DOC POPCORN Franchise Feasibility Study Warns “Don’t Get Burned on Popcorn”
August 17, 2013
A Doc Popcorn franchise feasibility study conducted by a team of Ohio University students provides compelling research into why a Doc Popcorn franchise probably won’t succeed in the college town of Athens, OH… or (one could assume) markets with similar demographics.
The feasibility study, prepared by OS students Brian Gibbons, Chloe Palmer, Michael Lamping, Laura Schaus, Matthew Sochacki for faculty members Professor Gary Coombs, Professor Jamie Lambert, Professor Wayne Huang, Professor Scott Wright, provides insightful primary and secondary research rarely conducted by prospective franchisees… despite the fact that franchisees risk their savings, homes, and the financial futures of their families without proper due diligence.
Read the study here: DON’T GET BURNED ON POPCORN A Doc Popcorn Feasibility Study
Also read & comment here: DOC POPCORN Franchise Complaints
Doc Popcorn Deemed Not Pop-ular Enough
The project proposal section of the feasibility study states:
Doc Popcorn is an emerging gourmet popcorn franchise offering all-natural popcorn in a variety of flavors. This report examines the feasibility of opening a Doc Popcorn franchise in Athens, Ohio. The initial proposed site for the shop, The Market on East State, was rejected. The final location option considered, a mobile PopCart™ to be operated at the intersection between Court Street and Union Street, also fails to demonstrate promise as a profitable investment.
After detailed sections analyzing the nature of the industry, competition, Doc Popcorn investment costs, traffic flow, consumer research and surveys into price sensitivity and demand, and other factors, the researchers determined a Doc Popcorn franchise was not feasible:
Explanation of PopShop™ and PopKiosk™ Rejection
Through a financial analysis of breakeven requirements based on projected market demand for gourmet popcorn, this site is deemed a “no-go.”
There are 63,000 people in Athens County (U.S. Census Bureau). From the survey [See Appendix E for survey results], 57% eat popcorn in an average month and 55% attend the mall at least once a month. That is approximately 19,750 individuals who can buy popcorn in any given month. Out of that 19,750, 21% (4,148) said they would be likely or very likely to purchase popcorn. In terms of pricing, nearly 68% of participants would be willing to pay at least $3.00 for the popcorn bag. Unfortunately with high start-up costs at this location, the determined price is set at $3.50. This is a balance to appease customers and the company’s bottom line. Drawing the conclusion that about half of the 4,148 are priced out of the market because they are not willing to pay the charge of $3.50, leaving approximately 2,000 customers per month who are willing to purchase popcorn from a retailer located at the Market on East State.
The franchise location for the PopShop™ requires an initial investment of $301,364. Besides the initial investment amount, fixed cost for the subsequent years total $121,664. After five years the deficit would be staggering $410,268 loss. To further emphasize the lack of promise, in order to break even in the first year, sales would have to reach $376,954, which is 143,601 units. For following years the break-even sales would need to be $152,180, which is 57,973 units sold [See Appendix C for detailed financials].
Another venue option would be to set up a PopKiosk™ inside the Market on East State. While this is more practical because of a lower initial investment requirement of $279,464 and a continual fixed cost of $112,264, financials show that it is still not feasible while selling at the necessary price per unit of $3.50. After five years the deficit would be a staggering $350,768 loss. To further emphasize the lack of promise, in order to break even in the first year, sales would have to reach $349,560, which is 133,166 units. For following years the break-even sales would need to be $140,422, which is 53,494 units sold [See Appendix D for detailed financials].
The researchers concluded that there’s a wide disparity between what a Doc Popcorn franchisee would need to charge for its products in order to be profitable, and the amount consumers are willing to pay for gourmet popcorn. The study concludes:
Even with a highly effective marketing campaign, while not impossible, it is improbable to expect sizeable growth and a willingness to purchase the product at a dollar higher than originally assessed. As initial excitement and curiosity subside, it is more likely that sales will decrease. Without the ability to control and accurately foresee growth opportunities for this franchise, it is suggested the investment be declined.
After researching the popcorn industry, demographic information, and the potential opportunities and threats associated with franchising the relatively new Doc Popcorn gourmet popcorn retailer in Athens, Ohio, it has been determined that opening the shop would not offer enough return to offset the risk associated with the investment. The major factors taken into consideration, in regards to the report’s recommendation, included the local and national economic conditions, the current and future projected snacking demands of the Athens population, the lack of foot traffic, as well as the pricing power of the buyer within the snack and food industry. The inability to achieve a sustainable competitive advantage within the local industry would inhibit complete differentiation of the product from other options available. These reasons, coupled with the low cost of entry into the snacking market, led to finding both potential locations not profitable, and thus the proposal is rejected.
If prospective franchisees conducted this level of scrutiny on each franchise investment, we imagine there would be fewer unhappy franchisees on UnhappyFranchisee.Com… and a lot fewer franchisors overselling marginally feasible franchises in the brutally competitive fast food and snack food space.
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