under the terms of the License Agreement. A Sonic Drive-In typically is a free-standing, one-story building with surrounding parking stalls covered by canopies, providing in-car service for approximately 20 to 36 cars. Many Sonic Drive-ins also incorporate drive-thru service and patio seating, and some may provide indoor seating. 



Financial Assistance: Sonic offers financing to the franchisee for the Sonic Sign package for a 10-year lease term. The franchisor will lease a Sonic sign package at rental rates ranging from approximately $120 per month for a single monument type sign to $790 per month for a large Sonic sign package.



Training and Assistance: Training is provided to the franchisee and at least one individual working full time at the new Sonic Drive-In. This includes up to 150 hours of ‘On-the-job’ training at a Sonic technical training drive-in at various locations throughout the United States, and in the classroom training of a 5 days Sonic Management Seminar. The classroom training is located at Sonic's corporate office in Oklahoma City, Oklahoma.


Territory: Sonic will grant the franchisee the right to operate a Sonic Drive-In either at a specific location or at a location within a specified area subject to Sonic's approval of the specific location within six months after the License Agreement date. Sonic will not own or operate a Sonic Drive-In and will not franchise any other person to own or operate a Sonic Drive-In within the “Protected Area”.



Term of Agreement and Renewal: The length of the franchise agreement is 20 years, with an option to renew for one additional 10-year term.



Obligations and Restrictions: Sonic does not require that the franchisee personally supervise the operation of the Sonic Drive-in. However, at least one individual (usually the manager) working full time at the Sonic Drive-in must attend and successfully complete the Stage Career Development Program and any other training program developed and designated by Sonic from time to time. If the trained individual ceases to work full time at the Sonic Drive-in, the franchisee will have 120 days to replace the individual with someone who has completed the Stage Career Development Program.


Total Number of Units: 2,791 franchised units at the end of 2008.



Financial Statements: Average Net Sales in 2008 totaled $1.15mn, with 44% of franchised units having sales at or above this figure.
Initial Investment: Name of Fee | Low | High | Franchise Fee | $45,000 | $45,000 | Payroll | $72,600 | $89,000 | Training, Travel and Living Expenses while training | $57,000 | $96,000 | Advertising Funds | $7,500 | $22,000 | Opening Inventory | $32,600 | $121,000 | Security deposits, impact fees for utilities, utility deposits, business license and other prepaid expenses | $10,000 | $12,000 | Insurance Premiums | $8,000 | $31,000 | Additional Funds – 3 months | $7,000 | $28,000 | Land | $218,000 | $1,127,000 | Building and Site Work | $525,000 | $1,471,000 | Equipment | $136,000 | $184,000 | Point-of-Sale System | $58,600 | $103,800 | Sonic Sign | $7,000 | $46,000 | LED Electronic Message Center | $25,000 | $38,000 | Total estimated Initial Investment | $1,194,300 | $3,398,800 |

Ongoing Fees: Name of Fee | Amount | Royalty Fee | 2%- 5% of Gross Sales | Brand Fee | 0.75% of Gross Sales | Advertising Cooperative Fee | 3.25% (Minimum) of Gross Sales | Additional Training Fee | $400 per Person | Transfer Fee | $1,500 | Audit Fee and Surcharge | Cost of Audit plus 10% of unpaid amounts | Late Charge | 1.75% of Amount Overdue | Renewal Fee | $6,000 |

Franchise Units YEAR | U.S. | CANADIAN | INTERNATIONAL | COMPANY OWNED | 2013 | 3,126 | 0 | 0 | 408 | 2012 | 3,005 | 0 | 0 | 438 | 2011 | 3,079 | 0 | 0 | 446 | 2010 | 3,103 | 0 | 0 | 458 | 2009 | 3,055 | 0 | 0 | 481 |
Where Seeking Franchisees: Franchisor is seeking new franchise units throughout the U.S.
Startup Costs, Ongoing Fees and Financing
Total Investment: $1,112,300 - $3,246,200
Franchise Fee: $45,000
Ongoing Royalty Fee: 2-5%
Term of Franchise Agreement: 20 years, renewable
FINANCIAL REQUIREMENTS
Net Worth: $1,000,000
Liquid Cash Available: $1,000,000
OPERATIONS
60% of all franchisees own more than one unit. Number of employees needed to run franchised unit: 25. Absentee ownership of franchise is NOT allowed.. FINANCING TYPE | IN-HOUSE | THIRD PARTY | Franchise Fee | | | Startup Costs | | | Equipment | | | Inventory | | | Accounts Receivable | | | Payroll | | |

Similar Documents

Free Essay

Business Organization and Adr

...venue for litigation and in the event of litigation a decision needs to be made where the venue will be. Tracey has always been interested in opening a Papa Johns since she was the General Manager ten years ago. After moving back to Baltimore, Maryland she had enough saved to begin the process of purchasing a Papa Johns’ franchise. “Because franchisors are usually larger than franchisees and have more resources, they often have the upper hand in franchise relationships. However, federal and state laws have been established to protect the franchisee. Thus, contract law, and the Uniform Commercial Code in particular apply. If the terms of the contact are not met, either side can sue for breach of contract” ((Kubasek, Browne, Herron, Giampetro-Meyer, Barkacs, Dhooge, & Wiliamson, 2012, p. 785). There are several advantages to owning a franchise. The most important advantage of owning a Papa John’s franchise is the low failure rate. Because Papa Johns was established in 1985, they have a long success rate. Another advantage in owning a franchise is the help with the start up. “When you buy a franchise, you get all the equipment, supplies, and instruction or training needed to start the business. You may also receive ongoing training and help with management and...

Words: 1506 - Pages: 7

Premium Essay

Cvp Analysis

...Snap Fitness, a fitness business based in Minnesota, offers franchise opportunities. The opportunity comes with a start-up fee ranging from $60,000 to $184,000. The following items are included in the start-up fee: 1. Franchise Fee 2. Grand Opening Marketing 3. Leasehold Improvements 4. Utility and Rent Deposits 5. Training Many people dream of owning a business as opposed to working for another business. The benefits of owning a franchise is priceless if ran properly. This paper will show an estimate amount of variable costs and monthly sales in members and dollars for Snap Fitness. Also included are five examples of variable costs and a summary about purchasing a franchise and the decisions that come along with it. Estimate Amount of Variable Costs A Snap Fitness franchise is estimated to incur fixed operating costs of $4,000 and $2,000 to lease fitness equipment. A newspaper article providing details about fitness centers like Snap Fitness states this form of business may only require 300 members to reach its break-even point. The cost-volume-profit, also known as CVP, analysis will assist Snap Fitness in determining the effects of changes of volume and costs on the business’ profits. The CVP analysis will help the new franchise apply appropriate profit planning. The CVP analysis determines profit by subtracting total revenue from total costs. The equation separates costs into variable and fixed. The equation coverts to profit = total revenue -...

Words: 1543 - Pages: 7

Premium Essay

Subway Franchise

...Subway Franchise Course Instructor’s Name 11 August 2012 Subway Franchise The franchise concept has several advantages for both the franchisor and the franchisee. For the franchisor, offering a franchise arrangement means an easy access to capital formation brought about by the investments of franchisees (Om Sai Ram Center for Financial Management Research, 2006). Furthermore, it provides incremental income for the franchisor through royalty payments. Another advantage of the franchise concept is that it makes possible a faster expansion program for the franchisor supported by motivated distributors in the person of the franchisees (Om Sai Ram Center for Financial Management Research, 2006). The franchisees stand to benefit too from a franchise agreement. The franchisee gets to experience entrepreneurial autonomy using a proven concept, often with extensive recognition of the brand name (Om Sai Ram Center for Financial Management Research, 2006). The franchisee also benefits from the training programs provided by the franchisor, coupled with continuing supervision of the store. Although there are advantages to owning a franchise, franchisees are faced with disadvantages too. Decision-making is quite limited since the franchisee should follow the guidelines set by the franchisor (Om Sai Ram Center for Financial Management Research, 2006). In terms of purchasing, the franchisee is forced to purchase supplies and equipment from the franchisor...

Words: 1378 - Pages: 6

Premium Essay

Snap Fitness

... Snap Fitness Even though owning a business can be costly, finding one that aligns with an individual’s ability to invest and operate is challenging. Health and fitness continues to be one of the biggest markets today. Snap Fitness is a growing franchise chain of fitness clubs that is a reasonably priced investment with relatively fast turn around on investment. Franchise History Peter Taunton founded this chain of fitness clubs in 2003 in Chanhassen, Minnesota. This fitness operation presents individuals looking for a way to own their own business in the fitness industry by offering affordable franchising opportunities. These franchise opportunities are client-friendly and can be found across the globe. Snap Fitness clubs are open 24 hours daily and seven days a week. Memberships in one of these fitness clubs give clients opportunities to fit a work out in at their convenience. Many fitness organizations require members to enter into annual contracts that can offer savings if purchasing two or more year plan. Another good feature of the fitness club allows the client to work out at any Snap Fitness facility in the United States. Cost Fitness franchise opportunity is a growing business. The Snap Fitness Franchise Disclosure Document (FDD) located on the Snap Fitness Website shows a total investments in a Snap Fitness Franchise will range from $60,000 to $184,000. Additionally, Snap...

Words: 1274 - Pages: 6

Free Essay

Subway vs Cousinw

...start their restaurant and why it is still here today. Today you will see why Team C, prefers Subway for its healthier option of food and why owning a Subway is more advantageous than owning Cousin Subs. Subway is one of the top sandwich shops to eat at. It is healthier than other sub shops and it is also cheaper to own a Subway franchise than other sub shops. There are many pros and cons for Subway. It has great tasting food and a great option for healthier subs. Another pro for Subway is that customers can make their own sub, and see how the employee is making it. Some cons for Subway are some sandwiches do not have enough meat. Since the meat and veggies are out in the open this is another con, people believe it is not as sanitary as other sub shops. There are also pros and cons with owning a Subway. It is cheaper to get into a franchise than other sub shops. To get a Subway franchise started the fee is 15,000 dollars. After that it can cost anywhere from 100,000 dollars to 250,000 dollars to get the franchise open and ready to serve customers ("Buying a Fast Food Franchise", 2014). Subway is very popular, they are seen on TV more than other sub shops, and have a lot of famous people including athletes that are endorsed by Subway. Having famous people involved with this company will also bring in more customers. The cons about owning a subway is a weekly payment called royalty payments. Subway...

Words: 2477 - Pages: 10

Premium Essay

Owning a Slice of Th Action a Domino's Pizza Frenchise

...CASE STUDY II OWNING A SLICE OF THE ACTION A DOMINO’ S PIZZA FRANCHISE 1. According to the article, Domino’s Pizza is a second largest pizza franchise, and it is called a “franchisor,” or business owner. Domino’s sells others the right to use its name and sell its products in specific geographic area. As usual, an entrepreneur, a person who risks time and money to start and manage a business, may be interested in opening his/her own business by purchasing a franchise, and is called a franchisee. However, there are many benefits of owning a Domino’s franchise. First, Domino’s is a strong global brand, and with the Domino’s reputation, new business is easier to start because the consumers are familiar with the products. Second, along with reputation of Domino’s, franchisees benefits from the national advertising programs. The franchisees are also assisted to be given the access to suppliers with the products and price, this makes the Domino’s franchise more profitable. In addition, Domino’s franchisees are not required to have experience because they will be trained and guaranteed in succeeding; therefore, owning a Domino’s franchise has a higher rate to succeed than start up a normal pizza business. In contrast, the franchisees will have great opportunities to reach to the high revenue, and Domino’s, at the same time, will earn great royalties (the fees paid to franchisor) from their franchisees. In the whole, both Domino’s and its franchisees benefit; the success of franchisees...

Words: 881 - Pages: 4

Premium Essay

Business Forms

...Many people dream of starting their own business and being their own boss calling all the shots. Before starting a business, entrepreneurs must think about what kind of business they want to start and under what Forms. The different kind of forms to consider is sole proprietorship, partnership, corporation, and franchise. Each form is tailored to certain kind of business and knowing the details of each will enhance the business strategy. Sole proprietorship: This form of business structure is mostly used by someone who owns a business by themselves. An example of this type of business in someone starting a home based business such as direct sales. Selling merchandise out of a home office is ideal for new start-ups because the direct sales company usually has an easy to follow plan to where the business owner only has to implement that plan. The advantage to owning this type of business is the owner is in complete control and can work as much or as little as needed. Other advantage is the owner can keep control of inventory, does not have to worry about rental space cost and business owner is able to take advantage of the tax breaks for operating out of the house. The disadvantage is that the owner is in complete control and is responsible for marketing, budgeting and any labiality claim towards the business. Partnership A partnership business is similar to a sole proprietorship but instead of just one owner, there are usually two or more owners.   For instance...

Words: 1036 - Pages: 5

Free Essay

Mc Donald's

...manages to serve 27 million Americans everyday. - 32,478 units gives employments to 1,5 million people (2009). - McDonald's brand is in 122 countries around the world. Over thirty thousand locations serve 51 million customers worldwide each day. - More than 70 percent of McDonald's restaurants around the world are owned and operated by independent local businesspeople. - Revenue: $22,745 million (2009) II. Mc Donald’s and franchisee agreement: * Initial required cash liquidity: 300,000 (2009) * Total investment: $1,057,200 - $1,885,000 - Franchise fee: $45,000 - Terms of agreement: 20 years, renewal * Initial (franchise) fee * Royalty fee – generally 4%–5% of sales * Rent income to McDonald’s(base and percentage rent) * Franchised restaurant expenses * Rent expense paid by McDonald’s to landlords * Depreciation on buildings and leasehold Terms: Franchisee– Initial franchise fee– Signs, seating and equipment- Pre-opening costs (training, advertising, etc.)-Full-time best efforts– Adhere to operating...

Words: 773 - Pages: 4

Premium Essay

Case Study #3

...Introduction After years of prayer and seeking God for direction, Shania Jackson has made the decision to create and operate a Christian coffeehouse called “The Gathering Place”. She prides herself on her strong Christian beliefs and values so she wishes to run the company in this same manner. Jackson has a few potential employees that she must decide whether they are suitable for her business interest. Her husband, Marvin, only wishes to be an investor but does not want to work for the company. Jackson’s sister, Kelsey, would like to work for her but her husband would prefer that she continued her duties as a stay at home mom. Jackson’s neighbor, Carlos, thinks the idea of a Christian coffee house would sell well because of local demographics and religious preferences. She must also cipher through state regulated laws in order to determine how she will structure her business. Business Forms Based on brief research Shania has decided to keep her options open regarding the classification of her business. Her research on business forms included: sole proprietorships, general or limited partnership, corporation, limited liability company (LLC), or a joint venture. It is important that Jackson establishes potential partners or investors before making a decision a final decision as this information will need to be included in the businesses articles of incorporation. Jackson has not stated any secured startup capital other than personal money and a potential investment from her...

Words: 1000 - Pages: 4

Premium Essay

Thought It Was Safer Than Starting His Own Business

...he worked in and invested them, with his wife, in a car repair franchise in a suburb in Indianapolis. He has been expanding since and seven years later he holds five franchised locations around Indianapolis. Revenues from the first two car repair shops financed his last two businesses. He currently has twenty-seven full time employees, yet feels the stress from running the shops for ten-hour work days and evenings full of paperwork. It seems Fred is working more now that he is semiretired than before as a senior executive. Fred is not going thru this by himself since this situation happens often with franchisees and the misconception of being their own boss and their own company. They believe that others will take care of all the headaches and exposure of the business, yet the franchisor is the one making the money in royalties and advertisement while dictating how the business must look and even be ran. If Fred does not comply then the franchisor can take the franchise away at any moment and Fred would be left with nothing. Assess Fred’s capability and capacity to be a franchisee in general and for this specific company. Seems to me that Fred definitely has the capability and capacity to be running a franchise of car shops. This is due to his thirty-year experience in the automobile industry. He has the knowledge and understands what it takes to run a car shop, even though his knowledge of a franchise might not be as extensive. Fred can certainly put his...

Words: 1616 - Pages: 7

Free Essay

Bussiness

...experience. Veterans have acquire different skills as well as work ethics. Other lines of business could be owning their own, especially in services. For instance a business in mechanics, auto or equipment repair. Construction, truck driving, animal trainers, personal trainers, security, electrical equipment, refrigeration equipment, restaurants and computer based business, to mention a few. Veterans are a source of highly qualified individuals, they posses a wide range of skills and experience that can make them a great fir for a business. Going into the military requires discipline, loyalty and commitment. Which allows them to be proficient in their own business. They posses leadership and responsibility. Like being on time, finish the job, being able to handle stress, pride on what they do and teamwork. They are also capable of working long hours, which is important to start a new business, since they are time consuming. o Besides those discussed in the case, discuss other characteristics that are essential to the success of franchisees and provide a rationale. Other characteristics that are important to the success of a franchise are understanding the business before investing on it. Knowing what you like to do, and making sure the type of franchise is a good fit for you. Other important factor is reviewing the statistics of the franchise, there are studies that show the ratio of the investment and revenue of the business. ...

Words: 393 - Pages: 2

Premium Essay

Easyinternet Case Study

...decided divert from large cafes to a franchise model with smaller café sizes. Its main goal is also to focus on its core competencies such as the yield management model. In order to do so, it will be outsourcing its non-core competence activities which include logistics. Ingram Micro has been chosen as the logistics provider as they offer more full service activities while remaining at a lower cost than its competitors. By including Ingram Micro in corporate decisions and meetings, EIC can keep Ingram Micro accountable and stay updated with issues as they arise (just as they would if they owned the logistics arm of the Company). By having the capital freed from investing in hardware and stores, EIC is able to invest more in creating value through their management of franchisees and their yield management model. Issues Identification EasyInternetCafe (EIC) was launched in 1999 under the umbrella of the EasyGroup. Their mission is to provide customers with internet access at low costs and to capitalize on the tech boom. Despite the excellent support and recognition from the public, EIC is experiencing adversity of keeping their business profitable after the “dot-com” bubble burst. Their business plan of owning many large cafes that could house 250-500 PC terminals at each café is not working. They have decided to restructure their business by downsizing the cafes. They propose to do this by using the franchise business model. These franchised...

Words: 1420 - Pages: 6

Premium Essay

Star Wars

...Star Wars is an American epic space opera franchise centered on a film series created by George Lucas. The franchise depicts a galaxy described as "far, far away" in the distant past, and portrays Jedi as a representation of good, in conflict with the Sith, their evil counterpart. Their weapon of choice, the lightsaber, is commonly recognized in popular culture. The franchise's storylines contain many themes, with influences from philosophy and religion. The first film in the series, Star Wars, was released on May 25, 1977 by 20th Century Fox, and became a worldwide pop culture phenomenon. It was followed by two sequels, released in 1980 and 1983. A prequel trilogy of films were later released between 1999 and 2005. Reaction to the original trilogy was largely positive, while the prequel trilogy received a more mixed reaction from critics and fans. All six films were nominated for or won Academy Awards, and all were box office successes; the overall box office revenue generated totals $4.38 billion,[3] making Star Wars the fifth-highest-grossing film series.[4] The series has spawned an extensive media franchise – the Expanded Universe – including books, television series, computer and video games, and comic books, resulting in significant development of the series's fictional universe. In 2012, The Walt Disney Company acquired Lucasfilm for $4.05 billion and announced three new Star Wars films, with the first film, Star Wars: The Force Awakens, planned for release in December...

Words: 361 - Pages: 2

Premium Essay

Business

...Americans dream of owning their own business and being in control of their destiny. The only issue is that very few folks will actually dive in and take the risk to become their own boss. The reason for this holdback: it's the fear of failing. The rate of failures on startup businesses varies from person to person. However, Scott Shane of Case Western Reserve University often has his data cited. He states that failure rates in one year are about 25 percent and 10-year failure is about 71 percent. What do these numbers mean? If four businesses begin in one year, one business is bound to fail in that first year. 71 percent of businesses currently open will be shut down in 10 years. Understanding Entrepreneurship In Franchising Since failure rates are high, it's of no surprise that very few people will try their hand at it. Many people don't know that a way to become a business owner is to start a franchise. Franchises have less of a chance of failing and are actually do well monetarily. Using the same 10-year study from above, nearly 62 percent of franchises are still in business, an extremely high figure. Why Franchises Stay In Business Why is it that franchises stay in businesses longer than a startup company? Franchises have a large quantity of advantages that novice entrepreneurs don't have, which means the venture is less risky. Five Advantages of Franchises Advantage 1 - Training and Support Franchise businesses will give new franchise owners plenty of...

Words: 700 - Pages: 3

Free Essay

Why Choose a Franchise?

...Why chose a Franchise Katherine Powell ACC 561 05/30/2013 Dale Stoeber Why chose a Franchise? Choosing to own a franchise is a big decision especially one in the fitness industry. I would say it would help if that were your interest? We are going to take a look at a few franchises businesses and discuss to pros and con of them. In today's fast paced world, it's difficult for people to commit to an exercise program due to busy, unpredictable schedules. When you own a Snap Fitness franchise, we will help you bring affordability and convenience to the neighborhoods of people across America. Our proven concept shows the fact that many people will give up the Athletic Conglomerates in lieu of convenience and cost. Snap Fitness provides a value people are looking searching. The hours and locations are convenient. They offer state of the art equipment in a clean environment. Snap Fitness offers its owners the opportunity to become part of a brand name. Partnering with Snap Fitness is like partner with the global leader in fitness franchises. Snap Fitness offers training and financial the first step in owning your own Snap Fitness franchise is by filling out the Express Request form. By providing us your contact information, a Snap Fitness representative will contact you and walk you through the approval process for your club. Once we receive the appropriate information from you, your approval will take approximately two to five days. Other Fitness clubs have jumped...

Words: 515 - Pages: 3