USTAD BANNE NAWAB - ETHNIC HYDERABADI FOOD & RESTAURANT

Elements of a MASTER Franchise Module in India

In this module, The Master Franchisee apart from owning the Master Model restaurant, “Ustad Banne Nawab’s Ethnic Hyderabadi Restaurant – Dining, Takeaway and Catering” in a particular state / region anywhere in India will also become a partner in Franchise business with the Franchisor, Charminar Foods restaurant division. The Master Franchisee is entitled to scout and appoint Unit Franchisees in his area of operation with the consent and approval of the Franchisor subject to fulfillment of terms and conditions laid down by the Franchisor. This effectively means that the Master Franchisee apart from owning the profits of his own Model Restaurant is also entitled to 50% Franchise Fee and 2.5% monthly Royalty Fee from all the Unit Franchisees he may appoint in his area. The other 50% Franchise Fee and 2.5% Royalty Fee being the entitlement of the Franchisor, Charminar Foods. The non-refundable, one time, Franchise Fee for all Unit Franchises will be Rs 5 Lakhs and the Royalty Fee will be 5% of gross sales payable every month.

Investment required by the Master Franchisee:

The Master Franchisee bears the total cost of approximately Rs 45 to 65 Lakhs for opening up and running the model restaurant. Costs involved are as follows:

Non refundable Master Franchisee Fee of Rs 25 Lakhs.
Owning / Leasing a Ground floor facility of between 1500 to 4000 square feet in a mix of commercial / residential locality on a main road with ample parking space and service entrance. The ideal space utilization will be 600 square feet of dining area to accommodate 50 people, 300 square feet for cash counter and Takeaway area, 300 square feet for kitchen, 600 square feet for store room / office / washroom. The cost involved here will be variable depending upon the location.
Franchisor approved furniture and décor – Rs 3 to 6 Lakhs.
Electrical fittings – Rs 3 to 5 Lakhs.
Civil works – Rs 1 to 3 Lakhs
Kitchen equipment including crockery and cutlery – Rs 3 to 5 Lakhs.
Licenses, Permits and Miscellaneous expenses – Rs 1 to 2 Lakhs.
Working capital for the first year – Rs 6 to 12 Lakhs.
Advertising Budget for First Year – Rs 5 to 7 Lakhs.

PLEASE NOTE THAT ALL COSTS MENTIONED ABOVE ARE APPROXIMATIONS AND MAY CHANGE ACCORDING TO VARIOUS FACTORS. THE ABOVE FIGURES ARE MEANT TO GIVE THE MASTER FRANCHISEE AN IDEA OF THE COST INVOLVED.

Projected Profitability Statement of Model Restaurant only:

Insha-Allah average sales will be about of Rs 15000/- per day in the first year of operation resulting in a turnover of approximately Rs 54 Lakhs for the first 12 months of operation and Rs 25000/- per day from second year onwards resulting in a turnover of approximately Rs 90 Lakhs per anum. Our current facility at Toli Chowki with only 300 square feet of dining area for 20 people and 300 square feet of kitchen / storeroom / toilet is realizing average sales of about Rs 10000/- per day within seven month of its operation.

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Summary of Projected Profitability Statement (INSHA – ALLAH):

Summary of Projected Profitability Statement
Figures are in INR (Lakhs)
	Particulars	1st Year	2nd Year

A	Revenue from Sales	54.00	90.00

	Total Revenue	54.00	90.00

B	Expenses
	Raw Material Cost – Approximately 50% of Sales	27.00	45.00
	Annual Overhead Expenses - Approximately	24.00	27.00
	Annual Royalty Fee - 5% of Gross Sales	2.70	4.50

	Total Expenses	53.70	76.50

C	Net Profit	0.30	13.50

Please note that The Model restaurant achieves the break even point at the end of the first year itself and starts making healthy profits from the second year onwards based on conservative sales projections.

Projected Profitability Statement from Master Franchise Business only (INSHA-ALLAH)

Profits from Franchising Business by appointing 5 new Unit Franchisees each in the 2nd, 3rd and 4thyear and ten new Unit Franchisees in the 5th year of operation

Summary of Projected Profitability Statement
Figures are in INR (Lakhs)
	Particulars	2010-11	2011-12	2012-13	2013-14

A	Revenues
	Franchising Fee of Rs 2.5 Lakhs per every new outlet Royalty Fee from New outlets Royalty Fee from Old outlets	12.50 6.75 0.00	12.50 6.75 11.25	12.50 6.75 22.50	25.00 13.50 33.75
	Total Revenue	19.25	30.50	41.75	72.25

B	Expenses
	Advertising and Marketing	6.00	6.00	6.00	6.00

	Total Expenses	6.00	6.00	6.00	6.00

C	Net Profit	13.25	24.50	35.75	66.25

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Please note that the profits from Franchising Business is without any further investments from the Master Franchisee with the exception of sharing Advertising and Marketing cost with the Franchisor towards appointment of Unit Franchisees. This is pure Goodwill income apart from profits from the Master Franchisee’s own Model Restaurant.

Summary of Guidelines for Master Franchise:

Master Franchise will be given for the entire city or region.
The master franchisee has the right to open mutually decided number of stores, either themselves or by sub-franchising.
For Master franchise, the company will not appoint another master franchisee in the same city or region.
Charminar Foods will assist the franchisee in locating lucrative locations across India. If there are locations that are available to you or you know of, please pass on the information to us. The final approval will be done by Charminar Foods.

PRELIMINARY DRAFT OF FRANCHISING OFFER:

IMPORTANT: PLEASE NOTE THIS IS JUST AN PRELIMINARY OFFER AND ALL POINTS MENTIONED BELOW WILL BE SUBJECT TO THE TERMS AND CONDITIONS LAID DOWN IN THE FINAL FRANCHISE AGREEMENT.

Ustad Banne Nawab’s, an ethnic Hyderabadi restaurant, specializing in traditional gourmet Hyderabadi cuisine is a division of Charminar Foods & Exports (P) Ltd, a company registered as per the Indian companies act 1956, located in Hyderabad, India and hereto referred as the Franchisor, is ready to appoint XYZ as its Master Franchisee for XYZ Area / Region / Country and hereto referred as the Master Franchisee on the following terms and conditions and after signing a contract called the Franchise agreement. The Franchise agreement will be a legal document and will be drawn up after this Memorandum of Understanding (MOU) is signed by the Franchisor and the Master Franchisee. Following are some of the points of the MOU.

The Master Franchisee agrees to pay the Franchisor an initial, non refundable, up-front fee, called the Franchise fee of Rs 25 Lakhs upon signing this MOU for setting up the model restaurant unit.
The Master Franchisee agrees to pay 5% of the gross monthly sales on a monthly basis as Royalty Fee to the Franchisor for the model restaurant mentioned above.
For all subsequent Unit Franchises / restaurants opened hereafter in the Master Franchisee’s territory, the Master Franchisee will pay the Franchisor, 50% of the Franchise fee and 50% of the monthly Royalty Fee.
The Franchise fee of all unit Franchisees will be Rs 5 Lakhs per Unit and 5%.
All costs incurred for establishing the Master Franchise model restaurant like buying / leasing property, kitchen equipment, hiring staff, all construction costs, décor, etc will be borne by the Master Franchisee.
In addition to the above costs the Master Franchisee should proof to the satisfaction of the Franchisor, the Master Franchisee’s financial ability and must have sufficient working capital to run the Franchise for a reasonable period of time before the business gets profitable.
The Master Franchisee agrees to follow as per the book all rules and regulations laid down by the Franchisor for running the Franchise / Restaurant.
The Master Franchisee will buy formula based packets from the Franchisor to make all preparations and will strictly follow the guidelines laid down by the Franchisor on the mode of preparations, etc.
The Master Franchisee agrees to put only Franchisor approved items on the Menu.
The Franchisor will not be responsible for any losses incurred by the Master Franchisee in the course of running the Franchise / Restaurant.
The Master Franchisee should also buy some special equipment approved by the Franchisor for preparation of items of sale.
The Franchisor will provide all training, detailed operating manuals and know-how to the Master Franchisee for running the Franchise / Restaurant at the Franchisor’s place upon signing the MOU and after receipt of the Franchise fee.
The final Franchise agreement should be drawn as soon as possible after signing the MOU.
The Master Franchisee should also provide a timetable for opening up the first model restaurant and provide later on a detailed plan for expansion.
The term of the contract would be for 15 years, renewable by the consent of both the parties.

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I) Elements of a Unit Franchise Module in India

II) Elements of a Master Franchise Module in India

III) Elements of an International Franchise Module