FRANCHISE GUIDE
A famous brand name does not guarantee that your outlet will make money. The franchisor earns from your fees whether or not you profit, so check the numbers yourself.
By ARS Market Research Services, Chennai. For first-time franchise buyers, investors and families.
Why a feasibility study for a franchise?
Franchise brochures show the best outlet, in the best location, in the best year. Your outlet will have its own rent, footfall and competitors. A feasibility study replaces the brochure’s average with your location’s facts, so you decide with evidence.
The 8 checks
1. Brand strength
Do customers in your city know the brand? Ask 50 people near your planned site, not only the franchisor.
2. Real outlet economics
Ask for actual sales and cost figures from running outlets, not projections.
3. Talk to existing owners
Visit at least three owners, including one who has left. Ask what they would do differently.
4. Total money needed
Franchise fee, deposit, fit-out, stock, royalty, marketing contribution and working capital for the first six months.
5. Location demand
Count footfall at different hours, check nearby competitors and rent per square foot. See our school and preschool franchise studies for an example.
6. Agreement terms
Contract length, renewal, territory exclusivity, supply obligations, exit and refund conditions. Have a lawyer read it.
7. Franchisor support
Training, supply chain, marketing and what happens if the brand weakens.
8. Your break-even
How many sales do you need each month to cover rent, salaries, royalty and loan EMI?
A break-even test (illustration only)
| Item | Illustration |
|---|---|
| Monthly rent, staff and power | ₹1,20,000 |
| Royalty and marketing contribution | 8% of sales |
| Direct cost of goods | 45% of sales |
| Left from each ₹100 of sales | ₹47 (100 − 45 − 8) |
| Monthly sales needed to break even | about ₹2,55,000 (1,20,000 ó 0.47) |
The question is then simple: can this exact location sell about ₹8,500 every day? If a footfall count says no, walk away before you pay the fee. These figures show the method only; they are not a forecast for any brand.
Red flags
- Pressure to pay a deposit this week.
- No audited or owner-confirmed outlet figures.
- Guaranteed returns or guaranteed profit.
- Heavy compulsory purchases from the franchisor at high prices.
Planning to buy a franchise?
ARS Market Research Services studies the brand, the location and the numbers independently, so you know your outlet’s chances before you sign. Customer surveys, footfall counts and competitor mapping in Chennai and across India.
Our business books and reports
Our four practical guides explain licences, loans, schemes and low-investment ideas in plain language: see all books. For ready-made market reports, visit the ARS Marketplace.