In a High Volume – High Margin business, there are online versus bricks and mortar business opportunities. Let us consider a Tim Hortons franchise as an example of the latter.
What is the cost to open up a Tim Hortons franchise?
(figures are in USD)
- $340,000 to $511,097 for equipment cost
- $2,400 to $38,000 for real property cost
- $35,000 franchise fee
- $47,000 to $85,400 pre-opening expenses
The franchise package for a standard restaurant where the franchisee leases the premises from Tim Hortons requires $159,500 to $296,900 (USD) unencumbered capital in the form of cash or liquid assets, with the rest eligible for loan financing. There may be royalty and advertising fees involved as well. Throw in legal fees, business registration and licensing fees, although these amounts will be small in comparison to the fees to Tim Hortons.
Depending on the size of the restaurant, the number of employees may range from 25 to 30 to operate the restaurant 24/7. These need to be hired and managed on an ongoing basis. Tim Hortons does not allow absentee ownership of a franchise; the owner will need to be involved in the operation and management of the restaurant.
A cup of coffee can be produced for $0.05 to $0.10 per cup. Sell it for $1.00 a cup. Even if another $0.20 per cup is added for expenses such as labor, that still leaves a very profitable 70% gross profit margin. Gross profit margin announcements of 60% by public coffee sales companies is a realistic goal for a Tim Hortons franchise. The net profit margin is probably in the 20% to 30% range depending on various factors.
A McDonald’s average net profit is around 10% depending on whose statistics are cited. The food business does not yield margins as high as in the coffee sales business. A mom-and-pop shop would be better off selling only coffee without food items to dilute the profit margin.
A Tim Hortons franchise business is relatively low risk so the upfront capital is safe but one needs that capital to start. The good news is that sales will be ringing in right at the start. The bad news is, so will the expenses. Contrast this with a high-margin online venture such as an advertising revenue website.
If the coffee business is not your “cup of tea”, there are other options but not many bricks and mortar businesses will yield better profit margins. There are many franchise business opportunities in the online world as well as bricks and mortar operations. Do your research to find the ones that satisfy your interest, experience and suitability.
Copyright © 2012 This1That1Whatever.com