MBE Investment and the returns

Financial information Investment and returns

Set up costs

The exact start up costs can vary depending upon the location, size and condition of the property and the equipment specification, the typical initial investment required to open an MBE Centre is approximately £60,000, of which we require a minimum of £20,000 to be liquid capital.

The Mail Boxes Etc. franchise system provides a complete turnkey operation and an allowance has been made in the start up costs for all franchise fees, training, site selection assistance, shopfitting expenses, legal fees, and supplies and inventory. The actual break down of the typical start up costs is as per the chart below.

Mail Boxes Etc. has an excellent working relationship with all the high street banks who will lend up to 70% of the total initial investment cost, subject to status. The banks can also provide overdraft facilities for the £10,000 to £15,000 in additional working capital that we recommend that our franchisees make provision for.

The MBE franchise has also been approved as a qualifying business under the parameters of the Government’s Small Firms Loan Guarantee Scheme. This scheme can provide financing for an MBE franchisee in circumstances where a franchisee’s lack of available security is preventing the lender from advancing a loan. Under the terms of the scheme interest rates are negotiated on a case by case basis although a premium will be payable to the Department of Trade and Industry.

Ongoing fees

In addition to the initial franchise fees payable as part of the start up costs, under the terms of the franchise agreement, our franchisees are required to pay a 7% Management Service Fee and a 4% Marketing Fee.

The Management Service Fee is payable monthly and is based upon gross sales less various exclusions and reductions for low profit margin items such as stamps. The Marketing Fee is also paid monthly and is used for national, regional and local advertising and public relations to promote the sale of products and services offered by all MBE Centres.

Returns on investment

On an ongoing basis the Mail Boxes Etc. franchise offers excellent profit opportunities and more than 31% of our Centres are multiple owned worldwide. As with any business however the amount of money you can make is directly in proportion to the effort you put in and your effectiveness at promoting and selling the services and products that an MBE Centre offers. That said, franchising statistically represents a business format in which 93% of franchisees report that their business makes a profit.4

The initial term of the Mail Boxes Etc. franchise agreement is 10 years and all franchisees have a right to renew for an additional 10 years at the expiration of this period.5

Whilst we obviously hope that our relationship will last for a considerable period of time, the franchise agreement does contain a right, exercisable at any time, for our franchisees to sell their Centre.5 In our experience, it is normal in such circumstances that the outgoing franchisee will have built up a significant value in the business as a going concern and can realise a substantial return on their initial investment.

NOTES:
1 Based upon a 450 sq ft Unit in a good state of repair.
2 Assumes that photocopiers are leased. Alternative lease finance may be available for all other equipment that is required.
3 Excludes VAT and working capital provision.
4 Nat West Bank/British Franchise Association survey 2002.
5 Subject to the actual terms and provisions of the franchise agreement