Gear up for business with Superfinish Express
Invest in this mobile automotives paint repair franchise and get to grips with environmentally friendly products,a business-to-business portfolio, and a support system that extends to chasing the invoices for you. So what will it cost?
The following is a breakdown of the total cost of franchise purchase including fees, for a turnkey operation in a greenfield site: these figures exclude GST.
Initial franchise fee: $15,395
Opening package fee: $12,150
Initial admin expenses: $3,055
Initial training fee: $19,350
Total initial fees (ex GST): $49,950 plus GST
As this is a mobile business a vehicle is also required. The incoming franchisee provides the van and the franchisor takes care of the rest – there are no additional charges assures Superfinish Express CEO Ben Forrest.
Typical costs for the first year
Because this is predominantly an owner-operator business in the initial stages of operation there are usually no wages payable in the first year of operation other than any salary the franchisee draws for themself.
The cost of goods (COGs) is typically between eight and 10 per cent of gross revenue.
Local area marketing (LAM), which is usually essential for a franchise, is not a priority in this business.
“Our franchisees do not work in the domestic markets, we only service the trade (car yards, rental fleets etc), which we do on a repeat business basis,” explains Forrest. For this reason there is virtually no marketing required to build the business, he says, apart from which, most franchisees can only service up to six clients as a single vehicle operator.
Building the business
“Instead of brand or shotgun consumer marketing, we assist the new franchisees to build their client database during their first two weeks of operation by sending a field or business development manager to complete what we call a “blend-in” period, where the BDM shows and assists the franchisee how to establish relationships with their potential clients,” says Forrest.
“Experience shows that we can usually establish a significant client base for the new franchisee during that period. Once the new franchisee has gained some experience and increased their productivity ((sually within a three to six month period) sufficiently to take on more clients, we then return to conduct further field visits with that franchisee and assist them to build their client base further.”
Superfinish Express will complete four field visits with new franchisees in their first year of operation.
“Our fee structure is royalty based and works on a sliding scale percentage – the more you earn the lower the fee rate becomes,” Forrest reveals. Franchisees pay a flat five per cent royalty to the franchisor, based on gross revenue. They also pay a management fee which is based on weekly turnover.
“This weekly management fee is in recognition of the fact that we cash flow our franchisees’ businesses, so franchisees send in their paperwork each week which we compile and then pay them (less our fees). We then collect the money from their clients over the next 30 to 90 days.
“This means that franchisees are guaranteed weekly cash flow (providing they report their sales) and don’t need to take out an overdraft facility for the own operating capital which they would be paying bank interest on.”
Of course it also means that franchisees don’t spend time chasing clients for payment which reduces their administration time substantially – usually admin is a couple of hours per month.
The weekly management fee rates are:
Between $1 and $1000: 20 per cent of gross revenue
Between $1001 and $1500: $200 plus 15 per cent of gross revenue in excess of $1000 (up to $1500)
In excess of $1501: $275 plus 10 per cent of gross revenue in excess of $1500
For Superfinish Express any franchisee must, before starting the franchised business, set up and maintain the following policies:
(a) A property insurance policy over property which is owned or leased by the franchisee or for which the franchisee is responsible or legally liable. This includes goods controlled by the franchisee and used in connection with the franchise. The insurance must be against all losses of any kind for approximately $15,000;
(b) A public risk liability insurance policy of not less than $5 million;
(c) A personal accident, illness and downtime insurance policy covering the gross revenue generated in the franchise;
(d) Comprehensive motor vehicle insurance.
Add together the costs of (a) and (b) = approx $1500 yearly. The costs of (c) = varies depending on income coverage, age and whether a smoker or non-smoker. For instance $5000 pm sickness and accident including additional business expenses cover for a non-smoker aged about 40 will cost about $1650 a year. The motor vehicle insurance (d) = approx $1000 annually.
What’s the biggest challenge?
If these figures are not too challenging for your budget, then once you get into your franchise there will be plenty of other tests and trials. The biggest challenge for new franchisees is the initial learning curve, says Forrest, when they gain experience and confidence.
“Most franchisees don’t have experience in this industry and need to learn a lot to begin with. For this reason we spend a lot of time with them in the field and on the phone during their first year. As they gain speed we will monitor their performance (quality and efficiency) and continually return to help them to build the client base as they need to.”