What expenses are included in the 'additional funds' estimate for a Bombs Away franchise, and what is excluded?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
igning the lease.
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- This includes any other required expenses you will incur before operations begin and during the initial period of operations, such as payroll, additional inventory, and other operating expenses in excess of income generated by the business. It does not include any salary or compensation for you. In formulating the amount required for additional funds, we relied on the following factors, basis, and experience: the development of a Bombs Away business by our affiliate, and our general knowledge of the industry.
Item 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
Generally
We have the right to require you to purchase or lease all goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, real estate, or comparable items related to establishing or operating your business (1) either from us or our designee, or from suppliers approved by us, or (2) according to our specifications.
Source: Item 7 — ESTIMATED INITIAL INVESTMENT (FDD pages 13–15)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the additional funds estimate covers expenses incurred before operations begin and during the initial period of operations. This includes payroll, additional inventory, and other operating expenses that exceed the income generated by the business. The estimated range for these additional funds is between $5,000 and $15,000 for the first 3 months of operation.
Specifically, the additional funds do not include any salary or compensation for the franchisee themselves. This is a common practice in franchising, as the initial investment typically covers the costs of setting up the business and ensuring it has enough capital to operate until it becomes self-sustaining. The franchisee's personal income is usually derived from the profits of the business after it has reached a certain level of profitability.
The FDD indicates that Bombs Away relied on the development of a Bombs Away business by their affiliate and their general knowledge of the industry to formulate the amount required for additional funds. This suggests that the franchisor has experience in operating a similar business and has a reasonable basis for estimating these costs. However, it is important for prospective franchisees to carefully review these estimates and consider their own individual circumstances, such as their personal financial situation and the specific market in which they plan to operate.
Prospective franchisees should also inquire with Bombs Away about the specific assumptions and calculations used to arrive at the additional funds estimate. Understanding these details can help franchisees better prepare for the financial demands of starting and running a Bombs Away franchise and ensure they have sufficient capital to support the business during its early stages.