Supermarket Franchise

[wazim81]

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Hi all

I am planning to purchase a mini supermarket franchise in partnership with one or 2 other friends. Most options within our budget ($300k-$500k) are IGA, Foodworks so i just wanted to see if there are people around who could shed some light on these particular (or similar) businesses. I have been involved in Taxi business so not really experienced in this field. What are typical franchise costs and how do we calculate approximate profit margins after all the fees, expenses? I understand it depends on lot of factors but let’s say an IGA has weekly sales of $30,000 and rent of $500pw (no labour costs).

Would appreciate any help or advice.

Thanks

[Caroline Goad]

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Hi

As part of the business advisory service we provide to clients we supply benchmarking reports on industry averages for supermarkets in Australia. Specifically we would look at cost of goods sold and overheads as a percentage of gross revenue. Other benchmarks and KPI’s we would measure your prospective purchase against include:

• Hourly rate per working Owner
• Gross profit per square metre of sales area
• $ of Wages
• Hours Worked per Owner per Year
• Owners Equity as % of Total Assets
• Asset turnover
• Assets per Person
• Growth Capacity
• Stock turn over rate
• % Revenue drops before losses start
• Trading hours per week
• Sales area as % of total area
• Gross margin return on inventory
• Current ratio
• Acid test
• Days’ debtors
• Liability turnover
• Interest cover: business
• Net profit per principal
• Maintain or increase sales

Some areas we would also focus on would include how to:

• Improve gross profit
• Reduce and control expenses
• Reduce and control expenses
• Improve stock turnover and reduce stock investment

If you would like to know more please feel free to call me on 03-53335144.

Kind regards

Caroline

[Anonymous]

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Hi wazim81, and welcome to Flying Solo,

I hope that Caroline’s advice is useful for you.

Good luck for your new venture,
Jayne

[wazim81]

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Thanks for the response Caroline, it makes sense I knew these factors would come into play but as you can understand most of these won’t be known until i get into the business but still gives me bit of idea.

Thanks Jayne, this place definitely seems quite interesting with plenty of information

[silentmoon80]

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Hi Wazim81,

I hope you have started your own business i.e. supermarket and appreciate if you can share your experience since i am planning to do the same thing.

Appreciate your precious inputs

[Rohan@TD]

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Foodworks and IGA should be able to provide you typical franchise costs, profit margins and other financial information as part of their franchising process. This should be occurring as part of the standard process of purchasing your franchise. Have you engaged with them about this? Request they provide you with a model based on the store you want (Foodworks and IGAs vary significantly in size, target market, liquor, products etc.).

“approximate profit margins” etc. will vary significantly depending on a variety of factors (Sales, specific products sold, wastage, theft levels etc.). You should be using their average figures as a baseline, doing some of your own analysis and assessment (depending on the data providing to you by the franchiser) to more closely reflect the business you want to set up.

In 2014 the WA Independent Grocers Association reported the following figures:
Cost of Goods 76%
Cost of doing business 19.5%
Net Profit 4.5%

Cost of doing business:
Wage and labour on costs 10-11.5%
Occupancy costs and rent 3-4%
Transport 0.6% metro/up to 2% country
Energy (electricity) 2% metro/up to 3% country

[LucasArthur]

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Also read today that there is a new supplier about to launch in Australia to compete with Metcash’s wholesale oligopoly. Cant recall name, but was in todays Age.

Cheers

Jason Ramage | Lucas Arthur Pty Ltd | E: hello@lucasarthur.net.au   P: 61 3 8324 0344    M: 61 412 244 888

[arrowwise]

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LucasArthur, post: 233727, member: 34537 wrote:

Also read today that there is a new supplier about to launch in Australia to compete with Metcash’s wholesale oligopoly. Cant recall name, but was in todays Age.

Cheers

Lindsay Fox’s company is rumoured to behind such a deal. A spokesman from his company said the success of such model of new and small independent operators is down to fast, cost effective nationwide delivery – which is very difficult to get right with population distribution spread far and wide.

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