Question: How does the franchisor make their income? Answer:
This is a question that we wish more people investigating purchasing any franchise would seriously consider.
In a broad sense, feedback from other franchisors aligns with our experience - that franchisors rarely make money from granting new franchises. This is because the initial fees often don't meet the additional costs involved in selecting, training, store set-up, additional support during the initial months of operation etc.
Consistent with most service-based franchise systems in Australia, the Party Plus franchisor earns income predominantly from ongoing royalties from franchisees (based upon turnover) and commissions from strategic service providers (based upon bookings).
In the 5 years to June 2009, 4% of total income was from sales of goods or services to franchisees (printing, artwork. uniforms), 10% from initial franchisee fees and training, and 86% from ongoing royalties/commissions.
2008/09 figures are 3%, 0% and 97%.
Apart from strategic service providers like marquees, jukeboxes and cocktail machine suppliers, no income is received in the form of fee or "kick-back" from any supplier.
Those figures show it's therefore strongly in the franchisor's interest to focus heavily upon existing franchisees ... as royalties are the ongoing and reliable income.
Our business model for franchisees is therefore based upon a simple question - how can we get the best benefit for the franchisee to drive their profitability (and as a result, turnover)?
