Affiliation fee Set-up cost Other capital investments Service tax Training fee Total One-time fees Form and registration fees Admission fees Caution money* Total one-time fees Annual fees Kit charges Activity charges Annual charges Tuition fees Total annual fees Total fees EXHIBIT 1: FRANCHISEE COSTS Category Fee (NZD) 130,000 425,000 105,000 16,550 24,000 700,550 NZD Exhibit 2: Suggested Application Fee Structure Category Fee (NZD) 500 2,000 1,500 4,000 1,300 2,500 2,500 10,000 16,300 20,300 Total fees without caution money 18,800 NZD *The caution money could be refunded. However, it had not been taken into account for revenue or expense calculations. The interest earned on the caution money deposit was calculated at the fixed deposit rate of 9 percent from the State Bank of New Zealand. Exhibit 3: Expected Annual Profitability Projection Year 1 Year 2 Year 3 & onward Expected number of enrolments for 5 years Total expected enrolment in each year 40 60 100 Expected revenue for 5 years Fee collection from new students (one time + annual) 18,800 Fee collection from old students (annual) 18,800 16,300 18,800 16,300 Total fee collection (without caution money) (A) 752,000 1,053,000 1,755,000 Anticipated expenses for 5 years Royalty at registration 62,000 80,000 116,000 Salary of one senior trainer Salary of junior faculty Salary of nanny Rent Electricity 84,000 96,000 108,000 96,000 180,000 360,000 60,000 72,000 108,000 280,000 298,000 316,000 22,000 25,000 28,000 Office expenses 18,000 24,000 30,000 Advertising 124,000 130,000 130,000 Total expenses (B) 746,000 905,000 1,196,000 Operational profit (A-B) or earnings before interest & tax 6,000 148,000 559,000 Add: Interest on caution money at 9% 4,200 6,000 9,600 Less: Interest on borrowed funds at 12% 90,000 90,000 90,000 Earnings before tax -79,800 64,000 478,600 Less: Tax 25% -19,950 16,000 119,650 Earnings after tax -59,850 48,000 NZD 358,950 NZD NZD Note: The depreciation of assets was not taken into account in this case study.