Training Institute Franchise Model

Build a Financial Model to evaluate a business opportunity to take a franchise of a Training Institute.
Details of average business are provided as below:
Average
Commissi
Products Monthly Price / Product
on %
Sale/product
Product-1 25 25,000 55%
Product-2 20 40,000 60%
Product-3 15 60,000 70%
Product-4 10 75,000 70%
Product-5 10 1,00,000 75%
Sales volume of each product is expected to increase by 3% and sale price/product will increase by 4% every year.
To setup the franchise we will need a space of 3000 sqft which will be leased at a rental rate of Rs. 200 per sqft per m
This rental rate will increase by 6% every year. Deposit worth 6 months of rent will be paid at start.
Renovation and furniture costs are Rs.40,00,000. These will depreciate in 10 years to "0" scrap value
The setup costs (Deposit + Renovation) can be funded using a D/E = 1.5.
Interest on debt is 12% and debt is to be repaid in 6 equal annual installments starting from year-1 (end of year paym
For delivery of the training products 2 trainers per product need to be hired. The salary for each trainer is Rs.9,00,00
Salary of trainers will increase at 9% every year.
Other staff details are as shown below.
Number of Salary/month/pe
Type
staff rson
Manager 1 50000
Counseler 5 35000
Office Assistant 3 25000
Accounts 2 40000
Staff salaries are expected to increase by 9% every year.
Other Operating Expenses are expected to be 15% of sales.
Marketing costs are expected to be 15% of sales.
Tax rate is 25%
Account receivables will be 2% of Sales.
All receivables will be collected in the last year of operation i.e. year 10. Thus receivable balance will be 0 at end of Y
Deposit paid at the start will be refunded in year-10.
No income is generated on surplus cash.
Evaluate this business with 10 Years horizon. Cost of equity is 20%.
(General Instructions : All the data provided above is to be assumed for Year-1. All growth should be applied from
Year-2 onwards)
Training Institute Franchise Model
DRIVERS Year-0 Year-1 Year-2

Commission %
Product-1 55% 4,125,000 4,418,700
Product-2 60% 5,760,000 6,170,112
Product-3 70% 7,560,000 8,098,272
Product-4 70% 6,300,000 6,748,560
Product-5 75% 9,000,000 9,640,800
32,745,000 35,076,444
Monthly Sale (Units/Month)
Product-1 3% 300.00 300 309
Product-2 3% 240.00 240 247
Product-3 3% 180.00 180 185
Product-4 3% 120.00 120 124
Product-5 3% 120.00 120 124

Price (Rs./Product)
Product-1 4% 25000.00 25,000 26,000
Product-2 4% 40000.00 40,000 41,600
Product-3 4% 60000.00 60,000 62,400
Product-4 4% 75000.00 75,000 78,000
Product-5 4% 100000.00 100,000 104,000

Sales
Product-1 7500000 8034000
Product-2 9600000 10283520
Product-3 10800000 11568960
Product-4 9000000 9640800
Product-5 12000000 12854400
48900000 52381680
 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9

4,733,311 5,070,323 5,431,330 5,818,041 6,232,285 6,676,024 7,151,357

6,609,424 7,080,015 7,584,112 8,124,101 8,702,537 9,322,157 9,985,895
8,674,869 9,292,520 9,954,147 10,662,882 11,422,080 12,235,332 13,106,487
7,229,057 7,743,766 8,295,123 8,885,735 9,518,400 10,196,110 10,922,073
10,327,225 11,062,523 11,850,175 12,693,908 13,597,714 14,565,871 15,602,961
37,573,887 40,249,148 43,114,887 46,184,667 49,473,015 52,995,494 56,768,773

318 328 338 348 358 369 380

255 262 270 278 287 295 304
191 197 203 209 215 221 228
127 131 135 139 143 148 152
127 131 135 139 143 148 152

27,040 28,122 29,246 30,416 31,633 32,898 34,214

43,264 44,995 46,794 48,666 50,613 52,637 54,743
64,896 67,492 70,192 72,999 75,919 78,956 82,114
81,120 84,365 87,739 91,249 94,899 98,695 102,643
108,160 112,486 116,986 121,665 126,532 131,593 136,857

8606021 9218769 9875146 10578256 11331428 12138226 13002467

11015707 11800025 12640187 13540168 14504228 15536929 16643158
12392670 13275028 14220210 15232689 16317256 17479045 18723553
10327225 11062523 11850175 12693908 13597714 14565871 15602961
13769633 14750031 15800233 16925210 18130285 19421161 20803948
56111256 60106377 64385951 68970231 73880911 79141232 84776088
 Year-10

7,660,534
10,696,891
14,039,669
11,699,724
16,713,892
60,810,710

391
313
235
157
157

35,583
56,932
85,399
106,748
142,331

13928243
17828151
20056670
16713892
22285189
90812145
Training Institute Franchise Model
INCOME STATEMENT Year-0 Year-1 Year-2

Sales - 32,745,000 35,076,444

Rent 6% 7,200,000 7,632,000

Trainer Cost 9% 9,000,000 9,810,000
Salaries 9% 4,560,000 4,970,400
Other Operating Expense 15% 4,911,750 5,261,467
Marketing 15% 4,911,750 5,261,467
EBITDA 2,161,500 2,141,111
DA 400,000 400,000
Int 547,200 479,771
PBT 1,214,300 1,261,340
Tax 25% 303,575 315,335
PAT 910,725 946,005

Other Details
Salary Details
Manager 1 600000 600000 654000
Counseler 5 420000 2100000 2289000
Office Assistant 3 300000 900000 981000
Accounts 9% 2 480000 960000 1046400
4560000 4970400
- -
Year-3 Year-4 Year-5 Year-6 Year-7 Year-8

37,573,887 40,249,148 43,114,887 46,184,667 49,473,015 52,995,494

8,089,920 8,575,315 9,089,834 9,635,224 10,213,338 10,826,138

10,692,900 11,655,261 12,704,234 13,847,616 15,093,901 16,452,352
5,417,736 5,905,332 6,436,812 7,016,125 7,647,577 8,335,858
5,636,083 6,037,372 6,467,233 6,927,700 7,420,952 7,949,324
5,636,083 6,037,372 6,467,233 6,927,700 7,420,952 7,949,324
2,101,165 2,038,495 1,949,540 1,830,302 1,676,295 1,482,497
400,000 400,000 400,000 400,000 400,000 400,000
404,250 319,667 224,934 118,833 - -
1,296,914 1,318,828 1,324,606 1,311,469 1,276,295 1,082,497
324,229 329,707 331,151 327,867 319,074 270,624
972,686 989,121 993,454 983,601 957,222 811,873

712860 777017 846949 923174 1006260 1096823

2495010 2719561 2964321 3231110 3521910 3838882
1069290 1165526 1270423 1384762 1509390 1645235
1140576 1243228 1355118 1477079 1610016 1754918
5417736 5905332 6436812 7016125 7647577 8335858
- - - - - -
Year-9 Year-10

56,768,773 60,810,710

11,475,706 12,164,249
17,933,064 19,547,040
9,086,086 9,903,833
8,515,316 9,121,606
8,515,316 9,121,606
1,243,285 952,375
400,000 400,000
- -
843,285 552,375
210,821 138,094
632,464 414,281

1195538 1303136
4184382 4560976
1793306 1954704
1912860 2085018
9086086 9903833
- -
Training Institute Franchise Model
BALANCE SHEET Year-0 Year-1 Year-2

Cash - 93,916 763,953

Accounts Receivable 2% 654,900 701,529
Deposit 3,600,000 3,600,000 3,600,000
Fixed Assets, Gross 4,000,000 4,000,000 4,000,000
Acc Dep - 400,000 800,000
Fixed Assets, Net 4,000,000 3,600,000 3,200,000
Total Assets 7,600,000 7,948,816 8,265,482

Debt 4,560,000 3,998,091 3,368,752

Equity Capital 3,040,000 3,040,000 3,040,000
Retained Earnings 910,725 1,856,730
Total Lia and Equity 7,600,000 7,948,816 8,265,482

Checksum - - -
Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9

1,381,831 1,928,005 2,379,969 2,711,899 4,003,354 5,144,777 6,101,776

751,478 804,983 862,298 923,693 989,460 1,059,910 1,135,375
3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000 3,600,000
4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
1,200,000 1,600,000 2,000,000 2,400,000 2,800,000 3,200,000 3,600,000
2,800,000 2,400,000 2,000,000 1,600,000 1,200,000 800,000 400,000
8,533,309 8,732,988 8,842,267 8,835,592 9,792,814 10,604,687 11,237,151

2,663,893 1,874,451 990,276 - - - -

3,040,000 3,040,000 3,040,000 3,040,000 3,040,000 3,040,000 3,040,000
2,829,416 3,818,537 4,811,991 5,795,592 6,752,814 7,564,687 8,197,151
8,533,309 8,732,988 8,842,267 8,835,592 9,792,814 10,604,687 11,237,151

- - - - - - -
Year-10

11,651,433
-
-
4,000,000
4,000,000
-
11,651,433

-
3,040,000
8,611,433
11,651,433

-
Training Institute Franchise Model
CASH FLOW STATEMENT Year-0 Year-1 Year-2 Year-3

PAT - 910,725 946,005 972,686

Dep - 400,000 400,000 400,000
Change in AR - (654,900) (46,629) (49,949)
CFO - 655,825 1,299,376 1,322,737

Change in Deposit (3,600,000) - - -

Change in Fixed Assets, Gross (4,000,000) - - -
CFI (7,600,000) - - -

Change in Debt 4,560,000 (561,909) (629,338) (704,859)

Change in Equity capital 3,040,000 - - -
CFF 7,600,000 (561,909) (629,338) (704,859)

Net change in cash - 93,916 670,038 617,878

BOP Cash - - 93,916 763,953

EOP Cash - 93,916 763,953 1,381,831
 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10

989,121 993,454 983,601 957,222 811,873 632,464 414,281

400,000 400,000 400,000 400,000 400,000 400,000 400,000
(53,505) (57,315) (61,396) (65,767) (70,450) (75,466) 1,135,375
1,335,616 1,336,140 1,322,206 1,291,455 1,141,423 956,999 1,949,657

- - - - - - 3,600,000
- - - - - - -
- - - - - - 3,600,000

(789,442) (884,175) (990,276) - - - -

- - - - - - -
(789,442) (884,175) (990,276) - - - -

546,173 451,965 331,930 1,291,455 1,141,423 956,999 5,549,657

1,381,831 1,928,005 2,379,969 2,711,899 4,003,354 5,144,777 6,101,776

1,928,005 2,379,969 2,711,899 4,003,354 5,144,777 6,101,776 11,651,433
Training Institute Franchise Model
ASSET & DEBT SCHEDULE Year-0 Year-1 Year-2 Year-3

Initial Investment
Deposit 3,600,000
Rennovation 4,000,000
Investment 7,600,000

Debt Schedule
Begin Debt 4,560,000 3,998,091 3,368,752
Interest 6 12% 547,200 479,771 404,250
EAI (1,109,109) (1,109,109) (1,109,109)
End Debt 4,560,000 3,998,091 3,368,752 2,663,893

Principal Payment 561,909 629,338 704,859

 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10

2,663,893 1,874,451 990,276 - - - -

319,667 224,934 118,833 - - - -
(1,109,109) (1,109,109) (1,109,109) - - - -
1,874,451 990,276 - - - - -

789,442 884,175 990,276

Training Institute Franchise Model
RETURNS Year-0 Year-1 Year-2 Year-3
Net Income - 910,725 946,005 972,686
Add: Depreciation - 400,000 400,000 400,000
Less: Capital Expenses (7,600,000) - - -
Debtors Adjustment - (654,900) (46,629) (49,949)
Less: Debt Payment/Add: Debt Raised 4,560,000 (561,909) (629,338) (704,859)
FCFE (3,040,000) 93,916 670,038 617,878

Cost Of Equity 20%

IRR 20.77%
NPV 124,979
Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10
989,121 993,454 983,601 957,222 811,873 632,464 414,281
400,000 400,000 400,000 400,000 400,000 400,000 400,000
- - - - - - 3,600,000
(53,505) (57,315) (61,396) (65,767) (70,450) (75,466) 1,135,375
(789,442) (884,175) (990,276) - - - -
546,173 451,965 331,930 1,291,455 1,141,423 956,999 5,549,657