Stage Three Franchise Site – What Other Operating Costs Will I Have?
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Key Operating Costs & Estimates
Here we will describe the other operating costs you will want to plan for, beyond wages and salaries. We’ve divided them into Variable and Fixed Expenses. And while some of the fixed will vary, they don’t increase customer by customer.
Variable Expenses
Food & Beverage Costs
Typically this will run 30 – 32% of sales.
Retail Costs
Budget 45% of retail sales for this.
Advertising
Budget 5% of Gross Revenues for this.
Promotions
Budget 5% of Gross Revenues for this.
System Rental Fees
This is paid to us, at Team Headquarters, for all the support and system. See details here on what that it. This is 7% of Gross Revenues.
Franchise Marketing Fund
This will be set by the Franchise Advisory Council (composed of each Franchise Owner and one seat from Team Headquarters, majority rules). Most well run funds are 2 – 5% of Gross Revenues.
Shopping Center Percentage Rent
Our goal will be to negotiate this out of the Lease, but in the really large Shopping Centers it’s almost impossible. This is there way of taking extra in your really good months. Typically it’s 5-6% above a certain baseline in sales. The only good thing about paying this is you’re crushing it financially when you do.
Fixed Expenses
Lease Rent
A typical Links Golf Cafe will be a minimum of 6,000 square feet. Major Regional Shopping Centers rents in high traffic areas are typically $30 to $75 a square foot, per year. So if we paid $50, that would mean $300,000 a year, or $25,000 a month, just for rent.
The good news is we will seek locations in the “dead wings” with easy outside access to parking. This will allow Members to bring their golf clubs in easily, as a bonus. It also is the least attractive spaces to rent. And with Amazon and Covid-19 kicking shopping centers butts, we expect significant savings on rent, CAM and significant investment in Tenant Improvement Fees.
All of this means this is the best time to consider locations like this. They still have massive foot traffic in the busy areas, massive free parking, and a desire to enhance their visitors experience. We’re a match made in heaven.
So expect to pay $30 – $35 per square foot, per year max.
Lease Common Area Fees (CAM)
Related to rent, but a separate item, is Common Area Maintenance (CAM), sometimes called “Triple Net”. It’s all the costs of running the shopping center, plus maintenance, plus a mark up for the Shopping Center. Then they take the overall rentable area of the entire Shopping Center, and calculate your payment.
Note, this will grow every year faster than inflation, and you have zero control over it. It’s the price to pay for a Major Regional Shopping Center.
Typically this will be $18 to $38 a square foot, per year, more. Normally the higher this number, the higher the traffic, but not always. That’s why we’ll be heavily involved in site selection and lease negotiation with you.
And we’re planning to offer Limited Play Memberships to all staff in the mall, in return for reducing this fee for us. Initial feedback is we might get this eliminated or cut in half. We shall see as we negotiate the leases, of course.
Legal, Audit and Bookkeeping Fees
While you shouldn’t have a lot of legal costs, you will have some. And you’ll need to prepare audited financials each year (super helpful if you ever decide to sell, and required by us). And of course bookkeeping (in the cloud, very affordable). Altogether plan on roughly $1,450 a month.
Utilities (Electricity, Gas, Internet, Phone)
This will vary a lot by city, state and country, and is sometimes included in the CAM fees (for example water usually is, so don’t list it). Rough budget $1,650 a month.
Maintenance & Repair
A new Links Golf Cafe will need about $2,500 a month to keep things in top share. Golf Simulator Screens are designed to wear out, as do their projector bulbs. We’ll set up a schedule for this, but you’ll want to plan it in for sure.
Licenses & Insurance
This shouldn’t be more that $225 a month.
Office Expenses
We suggest you plan on $250 a month for this.
Miscellaneous Expenses (Security, Bank Fees, etc)
This will be $300 – $500 a month.
Business Finance Expenses
This is for your cost of financing the overall investment to build a Links Golf Cafe. This will vary depending on the nature of your financing, if any.
And of course, the more Founding Charter Memberships that get pre-sold, the lower this will be.
