Franchise Accounting IFRS 15

A Successful Franchise or Not

MinMin is thinking of a way to grow his money. He thinks of acquiring a franchise from a company that offers roasted chicken. The initial fee is 800,000 plus a continuing fee of 2% of sales. All the needed services to set up the franchise will be provided by the franchisor. The franchise unit will be opened after 3 months. This time period will cover the preparation, construction of the store and training of the staff. 3 days after the meeting with the franchisor, he is considering another option. He wanted to open earlier but he will not avail the franchise package. Instead he will make a business and set that up on his own. Based on the feasibility study the annual sales is 890,000 and the estimated expenses would top up to 560,000. What will you recommend?