Page 155 - Business Plans that Work A Guide for Small Business

146 • Business Plans that Work

10.2 Cost Drivers

Again, Dan refers
to earlier tables where he
broke out costs and then Company Store Start-Up Costs
brings those estimates to his
projections.
Based on recent experience with Boulder and Boston, we
estimate new location start-up costs at $82,600 (Exhibit 5.4).
Franchisees must obtain these funds for a franchise. Lazybones intends to
borrow this money for company stores. Laundry equipment and installation for
Boston and Boulder were financed through the manufacturer Continental-Girbau,
Lazybones has an and computer equipment through Dell.
advantage over many of The costs of opening additional company stores will also be
you reading this book.
The b usiness has been financed through Continental-Girbau. We have confirmed this
o perating for 15 years so supplier’s willingness to finance the entire $82,600 per store
their e stimates are based
on that experience. If you in return for being Lazybones’s equipment supplier. Based on
are l aunching a brand new previous experience, we assume this money will be loaned at
v enture, you will have to
ground your projections 9 percent interest over five years.
into benchmarks and
primary r esearch (e.g., calling This contributes between $7,000 (year one) and $3,000
s uppliers and finding out (year five) per year in interest expense per store depending
what the terms might be).
on which year of operations they are in.

Company Store Variable Costs

Both the variable (cost of goods sold, COGS) and operating expenses of the
company stores are based on the same historical models described earlier.
Variable costs (COGS) are calculated as a percentage of laundry revenue, storage
revenue, or both, depending on which type of revenue the costs contribute. For
instance, laundry supplies only contribute to laundry revenue, and truck rentals
only contribute to storage revenue.
By far the largest cost at Lazybones facilities is labor. Hourly employees, who
do not receive benefits and only work when school is in session, perform most
of the labor (laundry washing, folding, and delivery). This labor is treated as a
variable cost proportional to workload.