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How do franchisors generate revenue and income from franchisees?
A franchisor has many different ways that they can make money. Some are self-evident, others not so much. Some are ubiquitous, others are industry or even brand specific. Below, I am going to take a look at a few. This list is by no means exhaustive.Initial Franchise FeesThe initial franchise fees, often referred to as the Franchise Fee, is the up-front money that you pay the franchisor for the right to be in the system, and the other rights given to you by the franchise agreement. The Franchise Fee can range from as low as a few hundred dollars to $100K+, and is somewhere between almost 100% profit to a net loss, depending on how the franchisor and how they run their business.Site Assistance FeesLOCATION, LOCATION, LOCATION! We all know that, for brick and mortar businesses, finding the right location is key. Many franchisors offer some level of assistance in site location, though the final decision usually rests with the franchisee, subject to the franchisor’s approval. Some franchisors cover their costs of this in the franchise fee, while others separate it out as a distinct fee. Like the franchise fee, this can be anywhere from a significant profit center to not enough to cover the actual costs.Training FeesFranchisee training can range from a couple of hours of webinars to months of on site training. Many franchisors provide free initial training for a limited amount of people per franchise, but most charge a fee for re-training, or additional people. There is a recent industry trend, however, to charge for training. The reason behind this is that, due to new accounting rules, franchisors soon will have to amortize their franchise fees of long periods of time, so there is a push to reduce the actual franchise fee down to just the value of the trademark license and access to the system, and then break out other things, like training, into their own fees. In my experience, even for franchisors that charge a training fee, it is a break-even at best.RoyaltiesRoyalties are the life-blood of most franchisors. Unlike fees that are reliant upon selling more franchises, future royalties are predictable and modelable. When a franchisor sells (the franchisor entity, not selling a franchise), this is often the main item used to value the business.Technology FeesMany franchisors have propriety reporting, POS, communication, and other technology. Additionally, most franchisors maintain websites, social media, and other technology-based brand awareness strategies. These are often paid for, or at least contributed to by, a fee that each franchisee pays. Technology fees are often a minimal profit center for franchisors.RebatesFor some franchisors, rebates are a large profit center. Essentially, the franchisor negotiates with a supplier of products that their franchisees need, and in exchange for being an approved supplier, they rebate a certain percentage of sales back to the franchisor. In a good franchise system, the franchisee still ends up paying less than they would on their own, and the franchisor profits, so its a win-win.Product marginSome franchisors manufacture some or all of the products that the franchisee sells, or products that they use to perform their service (propriety mixes at froyo locations, or special cleaning supplies for janitorial franchises are two examples). Though this is not extremely common, those franchisors that do this usually do so at a profit, and for some few franchisors this is their main revenue stream.Equipment marginSome franchisors either manufacturer or assemble the equipment needed for a franchisee to service its clients. A junk-hauling franchise, as an example, may provide the trucks that their franchisees use. Again, not extremely common but often a good profit center for franchisors that do it.Ongoing servicesMany franchisors provide necessary services for their franchisees. They may staff a call center for booking appointments, help a franchisee do research on potential clients (underwriting loans, for example), or handle billing for the franchisee. This is often done at a break-even or loss, but some franchisors have this as a profit center.FinancingVery few franchisors offer direct financing to their franchisees. Those that do, however, can make a significant profit from doing so. Financing may take the form of equipment leasing, loaning the franchisee money they need to actually run the business, or providing terms on fixtures and equipment, or even financing a complete turn-key business that the franchisor was operating.Keep in mind that certain services may be offered by an “affiliate”, IE a different company but under common ownership of the franchisor. All of these revenue and/or profit centers, whether paid directly to the franchisor or to an affiliate, must be disclosed to the prospective franchisee in an FDD prior to buying a franchise.What I have provided you, again, is just a sampling of the ways a franchisor can derive revenue from their franchise business, and also profit. Keep in mind that those are two VERY different things, and if you see a franchisor making a lot of revenue on a certain product or service, it doesn’t necessarily mean they are “profiting” off of their franchisees with that product or service.My advice to any prospective franchisee is to, among other things, study the franchisors revenue centers. evaluate where there cashflow is coming from, and where there profit is coming from. There are two reasons for this. First, if the franchisor is generating the majority of its cashflow and operating profit from a single source, is that source at risk? As an example, if 80% of the operating capital of a franchisor is coming from franchise fees, if something happens that slows or stops franchise sales, will they still be able to support you?Secondly, by looking at their profit centers, you can understand if your business and theirs are truly aligned. If a franchisor makes most of its operating capital and profit from royalties, then their success is directly tied to your success (assuming the business model itself is sound). If they make most of their money from you leasing equipment, paying them for marketing, or from rebates on low-margin products, then their success is tied to you staying in business, rather than being successful.There will always be some disconnect between franchisee and franchisor. Rarely if ever do franchisors take the cut off of profits, its almost always off of revenue (or the other sources we discussed here). But if you are generally aligned, then you can count on the fact that your franchisor truly is motivated by your success and, even if they change leadership or are acquired, the fundamentals of the business will mandate that the new leadership be as invested in your success as the previous.By the way, for franchisors, I go into a lot more detail about various revenue streams, and how to make a profitable franchise that is also a good investment for franchisees, in my book How and Why to Franchise Your Business.Hope that helps!Michael A. PetersonDon’t forget to upvote!
Is the Green New Deal socially and economically viable?
Well, firstly, what do you mean by socially viable?What kind of society do you think we’re going to have if we carry on as we have been? We’re running out of insects for god’s sake!But okay, let’s start with the meat of the issue.It’s the economy stupid.What does the Green New Deal offer?Don’t worry; I’m going to cater for the under ’30s by sticking to easily digestible bullet points bereft of passive voice nuance and punctuation.Even so, it’s an ambitious project.· 100% Clean and Renewable Electricity by 2035· Zero Net Emissions from Energy by 2050· 100% Net-Zero Building Energy Standards by 2030· 100% Zero Emission Passenger Vehicles by 2030· 100% Fossil-Free Transportation by 2050· National Clean Air Attainment· Cut Methane Leakage 50% by 2025· National Lead Pipe Replacement & Infrastructure Upgrades· Guarantee Access to Affordable Drinking Water· Protect Two Million New Miles of Waterways· Reforest 40 Million Acres of Public and Private Land by 2035· Restore 5 Million Acres of Wetlands by 2040· Expand Sustainable Farming and Soil Practices to 30% of Agricultural Land by 2030 and 70% by 2050· Cleanup Brownfields and All Hazardous Sites· Establish a National Fund for Urban and Rural Resilience· Expand Public Green Space and Recreational Lands and Waters· Modernize Urban Mobility and Mass Transit· Zero Waste by 2040· Capture 50% of Wasted Methane by 2040Now, usually, I’d go through this list one by one but if I di that, this answer would be very long.So I won'tI recently discovered a way of making my own vegan sausages and ever since then every day has been a ‘bad burrito,’ day. Trying to accommodate the additional time spent squatting atop the compost toilet installed in my hipster-doufas loft apartment has not been easy on me. I’ve tried to save time by growing a beard that the under 30s assure me is known on the street as ‘The Full Mumford and Sons’, but even so, restricting personal grooming can only shave off so much time in the day.Oh, look, I made a joke.I didn’t mean to, and I'm not glad I did. But If I have one rule in my life that I adhere to religiously it’s this. I never delete anything I write on Quora because I make a living as a writer and if I crafted the stuff on Quora the way I do when I’m being paid then… well, let’s just say that it’s not an economic model I’m overly comfortable with.So, let’s take an overview of what the Green New Deal ( hereafter GND), is trying to do instead.But before we do, we have to acknowledge that the political mechanics of the U.S are such that pretty much all legislation involves compromise of some sort. The bullet points above represent an ideal that is unlikely ever to see the light of day. It’s going to be as watered down as music festival cola by the time it receives a presidential signature and that – in part– is probably why it seems so radical at the offset.Still, it’s a useful review of what needs to be done and so what if some of the target dates move around a little? My beard is the texture of Yak’s fur but if you want to know what that looks like you’re going to have to follow me on twitter. If you want to know what that feels like, then I’m prepared to send you a sample for a reasonable price. Or you could find a yak.So, in brief, clean air, less pollution, drinkable water, nature reserves, green spaces and butt loads of job creation.Fucking commies eh?Right or FlightIf you spend time watching Fox news, then you’ve probably already seen the right-wing reaction to the GND. They react to notions of sustainability in much the same way I behave when I wander into a field with a male Yak on heat.They run for the hills.We’ve watched Tucker Carlson look like he went to doctors complaining of heartburn and left with an unscheduled dick-swab, a script for ceftriaxone and some explaining needing doing to his wife.We’ve seen Jennine Pirro stand up in such sudden fury that camera two inadvertently captures a full foot and a half of the stick jammed up her ass thus causing the producer to cut to a commercial rather unhelpfully proselytizing Baker’s Best extra-smooth cake improver.And of course, you cannot have failed to notice Sean Hannity twitch like hemorrhoid ridden Bison whenever the topic of trying to improve the lives of ordinary peasants come up.So you might be surprised to learn that the Green New Deal poses no economic threat to American whatsoever.None.Part 2: The Bit where I get to the pointI know, shocking, right?All that huffing and puffing over something that’s no threat to anyone. Well, not anyone. There are a few industries I can think of that are going to have to adapt. But the question of economic viability is a canard or such massive proportions that the closest thing it could get to floating in a duck pond would be by squeezing the rear end of its body into Lake MichiganBecause here’s the thing.Would you like to buy Manhatten?I mean, if you really wanted to buy it and – assuming it was for sale and that I had the title deeds – could you afford it? Could anyone?In 2014, a paper in Regional Science and Economics journal in 2014 found that developable land in Manhattan—excluding parks, roads, and highways—was worth between $1.54 and $1.95 trillion. You can read the whole thing here. Impressive though that figure is – it’s close to Canada’s entire GDP for a year – it’s only part of the story. Manhattan is, in fact, worth far more than the land value of the island itself. As Max Galka points out in his rather excellent post, residential real estate – i.e., the apartments condos and whatever the hell a duplex is– are worth around 1.54, trillion.He also noted that he hadn’t:“Gone through the analysis for commercial property, but the City's reported market value is about 260 billion. I think that is also an underestimate, but not by nearly as much as residential.”Let’s call the running total $2 trillion then. But even that’s not going to suffice. Because the island comes with a raft of income attached to it: rent in Manhattan fluctuates. Some 900 square feet in an expensive part of town is going to set you back $3, 584, a month whereas 480 Sqft in an average area comes in at $1,936.I think. I really should not get involved in numbers. Inevitably, someone in the comments below is going to tell me how wrong I am and then wish me luck in finding an apartment for that price or else talk about rent control and how its possible to rent a disused lavatory just off central park for a mere $437 bucks plus utilities ( of which there are none). I get it, my knowledge of the New York rental market is not what it once was.As I think I mentioned I have a self-mulching toilet, so I’m not moving to New York City ever again…The point is that whatever figure we come to, it’s going to be a high one and we have to add such valuable future earnings into any price valuation of the island of Manhatten.Which leaves us with what?I doubt that anyone would sell Manhattan for less than 10 Trillion. You might be able to lease it for less. The U.K did that with Hong Kong for a while, but it was snatched up as a spoil of war, and the Victorians didn’t give a dingo’s kidney about egregious assaults on sovereign nations.I’m probably undervaluing it anyway.Sorry, New Yorkers. I remember your hot almonds so well.Still, that’s a lot of money, Half of the U.S debt in fact and if you’ve ever wondered who or why keeps lending American so much money, the scratch valuation of Manhatten no doubt answers that question for you. (Its assets y’all.)Now, how much is Manhatten worth underwater I hear you ask?Well, OK, maybe that’s part of my internal dialogue, but it’s a pertinent question nonetheless, and it’s hardly your fault that my medication does not work as well as it used to. I started hoarding them back in 1996, and I think I’ve been taking them in non-chronological order.Now, I know, predictions about the watery future of New York have been made like this before and not always in Stephen Spielberg productions either.But, if you look at some of the gutter Press, they’ll insist that scientists insisted that New York would be submerged by 2015 and that the fact that its now mostly above ground proves that: A) Neil Armstrong never walked on the moon and that that b) Amazon Alexa connects to an individual NSA agent armed with a notepad, walkie talkie and an empty bottle of Snapple in case he needs to pee while you’re spilling your secrets.Of course, you cannot believe everything you read. Let’s look at where this story originates from:Back in 1988, Professor Jim Hansen was looking down at Broadway when a journalist asked him if anything would look different in 20 years?“I expect I’ll have grown me some man boobs,” he answered.Of course, that’s not what he said at all. I was trying to emphasize the last point I made about not believing everything you read and it backfired. What he really told the journalist was this:“Well, there will be more traffic. The West Side Highway which runs along the Hudson River will be under water. And there will be tape across the windows across the street because of high winds. And the same birds won't be there. The trees in the median strip will change."That’s it! Smoking gun! Proof if proof is need be say the climate deniers (unaware that their command of grammar does more to infuriate the urban liberal elite they so despise than any slur they could post on social media).It’s all a hoax, mic drop with no fear of electrocution because the floorboards are dry!But let’s look a little more closely. Hansen’s vision for Manhatten was of a likely scenario taking place in 20-30 years resting on an assumption of humanity doing what it does best.Nothing.But that’s not how things panned out.In fact, we made quite a lot of progress.In 1994 for example, the United Nations Framework Convention on Climate Change came into force. In 1998 the Kyoto Protocol was adopted, and Elton John released ‘Candle in the Wind,’ although those two events are not related. EU trading emissions launched in 2005, the same year the Kyoto protocol came into effect. In 2016 the Paris Agreement was adopted by most nations including the U.S although the ‘literal embodiment of the Hooter’s business model’ that is President Donald Trump of pulled out of it like he was barebacking a porn star.So, that ’s not nothing. And no, spell check, I don’t mean ‘anything; you’re not the boss of me, and I’m going to be dead long before AI becomes sophisticated enough to outthink me so the jokes on you, you future, immortal-genius overlord bastard!Still, the progress we made was according to Anderson Cooper* both ‘small and twatty’, in comparison to what actually needed to be done. Indeed, the measures we undertook to stave off our eventual demise were reminiscent of that scene in Titanic when Théoden King suggests that the ship’s pumps might help.“Too little too late my bearded friend,” replied the ship's engineer (who has to be Scottish thanks to a legally binding clause between Holyrood and Hollywood signed in the 1950s.)“We’re going to sink like super-glued ducks’” he added sadly before staring off wistfully at an Edwardian clock.Maybe I remember it wrong… I haven’t seen it since it was in the cinema.Regardless of the point that I’m pretty much sure I’m trying to make is this. Back to the bullet points, I think.· The estimates climate scientists gave were based on incomplete data which we now have in much higher quantity.· We have taken steps to offset Climate Change, and that has bought us some time. We just have not done enough.· New York did actually flood in 2012 causing tens of billions of dollars in damage and killing 43 people. It annoys me when people forget that.· Manhattan is spending 1 billion dollars in flood defense to combat growing evidence that the island is at risk.· Here’s a picture of what it might look like if the sea levels rise by 8 feet.Which brings us to the crux of the matter.When Fox and Friends talk about the damage to the U.S economy, they never take into account the cost of doing nothing.The cost of rehousing everyone in Miami. The cost of helping refugees in far-flung islands after their entire nation gets swept away. The cost of policing a population used to plenty during times of mass crop failure. The cost of mass extinctions. The cost of building up coastal defenses in a nation that famously has an awful lot of coast. The cost of rising extreme weather events. The medical cost of record levels of respiratory disease. The political cost of trying to manage large swaths of voters who are forced to drink poisoned water from aging infrastructure.I could go on, believe me, I could.Losing Manhatten to encroaching ocean would make the 2008 financial crisis look like a misprinted and quickly sorted out the next day overdraft statement form a 1950’s bank.And you talk of the societal cost?What on that GND bullet list is going to hurt society more than our current way of doing things already has?We are entering an age where autocratic China is rising resurgent. An era where retail jobs might disappear entirely. The next quarter of a century will see off trucking as an industry. That’s over 3 and a half million jobs people! In just one sector.What exactly are humans going to do with themselves? Who wants a job re-planting the forests? Who wants contracting to replace ever pipe in America with modern materials? Who wants to clear the brownstone sites? Any takers for a 20-year sub-contract to install the infrastructure needed to build a zero-emission car network?I’m pretty sure that there would be many, many takers.And where are the people who want to breathe shitty air? Where are the people who fail to see a link between access to green spaces and human happiness? Who exactly is pro-methane? Because I know you exist because you keep voting for a bunch of industry shill whang handles who seem to have convinced you that the most significant risk to civilization is a modest hike in an estate tax that you personally are never going to have to pay.Newsflash, the big business octagenarian White-Guy brigade led by Turd- Biscuit in Chief @realdonaldtrump doesn’t have your best interests at heart. They distract you with endless diatribes about illegal aliens in the hope you won't even notice the elephant in the room. Big oil, big pharma et al., they are all as bad as one another. The billionaires club have already made their investments and they sure as hell did not make their mountain of cash by investing in people. They want to screw you for every penny you have and leave nothing for the next generation.Some of them are building bunkers to prepare themselves for the trials to come.Not only is the New Green Deal economically viable it’s America’s last, best hope of getting itself out of the mess its got itself into.China just landed a probe on the dark side of the moon. They built the world’s fastest computer. They are outpacing the U.S in the development of A.I. They are showing the seeds of soft power that all but guarantees that the 21st century is going to be the Chinese century. Saying to yourself ‘Oh but they don’t innovate as we do,’ isn’t going to help you anymore. ( It’s also a bit racist).And while Chian is surging ahead, what’s going on in the U.S?You’re shutting down your government for a month at a time. You’re taking more satisfaction at sticking it to the ‘Libtards’ than you are to actual success on the world stage. Why make American great again when you can speed it towards a cliff edge while wearing the soothing placebo of a MAGA hat?The U.S of today convinces itself that NASA never landed on the moon, congratulates itself on closing down essential projects such as – oh, I don’t know, educating its population – and looks at companies like Amazon as a replacement for lost middle-class incomes. Sure, small government sounds good. Until the bridges collapse and the fire department struggles to recruit for lack of decent wages. Until the schools crumble and sinkholes show up in the nation’s capital.Yeah, if NASA wants to send someone to space, they need to ask Russia for a lift and if that’s not MAGA then what the hell is?USA, USA USA! No?Every nation is entitled to its quirks and cultural oddities, but America’s hostility towards government, commonwealth and sensible adherence to scientific principles, has got to go. Without healthcare, there is no life, and you see what happens to your liberty as the elite move towards ever more sophisticated methods of policing an ever more disgruntled population. And as for the pursuit of happiness? Well, without access to clean water it just sort of takes on a sarcastic tone now doesn’t it?You need jobs, good ones. You need air, fresh air. You need to follow the evidence where it leads.That last point is essential.If 99.9 percent of scientist got together and concluded that a comet large enough to wipe out all life on the planet was on a collision course with the Earth circa 2050, what should we do about it? The rational answer is that we should devour our time, resources and ingenuity to figuring out some way to divert the disaster.The GOP, however, would no doubt deny the existence of the ‘so-called cosmic bullet.’ They’d find the half dozen astronomers – mostly in their 70s – willing to take bribes from vested interests opposed to the government devoting money to expensive ‘continuation of the species programs,’ of no personal use to those guaranteed to be dead before D day.We should force them to wear Dead Before the D-Day shirts whenever the testify come to think of it.“Can we afford to throw billions of dollars into ‘Everyone is going to die in a horrible explosion fund?” Tucker Carlson would ask before staring at the camera and looking like he’s trying to figure out of the prostate examination has started yet.“The radical pro-humanity fringe of the Democratic party!, Jeanine Pirro would warn us“Is hellbent on spending your tax dollars on making sure that human life as we know it carries on into a hellish future that directly affects my tax bracket while leaving yours relatively unscathed.”It’s not even funny.As scientists work their way to virtual unanimity on how our flagrant disregard for the planet we live on is going to end us, right-wingers insist that there is nothing to be done.They bring on sophists whose job it is to distract. It’s unavoidable they say ( it’s not), the scientific community is divided ( it isn’t) the radical hipster doufas under the 30s with their extensive vocabulary, unfamiliar vegetables, and inability to focus on anything for more than 18 seconds are a bunch of self-obsessed hippies…OK, there’s some truth to that last one.Still, if a doctor tells you that he needs to remove a tumor then, by all means, get a second opinion. If you ask a thousand doctors and 999 of them agree with the initial diagnosis then its probably an excellent idea to prep for an operation.Do not, under any circumstances follow the advice of the outlier –who just so happens to be on a retainer from the world’s largest consortium of funeral directors – that you should kick back and enjoy life while you’ve still got some butThe recent study on insect populations published in the Journal of Biological Conservation painted as bleak a picture of the future we face as one could imagine. We are running out of insects. We are not on the cusp of Earth’s sixth mass extinction event; we are living through it. I mean right now. Hence the bunkers. Because without insects, human life as we know it CANNOT continue. It’s not my place to teach basic ecology, but I’m more than happy to report basic facts.No bugs: No Bread.There is no viable alternative to the Green New Deal, and any discussion of its lack of viability should be treated with the contempt it deserves.Climatologists say that things are going to get dystopian if we don’t do something NOW. If they are wrong, and we clean up the planet for good and provide good jobs for ordinary hard-working people in doing so then fine, I’m good with that.Now tidy your room and think about what was said here today.For general musings or indeed if you want to contact me/ yell at me or ask for my phone number, you can contact me via twitter.
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