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Troy University New Startup Business Responses

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This is a discussion Board that I have to respond to two classmates.
It must be at least 200 words.
For this discussion, review the submissions your student peers
made in Post 1.
When responding to your classmate, you may NOT respond
to a student who has picked the same franchise as you did.
The goal is to research more than just the one franchise you
selected to post about.
Briefly summarize your fellow student’s selected franchise
information and financing option selected in your response
post and provide your opinion on the following:
1. Do you agree or disagree with your fellow student’s
conclusion on the worthiness of the franchise
investment they selected and the financing option
preferred?
2. Why or why not?
1. Stark
Image One is a cleaning and janitorial service company with over 30 years of experience
in the field, and has been offering franchise opportunities since 2011 (Image One USA,
2021). The company is found in nearly all 50 states, and currently has over 100 unique
franchisees offering cleaning services to businesses of all shapes and sizes.
There are several incentives that Image One offers its prospective franchisees
including training, equipment, cleaning supplies, instruction in billing and
administration, marketing, and ongoing support (Booth, 2019). The training program
itself is unique in that, its modular system encompasses classroom, on-the-job, and onsite learning. Once the training is complete, and the franchise is up and running, a
franchisee with Image One will also enjoy continued support from the home company
through purchasing and marketing tools, supplies, and continual training and
instruction.
Image One is one of the most affordable franchises to be a part of in the US, as it
sports an average franchise fee, based on geographic location, of $89,800. Like most
other franchises in the corporate world, the costs associated with starting up and
running a franchise do not stop with the initial fee. The initial fees are merely the first
part of a long list of investment articles, which in the case of Image One, show as
follows:














Initial Franchise Fee – $89,800 (average)
IPad – $500 to $1,200
Vehicle – $0 to $1,200
Cleaning Supplies – $3,500 to $10,000
Insurance – $3,100 to $3,900
Name Registration – $100 to $200
Incorporation/Legal – $400 to $2,000
Travel for Training – $150 to $3,000
Location Marketing – $1,175
Ongoing Marketing – $450 to $4500
Salesperson – $0 to $15,000
Start-up Costs – $1,500
Additional Funds – $2,000 to $5,000
Inventory – $0 to $500
The total range given by Image One to its prospective franchisees for all of the above
costs is typically $72,775 to $216,675, with an average total investment cost of $144,724
(Image One USA, 2021).
Image One is an incredibly attractive franchise institution, and if I were planning on
financing the amount as a prospective franchisee, I would examine two possible finance
scenarios: A 5-year loan at 5% interest, and a 10-year loan at a 6% interest. The 5-year
loan once calculated would yield the following:




Amount Borrowed – $144,724
Monthly Payment – $2,731.12
Total Interest/Life – $19,143.25
Total Payments/Life – $163,867.25
As opposed, the 10-year loan once calculated would yield the following:




Amount Borrowed
– $144,724
Monthly Payment
– $1,606.73
Total Interest/Life
– $48,084.16
Total Payments/Life – $192,808.16
In the first 5 to 10 years of the business, depending on the loan type, the monthly
payment would be the most important factor, simply due to the fledgling revenue
stream of $4K to $10K per month (Image One Franchise Opportunity Rating,
2021). However, as the life of the loan matured, as well as the revenue stream, the
factor of interest would become more and more important, increasing the criticality of
high revenue early on.
I believe that Image One would definitely be a worth-while investment, due to the
liability of the initial investment becoming equated by the surprisingly high revenue
stream in the early years. This of course isn’t only reason that Image One would be a
sound choice as a franchise opportunity, given that the franchisee training, resource
provisions, and marketing support are all offered to ensure the success of the
franchisee.
If I were to continue with one of the loan options as a prospective Image One
franchisee, I would select the 5-year option with higher monthly payments. In the
research, Image One has proven that in the initial years of business, its ability to provide
moderately high revenue is almost a guarantee. This would ensure that the higher
monthly payments would be satisfied, and there would still remain enough revenue to
maintain a personal existence. The loan term is short, half the duration of the 10-year,
and with that only $19K in interest is paid over the life of the loan, in comparison to the
$48K of the 10-year.
In conclusion, Image One would be a fantastic choice for a prospective franchisee,
due to the relatively cheap start-up costs, company support, early-on high revenue
stream, and low total-life interest on a 5-year loan. I think I’m in the wrong business!
RESPONSE:
2. Meron
Taco Bell is a fast-food franchise that offers a variety of American-Mexican dishes such as tacos,
burritos, quesadillas, and nachos. “Taco Bell and our more than 350 franchise organizations
operate over 7,000 restaurants that serve more than 40 million customers each week in the
U.S” and is owned by the YUM! Brands (Taco Bell, n.d.) The franchise also is expanding its
international presence around the world. Taco Bell uses a third party to assist with financial costs
of opening a store. Taco Bell itself does not do any financing. However, YUM does offer those
that qualify up to $3 million in a financing lending program. Those that want to franchise Taco
Bell will take a 7 week course offered by YUM! that will teach the students on managing a Taco
Bell. Other factors that Taco Bell offers franchisors to be successful is their “multibranding,
strong track record, absentee ownership, strong parent company, and store options” (Aebischer,
2021). This means that there is a solid reputation, good brand exposure, and diverse setup
options in the Taco Bell brand.
According to businessinsider.com, a new Taco Bell costs between $1.2 million and $2.6
million, depending on what type of Taco Bell is being opened and the property costs. The
initial franchise fee ranges from $25000 to $55000. There are several ongoing costs that include
a royalty fee of 5.5% of gross earnings and a marketing fee of 4.25%. Additional fees and cost
are Application and Background check ($350-$600), First Unit Construction Services ($22,250 $27,250), Permits, Licenses, Security Deposits ($74000), Real Property ($20000-$1.4 million),
Building/Site Construction ($177,000-$1 million), Equipment/Signage/Decor/POS ($200,000390,000), Initial Inventory ($7,000-$10,000), Grand Opening Expense ($5,000), and Additional
3 months funds ($40,000) (Myrick, 2021). The average cost of the low and high end of starting a
Taco Bell is approximately $1.9 million.
Assuming a 5 year loan period at 5% interest rate per year the amount to be borrowed would
be $1.9 million, with a monthly payment of $35,855.34. The total interest cost for the life of the
loan will be $251,320.67 and the total of payments for the life of the loan will be
$2,151,320.67. Assuming a 10 year loan period at 6% interest rate per year the amount to be
borrowed would be $1.9 million, with a monthly payment of $21,093.90. The total interest cost
for the life of the loan will be $631,267.23 and the total payments for the life of the loan will be
$2,531,267.23.
With an increasing average franchise sell of $1.6 million I believe that Taco Bell is worthy
investment (Statista, 2021). The initial startup costs would be the major hoop to jump through
first, if enough funds can be acquired and approved. If this was my first location and risk
investing in a project as large as this, I would try to reduce initial costs. This can be done by
buying a Taco Bell already built, or opening a location that is a part of a joint facility. In addition
to the major risk of the initial costs, Taco Bell does not offer territory protection. This means you
would have to compete with another nearby Taco Bell, if not owned by yourself. Strategically
placing the Taco Bell would facilitate optimal success. A major advantage of opening a Taco
Bell would be the brand exposure through YUM! Brands and the particular menu that is served.
Taco Bell offers a completely different menu than your most common fast food restaurant of
burgers, fries, and chicken fingers. Knowing the provided information, Taco Bell is still a worthy
investment if you can manage to gather the initial funds.
Comparing the two previously mentioned loan types, I would choose the 5 year loan with 5%
interest. The monthly payment of $35,855.34 is absurdly high compared to $21,093.90 for the 10
year loan, however, the amount paid in interest of the 5 year loan is $379, 946.56 less than the 10
year loan. This is the biggest difference between the two. I rather strictly budget the finances for
5 years and pay almost $400,000 less in interest than have the cheaper monthly payments the 10
year loan would offer.
RESPONSE:

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