Franchise

I was recently looking to buy into an F&B franchise. From what I have learned so far, this is the rough break down of a typical successful outlet.

Rent: 20%
Manpower: 20%
Food: 30%
15%: Depriciation + Utilites.
Profits: 15%

The break down above really varies from the kind of F&B that you are doing.

If we start looking at an F&B objectively and try to optimise it, there are a lot of ways where the F&B business can be made much more competitive than others.

1. Rent
Essentially when you run an F&B, it is a brick and motar business. You are trying to captilise as much profits per square feet of rent that you are paying. If you are able to generate the same kind profits by doing other kind of businesses, there is really not much point in trying an F&B business. Another way to look at it is, finding a location where you are able to generate similar kind of revenue, but at a much cheaper rent. Much easier said than done. But if you can find such a location, it gives you a chance to 'capitalise' on this cheap rent, regardless if you are doing an F&B business, retail etc.

2. Manpower
How do you optimise the business that is naturally capital intensive? Either you automate more of the process, or pay your staff lesser. Automation can be done to a certain extent, like automatic ordering system etc. As for labour costs, it is know a fact that foreginers are much cheaper than locals and are generally more willing to do such labour. I was previously thinking, what if we can staff more foreigner talents into such industry, but yet still meet the local to foreigner ratio required by the goverment? I have thought of some ways about this before. What if a stall only hires 1 local manager and the rest of the 5 foreigner staff are sub contracted from an employment agency? Such agencies can be used as a holding company that have access to lots of Singaporean workers. Hence there is really no violation of the law.

3. Food
I don't have much comment about this because essentially I think it entails going further upstream to the source and buying more in bulk.

4. Deprication / utilities
Based purely on number, a smaller deprecation means greater profits. Essentially the lower the onset of start up cost, the smaller depreciation. If you can find an outlet that is fully renovated but is distressed, due to various reasons, you have an upper hand when starting the business. You are essentially starting a business with subsidized costs.

The points I mentioend above are easier said than that. However it is always good to keep in mind the above points.