Real Estate Feasibility Study

It is important to conduct a real estate feasibility study to examine the possible outcome either positive or negative for a real estate project before investing money, effreal estate feasibility studyort and time into it.  This study also deal in consideration for legal, technological and economic issues as well as other factors which are important for the completion of a real estate development.

There are five (4) steps in conduction a real estate feasibility study such as market analysis, location analysis, competition analysis and risk analysis.  During market analysis, the space supply and the development of space demand as well as the space vacancies should be examined.  Also, the assessment of supply and demand, vacancies, space and rent should take into consideration. The second step is the location analysis.  Location analysis includes the geographic dimensions as well as geographic structure and population structure.  It also assesses the employment and economic development.

In competition analysis, relevant competitive real estate should be identified.  You can prepare a checklist of criteria so that you will estimate the degree of completion of your goals and results respectively. While risk analysis is the identification of the risk such as the development risk and liquidation risk.  Examples of these risks are completion risk, cost overrun, financial risk, market and location risk.  Through identifying of risk, you can make a decision immediately to avoid problems to occur.

Legal Feasibility Study

Legal feasibility study is to know if the proposed project conform the legal and ethical requirement.  It is important that the project or business is following the requirements needed to start a business or a project including business licenses, certificates, copyrights, business insurance, tax number, health and safety measures, and many more.

There are some things to consider in legal feasibility study including ethical issues and some social issues. These issues are the privacy, nepotism, and accountability.

legal feasibility studyA proposed system should determine if it has a conflicts with a legal requirements like for example if the data processing system is complying with the local Data Protection Act.

An example of requirements needed to proposed a construction projects are architect contract, bid bond, bid form, equipment lease, guaranty agreement, flooring contract, electrical service agreement, construction contract, construction agreement, warranty bond, certificate of final completion, change order, contract extension agreement, and many more. These documents should be able to provide once the project will be started.

Other legal documents needs for business are corporate resolution, day care policy statement, activity release of liability, business fact sheet, letter of intent, location of release, insertion order, IT service contract, Attorney Engagement Letter and many more.

10 Types of Feasibility Studies

Feasibility study is written to know if the project or business is possible to implement given a certain circumstances. It will show strengths and weaknesses before the project is planned and budgeted for. Through feasibility study, company can save time and money as well as other resources in the long run by preventing projects that are not feasible.

The following are types of feasibility study:

  • Marketing Feasibility Study – demonstrate the target demographic.  If there is enough consumer in the market place.
  • Operational Feasibility Study – evaluates if the system will operates will.
  • Resource Feasibility Study – measures if there is enough resources are available such as the facilities to be used.
  • Real Estate Feasibility Study – distinguishes if there is available land or property required to undertake the project
  • Cultural Feasibility Study – knows the impact on local and general cultures.
  • Schedule Feasibility Study – recognizes if the company has available time to complete the project
  • Technical Feasibility Study – identifies if the company have technology that deals with the project including the processes and procedures needed for the success of the project
  • Legal or Ethical Feasibility Study – reminds the legal implication and ethical consideration of the project
  • Economic Feasibility Study – knows if the company has enough financial resources for the project.
  • Comprehensive Feasibility Study – it looks all aspects of feasibility study including marketing, cultural, economic, real estate and many more.

 

A Feasibility Study of Establishing a McDonald Branch along Nicanor Reyes Street, Sampaloc, Manila

Establishing McDonald Restaurant Feasibility Study

1.    General Objectives

1.1    Description of the Business Project

The proposed business will need a three-storey building in a 2,000 square-meter lot with a parking space at the rear.  The customers will drive in the left entrance greeted by the water-sprinkled Indian trees partly shielding the establishment from the fumes coming from the busy street.  Embraced by the multi-colored lights, the trees will set the cosmopolitan setting to a rustic atmosphere.  The M insignia appearing to be cradled by the trees from a distance will outshine the multi-colored lights below stressing the romantic surrounding.  The building will be constructed to hide the stockroom complementing the architectural masterpiece.  The smoothly cemented exit passing through the well-manicured lawn will draw sighs of satisfaction from the customers.

The state of the art tables, chairs and utensils will enhance the customers feeling that they are in a five-star hotel.  Very affordable, the food will enthrall every customer to come and savor the food over the widely spaced tables on the immaculately marbled floor.  The electronically flushing system of the restrooms will motivate the customers to force their friends and relatives to frequent this new McDonald Branch at the heart of the university belt.

1.2    Project Time Table

All minor detail considered, the project will start serving the ten thousand targeted daily customers within five months.  The contractors will complete the fence and the framework of the building in the first month.  They will finish the walls and the floors in the second month. They will install the electrical and the air conditioning units in the third month  After the first and second layer coating, they will complete the final painting in the fourth month and finally they will landscape and plant balled-trees in the fifth month.  As the project will be in progress, the company will buy the facilities to be used.

1.3    Management of the Business

With three managers alternately scheduled on an eight-hour duty to man the 130 crew in the 24-hour service, the business will surely satisfy the customers, propelling profit to soar.

The personnel will make a customer feel that he is the only one served amidst the queuing multitude.  The high wage given by the company and, likewise, the humane treatment of the superiors will inspire the crew to render machine-precise service.

2.    Product and Market Aspects

2.1 Market Outcome

A variety of expensive fireworks commence the business to attract the children, students, parents and professionals.  This opening blast will have been advertised a month before.  The initial big crowd from the different districts of the city will keep growing to actualize the management’s vision that this McDonald Branch will be the most profitable among the food chains that mushroom in the metropolis.

2.2 Market and Selling Price

The customers can order from a variety of choices in the counter staffed with beautiful and handsome ever-smiling crew.  The waiters will serve the orders in the well-crafted, smoke-free dining areas with both oriental and western motifs to fit their number and their tastes.  These areas will enhance customer-privacy as the customers enjoy eating while talking about the gossips of the town, or as they engage in a highly intellectual calisthenics about a hot political issue.  The area will also conduce lovers to cement their relationship with their soul-penetrating interlocked gazes that only lovers could fathom, as they savor their food.

mcdo food

3.    Technical Aspect

3.1    Location Factor

Situated at the corner of R. Papa and Dr. Nicanor Reyes streets at the heart of the University belt, this food center will surely draw customers from the cross-section of society.  The following factors will back-up the company’s foresight:

3.1.1    Topography

The 2,000 square-meter lot does not need labeling because the area is already flat.  Although the place lies in the lowest part of Manila, Mayor Atienza’s Buhayin ang Maynila program has eradicated the perennial floods that residents of the area suffer from.  No matter how strong the typhoon will be, the rains will not flood the area.  The customers will not be drawn away from enjoying the services of McDonald.

3.1.2    Cost of Land

The fertile business venture will cheapen the current Php 20,000 per square meter piece of land.  The forty million peso worth of property will double after only three years of operation.

3.1.3    Security

The place will be very safe.  Secretly installed cameras will monitor every move to ensure the security of the customers. Four security guards simultaneously assigned to the area will guarantee the safety of the clients.  This will be backed up the policemen assigned at the outpost nearby.

3.2     Size and Layout of the Building

To maximize the 40 x 50 meter land area, the engineers will erect the 20 x 50 meter land area, the engineers will erect 20 x 30 meter proposed three storey building, leaving five meters at both sides and 18 meters fronting the street.  Only two meters will be left at the back of the building  This will ventilate the establishment.

3.3    Equipment

The San Jose Builders will construct the building.  This construction company will use modern building equipment like a cement mixer, caterpillar, automatic digging drill, and other state-of-the-art construction materials.

4.    Project Cost

4.1 The Land and the Building

This project will cost about Php 43,500,000 which is roughly broken into the following:

Cost of 2,000 meter lot – Php 40,000,000
Cost of the 3-storey building – Php 3,000,000
Accessories and equipment – Php 500,000
Total Cost – Php 43,500,000

The 40 million pesos worth of land is the biggest of the capital investment but it is worth it because unlike the other expenses, the land value will appreciate through the years.  The contract with the San Jose Builders for the proposed three-storey building is Php 3,000,000.  This includes materials and labor.  With the five-month paying scheme, McDonald will pay Php600,000 every month until the last month.  The food center will need Php500,000 for the imported accessories like tables, chairs and other needs.

4.2    Franchise

The food center will pay the current Php1,000,000 McDonald franchise.

4.3    Sources of Financing

The proprietor will put in Php3,500,000  The remaining Php40,000,000 will be borrowed from the bank

5.    Business Operation

5.1  Revenues

With 50 thousand monthly net income target from about five thousand daily customers, the proposed branch projects the following net income by month and years:

First month – Php 1,500,000
First year – Php 18,000,000
Second year – Php 36,000,000
Third year – Php 54,000,000
Fourth year – Php 72,500,000

After four years of operation, this venture will have gained Php 11,500,000 as shown in the following computations:

Net income in four years – Php 72,500,000
Minus the sum of investments – Php 61,000,000
Difference – Php 11,500,000

Loaned money from the bank – Php 42,500,000
Interest of loaned money – Php 17,000,000
Franchise – Php 1,000,000
Maintenance – Php 500,000

Total – Php 61,000,000

5.2 Accessories and Equipments

Being of high quality, the accessories will still be usable after four years.  However,  Php 500,000 pesos is allotted for maintenance and replacements of damaged property,

Summary

The figures above prove how financially rewarding this business venture is.  Because food is a necessity, a venture like this guarantees 99% success  This is especially so if the location is the University belt like McDonald N. Reyes.

(This feasibility study was taken from Technical Writing Revised Edition by Corazon C Obnamia, et al)

Business Franchising Tips

Franchising is allowing one party to another party the right to use its trademark or trade name  as well its business system and processes.  Business owner offer their business franchising to expand their business at a fast pace. Franchisee or franchisor is the one who owns the overall rights and trademarks of the company and allows its franchisees to use these rights and trademarks to do business.  The franchisee charge a franchisee fee for the rights to do business under the franchise name.  Also, the franchisor collects an ongoing franchise royalty fee from the franchisee.
Business franchising is considers one of the safest and risk free ways to start a business but it cost a lot of money.  These amounts of money are worth it if you choose a right business franchise according to your interest.

The following are some tips before franchising a particular business

  • Research the best franchise.  It is important to do a research because there are thousand of different business franchises.  Ask existing franchisees and customer to gather information and seek advice from friends, relatives and colleagues to determine the reputation of the business you want to franchise. Also, research for the local market to know the demands of the products or services you would like to offer.
  • Choose a franchise that you will enjoy.  Most business is successful because the owner of the business is very passionate.  If you are interested in your product or services, you will learn rapidly.  Being an expert to your business is important to running to any business.
  • Make sure that your franchise has a good profit model.  If there is a good profit model, it is easy to start up, run and maintain a successful business.  Business with reputation and strong brand names usually have a stronger profit model since customer pays higher price to receive best and trusted product or services.
  • Look for Integrity.  It is important that the business you want to franchise has integrity. It means that if your business is with high integrity, your reputation will grow and shines.
  • Make sure to understand contract clearly before signing it.

 

Elements of Feasibility Study

A feasibility study is written to present a problem or opportunity to be studied to determine if the proposed solution or business is viable. It includes the analysis of the current situation, requirement description as well as the evaluation of all alternative solution and the course of action.  Feasibility study can be applied to any kind of project so that you will determine if the project will be implemented successfully.  Likewise, feasibility study is important in business planning because you will know if your prospect business will be profitable or not.

The following are elements of successful feasibility study:

  • Executive Summary. It contains the overview of the project so that investor will be able to know the proposed solution or project without reading the entire documents.
  • Problem Definition.   This section will state the problem intended to solve as well the short description of the proposed solution or opportunity.
  • Current Analysis. It contains the understanding of the current system or product being implemented.
  • Requirements. It provides the requirements needed of the proposed solution.
  • Methods or Approach. It provides the methods or approach to be used in your study.
  • Cost.  Discuss the budget of your proposed solution. It includes the sales forecast and profitability as well as cost benefit analysis.
  • Evaluation.  Evaluates the solution being proposed.

 

Components of Feasibility Study

First of all I would like to define what is feasibility study? Well, a feasibility study is written to find out if the chosen project is feasible before investing money. Feasibility study will determine if the proposed venture is profitable and viable and also to study the possible risk that will encounter during the implementation.

The following are some of the components of feasibility study.

  • Project Description. It contains the project name such as the name of the enterprise as well as the purpose of this business venture. You must also include the information about stakeholders and the end result expected.
  • Goals. It provides the list of your goals and procedures needed to achieve these goals.
  • Timetable. It should have the estimated time to complete the project.
  • Cost and Budgeting. All cost must be included such as all cost incurred for the project.
  • Market Analysis. It provides if the proposed project or business venture has a demand. It includes the market assessment such as the industry description and competitiveness as well as the market potential and sales projection.
  •  Technical Analysis. It contains the competiveness of technology and it identifies the constraints and limitations of the technology.
  • Financial and Economic Analysis. It details the capital requirement to facilities, equipment and inventories.
  • Resources. It identifies all the resources needed to complete the project including the technical, inventory and human resources.
  • Process. It contains the project flow such as the flow charts showing project stages.
  • Teams and Management. It includes the organizational structure and team management teams. Provides the staffing structure of the proposed business.
  • Conclusion.  It contains other alternatives and compares these alternatives based on your goals. Outline the criteria for decision making.

 

Steps on Franchising Dunkin Donut

One of my friends suggested me to franchise Dunkin Donut that’s why I want to share my gathered information on how to franchise Dunkin Donut.

The following are steps on Dunkin Donut Franchising:

1.    Application

Of course, you have to secure an application from Dunkin Donut.   After reviewing your application, the Dunkin’s Donuts franchise team will contact you.  Then a Franchise Disclosure and Qualification Package will received and reviewed. This will provides prospective franchisees with information about the franchisor as well as the franchise system and the agreements required. Also, you have to provide proof of citizenship or Permanent Resident/Alien Registration care, proof of assets and they will check also credit and initial financial review.
2.    Business Plan

After initial screening, you will be met by their Franchise Manager.  They will conduct due diligence and talk with the existing franchisees.  Then, select a territory and make a business plan.

3.    Financial Reviewdunkin donut

After background check, the business plan will be presented to Franchise Manager and submit legal entity documentation.  Also, conduct a financial review based on business plan then receive a franchise approval.

4.    Approval

Sign Store Development Agreement (SDA) and if approved, they will begin franchise training and select and submit site for approval then secure financing.

5.    Grand Opening

After the franchise approval, they will finalize the lease or purchase and you will have to sign the Franchise Agreement then start the construction and crew training.  Then, the store opening.

McDonald Franchising Requirements

Many businessmen and entrepreneurs want to franchise a business that is established already.  There are many franchises available and all you have to do is choose the right for you.  McDonald is one of the prestigious companies who offer franchising.

The following are the requirements for franchising McDonald’s Restaurant

•    Financial Requirement

  1. Initial down payment of 40% of the total cost for a new restaurant and 25% of the total cost for an existing restaurant. This down payment should come from non-borrowed personal resources such as cash on hand, securities, bonds, business or real estate equity and debentures. The minimum amount for a down payment will differ depending from restaurant to restaurant but generally, they require a minimum of $750,000 of non-borrowed personal resources to consider you for a franchise.
  2. McDonald also required the buyer to pay a minimum of 25% cash as down payment toward the purchase of a restaurant while the remaining balance of the purchase price can be financed for a mcdoperiod of no more than 7 years.
  3. There is an on going fee to pay during the term of franchise such as the service fee and rent. The service fee is a monthly fee based upon the restaurant’s sales performance while rent is a monthly base rent or percentage rent that is a percentage of monthly sales.

•    Other Requirements

  1. Business Experience. A person who have established successful ownership or management of multiple business units.
  2. Business Plan. Develop a business plan
  3. Manage finances well. With thorough understanding of the business financial statements.
  4. Training. Should complete a comprehensive world class training program in all aspects of operating McDonald’s restaurant business.
  5. Management Skill.  Should personally manage the day to day operations of the restaurant business.
  6. Credit History. With good credit history

 

Franchising Business Opportunities

Many people todays thinks to put up business.  It is hard to think of type of business that will be profitable. But of course, definitely many people are a food lover that’s why more and more businessmen open a food business.

food cart franchisingLet’s see some of available franchising business:

  • Santino’s Pizza.  This franchise opportunity is one of the best for starters. It has over 50 outlets available nationwide. Their menu is easy to prepare and their pizza is very affordable for just Php25 per slice. There is high revenue potential. It cost Php280,000 in capital for 2 year franchise contract plus a Php50,000 as refundable deposit and another Php5,000 monthly support.
  • Adobo Connection. They serve different varieties of adobo, considered the main dish for all the Filipinos wherever they may be. This fast food chain requires around 4M to 6M initial capital. The company trains the manager and staff of each store to ensure that each franchise will become successful as the rest of Adobo Connection locations.
  • Lady Christine’s Baby Back Ribs. At first, this restaurant is designed to be a take-out counter but after a proven success, the owner decided to transform the business into a restaurant. Their menu is a mouth-watering baby back ribs.  The cost of franchise is P500,000 to 1 million depending to the type of franchise.
  • Pizza Pedrico’s. It considered as certified franchising success because it has been dominating the market for foodcart pizza businesses and it has more than 300 food carts and kiosks scattered nationwide.  The pizza they served contains four varieties such as cheese, ham and cheese, chorizo and cheese and sausage and cheese in one box. Filipinos enjoying the 3 flavors in one seating. The cost of their franchise is around Php400,000 which includes the food cart, initial supplies, basic equipment, utensils and marketing materials.
  • Lembest Lechon. It serves lechon manok which considered one of the most popular foods here in the Philippines. Filipino people loves lechon manok that’t why there would always be enough room for more lechon manok businesses in the market.  The initial capital investment is around Php400,000 to Php500,000. The owner assures that return of capital is possible faster than expected because the expected monthly income of each franchise could be about Php30,000 to Php150,000.00