• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 8. Financial Analysis > Return on Investment

Return on Investment

A franchisor cannot be successful unless the franchisees gain a return on their investment. In the next section we analyze ROI and how much is necessary or acceptable for a robust system. Simply stated, ROI is the level of income relative to invested capital. A business’s income is derived from two basic sources: cash flow from operations and a capital gain from the harvest or sale of the business. Table 8-3 illustrates Bagelz’s ROI under three investment scenarios.

Table 8-3. Return by Investment Scenario[*]
Investment ScenarioLowMediumHigh
Total investment$146,800$176,450$207,600
Total profit from operations$75,088$75,088$75,088
Expected ROI51%42.5%36.2%


[*] All figures have been estimated based on industry data and do not necessarily represent the actual financial performance of a Bagelz store operation.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint