Training Institute Franchise Model

Submitted By:
Akansh Arora 43122
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 FOR YEAR-1:

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
month. This rental rate will increase by 6% every year. Deposit worth 6 months of rent will be paid at start. ENTIRE
DEPOSIT AMOUNT WILL BE REFUNDED BACK AT END OF YEAR-10.
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.9,00,000/year. Salary of trainers will increase at 9% every year.
Other staff details are as shown below.

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 & FIND THE NPV AND IRR OF THE BUSINESS. 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
of Year-10.

rom Year-2 onwards)

Training Institute Franchise Model
DRIVERS Year-0 Year-1 Year-2

Commission % => Revenue per year

Product-1 55% 4,125,000.00 4,418,700.00
Product-2 60% 5,760,000.00 6,170,112.00
Product-3 70% 7,560,000.00 8,098,272.00
Product-4 70% 6,300,000.00 6,748,560.00
Product-5 75% 9,000,000.00 9,640,800.00
32,745,000.00 35,076,444.00

Monthly Sale (Units/Month)

Product-1 25 300.00 309.00
Product-2 20 240.00 247.20
Product-3 15 180.00 185.40
Product-4 10 120.00 123.60
Product-5 10 120.00 123.60
Expected per year growth 3%

Price (Rs./Product)
Product-1 25000 25,000.00 26,000.00
Product-2 40000 40,000.00 41,600.00
Product-3 60000 60,000.00 62,400.00
Product-4 75000 75,000.00 78,000.00
Product-5 100000 100,000.00 104,000.00
Expected per year growth 4%
 Year-3 Year-4 Year-5 Year-6 Year-7

4,733,311.44 5,070,323.21 5,431,330.23 5,818,040.94 6,232,285.45

6,609,423.97 7,080,014.96 7,584,112.03 8,124,100.80 8,702,536.78
8,674,868.97 9,292,519.64 9,954,147.03 10,662,882.30 11,422,079.52
7,229,057.47 7,743,766.36 8,295,122.53 8,885,735.25 9,518,399.60
10,327,224.96 11,062,523.38 11,850,175.04 12,693,907.50 13,597,713.72
37,573,886.81 40,249,147.55 43,114,886.86 46,184,666.80 49,473,015.08

318.27 327.82 337.65 347.78 358.22

254.62 262.25 270.12 278.23 286.57
190.96 196.69 202.59 208.67 214.93
127.31 131.13 135.06 139.11 143.29
127.31 131.13 135.06 139.11 143.29

27,040.00 28,121.60 29,246.46 30,416.32 31,632.98

43,264.00 44,994.56 46,794.34 48,666.12 50,612.76
64,896.00 67,491.84 70,191.51 72,999.17 75,919.14
81,120.00 84,364.80 87,739.39 91,248.97 94,898.93
108,160.00 112,486.40 116,985.86 121,665.29 126,531.90
 Year-8 Year-9 Year-10

6,676,024.18 7,151,357.10 7,660,533.73

9,322,157.40 9,985,895.01 10,696,890.73
12,235,331.59 13,106,487.19 14,039,669.08
10,196,109.65 10,922,072.66 11,699,724.24
14,565,870.94 15,602,960.95 16,713,891.77
52,995,493.75 56,768,772.91 60,810,709.54

368.96 380.03 391.43

295.17 304.02 313.15
221.38 228.02 234.86
147.58 152.01 156.57
147.58 152.01 156.57

32,898.29 34,214.23 35,582.80

52,637.27 54,742.76 56,932.47
78,955.91 82,114.14 85,398.71
98,694.88 102,642.68 106,748.39
131,593.18 136,856.91 142,331.18
Training Institute Franchise Model
INCOME STATEMENT Year-0

Sales

Rent 6%
Trainer Cost 9%
Salaries 9%
Other Operating Expense 15%
Marketing 15%
EBITDA
DA
Int
PBT
Tax 25%
PAT

Other Details
Salary Details No: of staffs Salary/month/Total Salary
Manager 1 50000 50000
Counseler 5 35000 175000
Office Assistant 3 25000 75000
Accounts 2 40000 80000
Total 11 150000 380000
4560000
Rent 600000 per month
7200000 Per year
 Year-1 Year-2 Year-3 Year-4 Year-5 Year-6

32,745,000 35,076,444 37,573,887 40,249,148 43,114,887 46,184,667

7,200,000 7,632,000 8,089,920 8,575,315 9,089,834 9,635,224

9,000,000 9,810,000 10,692,900 11,655,261 12,704,234 13,847,616
4,560,000 4,970,400 5,417,736 5,905,332 6,436,812 7,016,125
4,911,750 5,261,467 5,636,083 6,037,372 6,467,233 6,927,700
4,911,750 5,261,467 5,636,083 6,037,372 6,467,233 6,927,700
2,161,500 2,141,111 2,101,165 2,038,495 1,949,540 1,830,302
400,000 400,000 400,000 400,000 400,000 400,000
547,200 479,771 404,250 319,667 224,934 118,833
1,214,300 1,261,340 1,296,914 1,318,828 1,324,606 1,311,469
303,575 315,335 324,229 329,707 331,151 327,867
910,725 946,005 972,686 989,121 993,454 983,601

per month
per year
Year-7 Year-8 Year-9 Year-10

49,473,015 52,995,494 56,768,773 60,810,710

10,213,338 10,826,138 11,475,706 12,164,249

15,093,901 16,452,352 17,933,064 19,547,040
7,647,577 8,335,858 9,086,086 9,903,833
7,420,952 7,949,324 8,515,316 9,121,606
7,420,952 7,949,324 8,515,316 9,121,606
1,676,295 1,482,497 1,243,285 952,375
400,000 400,000 400,000 400,000
- - - -
1,276,295 1,082,497 843,285 552,375
319,074 270,624 210,821 138,094
957,222 811,873 632,464 414,281
Training Institute Franchise Model
BALANCE SHEET Year-0 Year-1 Year-2 Year-3

Cash - 93,916 763,953 1,381,831

Accounts Receivable 2% - 654,900 701,529 751,478
Deposit 3,600,000 3,600,000 3,600,000 3,600,000
Fixed Assets, Gross (RENNOVATION 4,000,000 4,000,000 4,000,000 4,000,000
Acc Dep - 400,000 800,000 1,200,000
Fixed Assets, Net 4,000,000 3,600,000 3,200,000 2,800,000
Total Assets 7,600,000 7,948,816 8,265,482 8,533,309

Debt 4,560,000 3,998,091 3,368,752 2,663,893

Equity Capital 3,040,000 3,040,000 3,040,000 3,040,000
Retained Earnings 910,725 1,856,730 2,829,416
Total Liabilities and Equity 7,600,000 7,948,816 8,265,482 8,533,309

(Checksum) - - - -
Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10

1,928,005 2,379,969 2,711,899 4,003,354 5,144,777 6,101,776 11,651,433

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 -
4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
1,600,000 2,000,000 2,400,000 2,800,000 3,200,000 3,600,000 4,000,000
2,400,000 2,000,000 1,600,000 1,200,000 800,000 400,000 -
8,732,988 8,842,267 8,835,592 9,792,814 10,604,687 11,237,151 11,651,433

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
3,818,537 4,811,991 5,795,592 6,752,814 7,564,687 8,197,151 8,611,433
8,732,988 8,842,267 8,835,592 9,792,814 10,604,687 11,237,151 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 = CFO+CFI+CFF - 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

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

Debt Schedule
Begin Debt 4,560,000 3,998,091
Interest expenses 547,200 479,771
Additions - -
Equally Annual Installmens (EAI) (1,109,109) (1,109,109)
End Debt 12% 4,560,000 3,998,091 3,368,752

Interest expenses 547,200 479,771

Principal repaid 561,909 629,338
 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10

3,368,752 2,663,893 1,874,451 990,276 (0) (0) (0) (0)

404,250 319,667 224,934 118,833 (0) (0) (0) (0)
- - - - - - - -
(1,109,109) (1,109,109) (1,109,109) (1,109,109)
2,663,893 1,874,451 990,276 (0) (0) (0) (0) (0)

404,250 319,667 224,934 118,833 (0) (0) (0) (0)

704,859 789,442 884,175 990,276 0 0 0 0
Training Institute Franchise Model
RETURNS Year-0 Year-1 Year-2 Year-3

FCFE = CFO + CFI + CHANGE IN DEBT (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

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