What Nobody Tells You Before You Sign
The numbers that matter most are often the ones you are not shown.
The headline investment may seem manageable, the projected sales may look attractive, and the brand may have a strong reputation. But the real question is not simply “Can I afford to open?” — it is “Can this business realistically support the return I expect?”
The Reality Behind the Numbers
What You Should Know Before You Sign
Before you commit, we look beyond the brochure and test the commercial reality: rent, revenue, labour, fit-out, launch costs, lease terms, break-even point and the performance of comparable outlets.
01. The 15% Rule
A useful starting point is to understand rent as a proportion of realistic revenue. As a general commercial benchmark, under 10% of revenue is often considered comfortable, 10–15% workable, while moving beyond 15% can put increasing pressure on the business. The important word is revenue — not optimistic sales projections.
For example, if a site carries annual occupancy costs of 75,000 the business would need approximately 500,000 in annual revenue simply to keep that cost at 15% of turnover.
If the projected revenue is only 400,000, the same 75,000 occupancy cost represents 18.75% of revenue. That difference can materially affect profitability. We therefore test the proposed rent against realistic trading potential, comparable locations and the wider cost structure before treating a site as commercially viable.
02. The Working Capital Gap
The biggest financial mistake is often not underestimating the cost of opening — it is underestimating the money required after opening. A business may require significant time to reach stable trading levels. During that period, rent, wages, utilities, marketing, stock, finance payments and other operating expenses still need to be paid.
For example, if your business requires 20,000 per month to operate and takes six months longer than expected to reach break-even, the additional working-capital requirement could be around 120,000. That is money that may not appear in the original headline investment figure.
We stress-test the numbers to understand how much cash is required to reach break-even, what happens if sales build more slowly than expected, and whether the business has enough funding to survive the ramp-up period without putting unnecessary pressure on the owner.
03. The Fit-Out Gap
The advertised investment figure is not always the final amount required to open.
Fit-out costs can vary significantly depending on the size and condition of the premises, landlord requirements, utilities, mechanical and electrical works, signage, kitchen or specialist equipment, professional fees and changes required to meet brand standards.
A simple example: if the initial fit-out allowance is 150,000, but contractor quotations indicate a realistic cost closer to 190,000, there is already a 40,000 funding gap before trading begins.
That gap matters because every additional pound spent before opening reduces the cash available to support the business afterwards.
We help identify where estimates may be unrealistic, what should be independently quoted, which costs need clarification and where contractual or commercial protections may be appropriate.
04. The Questions Nobody Asks
Opening numbers tell only part of the story. You also need to understand what happens across the wider network. How many units has the brand actually opened? How many are currently trading? How many have closed, transferred or changed ownership? How long did comparable outlets take to reach maturity? What are the typical revenue ranges rather than the best-performing examples?
These questions can change the investment decision.
For example, a brand may highlight a top-performing outlet generating 1 million in annual sales, but that figure tells you very little if comparable locations are trading closer to 500,000.
We look for evidence behind the headline claims and focus on the performance of businesses that are genuinely comparable in size, location, format and trading conditions.
The objective is simple: understand the typical outcome, not just the impressive one.
05. Lease Clauses That End Businesses
A property can appear commercially attractive while the lease creates significant long-term risk.
The headline rent is only one part of the equation. You also need to understand rent reviews, service charges, repair obligations, permitted use, assignment rights, renewal provisions, break clauses, guarantees and what happens if the business needs to exit. For example, an apparently attractive lease may become far less attractive if the occupier remains responsible for significant costs after the business has stopped trading.
The same applies to clauses that restrict assignment or require extensive landlord consent when selling or transferring the business. We examine the commercial implications of the lease alongside the business case, helping identify provisions that may require clarification, renegotiation or professional legal review before you commit.
06. When We Tell Clients Not to Proceed
Our role is not to make every opportunity look attractive. Sometimes the right advice is no.
That might be because the rent is too high for the realistic turnover, the required investment is disproportionate, the working-capital requirement is excessive, the lease creates unacceptable exposure, or the available evidence does not support the projected performance.
For example, if a business requires 600,000 of annual sales to achieve a sensible cost structure but comparable outlets consistently trade closer to 400,000–450,000, the problem is not something that should simply be explained away through optimism.
Walking away before committing 100,000, 250,000 or 500,000 can be a far better commercial decision than trying to recover the investment after opening.
Good advice does not always lead to a purchase. Sometimes it prevents one.
Frequently Asked Questions
Find Clear Answers Before You Get Started
From brand expansion and property matching to site identification and commercial leasing, here are answers to some of the questions clients ask most often.
1. What does franchise due diligence check before you sign?
Rent against realistic revenue, working capital to break-even, fit-out and launch costs, lease terms, and how comparable outlets are genuinely performing today.
2. Why is rent measured as a percentage of revenue, not rupees?
Because affordability depends on turnover. Under 10% of revenue is comfortable, 10–15% workable, beyond 15% the occupancy cost starts squeezing profitability hard.
3. What is the working capital gap in a franchise investment?
Money needed after opening, not to open. Rent, wages, stock and utilities continue while sales build, and headline investment figures rarely include it.
4. Why not simply trust the franchisor's revenue projections as given?
Projections usually describe a good outcome, not a median one. We rebuild them at reduced footfall to see whether the unit still covers its costs.
5. Can you review an opportunity I have already shortlisted myself?
Yes. Bring the numbers, the site and the agreement. An independent review before signing is considerably cheaper than discovering the gaps afterwards.
