Does a $25,000 franchise fee for a Geeks on Call franchise seem too high for a home-based computer repair service? I understand that the brand name can be quite valuable once a minimal level of brand identity is recogized by the public, but at that price I would expect noticeable market brand recognition to already exist. Additionally, the royalty of 11% of gross revenue seems steep as well.
If I wanted to get into this type of business, I’d start “Computer Nerds on Call”. I would then take the $25,000 franchise fee and ongoing 11% royalty that would have gone to the franchisor and spend it on additional radio advertising instead.
Or, I’d weigh the differences with Friendly Computers who smartly has tiered their royalties at 3% your first year, 4% your second year, and 5% thereafter.
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
I was looking at this business model. People have tried it for a long, long time. To get out a Geek I’d guess it’d cost a $100 minimum to get someone out to fix something. I don’t think many customers will want to spend that much money. But I know how to fix computers. Many take their computers to Circuit City or CompUSA.Â
Thanks Geek Wanna Be. I agree, it will take a heck of a lot of marketing dollars to pull people away from chain store repair shops. Wouldn’t it make sense for the chains like Circuit City and CompUSA to hire contracts to repair the computers on site? Look to a similar model of Home Depot who bids out the installation jobs at a very low price.
Here are some more interesting facts:
the FranchisePundit
If I was going to go this road in Canada, I would be looking at something a little more reasonable in price and a little more fresh of an idea – something more like http://www.techsquad.ca
I agree the fee seems rather high and nobody likes to part way with 11% of their top line. However, I disagree with the marketing expense and the cost to “roll a truck”. Labor is a variable cost, the goofy truck a fixed (insurance, lease) fuel is a simi-fixed. If you paid a tech the equal to $40K per year and achived a utilization of 70% of 1,920 (1344) + an overhead of $21,000. Your overhead allocation per billable hour is $15.66 + avg. direct labor cost per billable hr. of $4.96 and you have $20.62 as your total to roll the truck. Of course not all of the cost are in this number, but the difference is not material.
On another note – and a variation of the theme
I once owned and have since sold a “managed IT services” business. I focused on small businesses with 10 – 25 systems and charged them on average $600 per month to manage their systems. One bill, guaranteed arrive time. I was billing out 20 of these businesses with just two techs each earning 30K per yr. There were a couple of businesses that tried to run me down by calling for every little problem and when I evaluated annual profitability, I fired one of them. The biggest pain the butt? Educating small business owners.
thanks
The royalty is probably higher because it is a services business and the ‘zor is not earning rebates from supplier, so the royalty is the sole post-signing income.