RE:RE:RE:RE:RE:RE:RE:FAF annualsJessa7 wrote: Towering there is 10 corporate stores, plus Kingston soon so that will be 11(unless Kingston is already under corporate I'm not sure). Plus 36 franchised stores.
I think you need to check your numbers, top line revenues across cannabis retailers seems to be 10-12%. ISH gets 5% gross from all franchises, plus 1% gross for advertising . So it takes approx 2 franchise stores to equal one corporate but without the cost to open, staff, maintain, inventory, lease hold ect ect ect. Based on this ISH brings in revenue to corporate equal to 29 corporately owned stores. These revenues may be lower across the board though considering we're seeing Meta and F&F closing stores already.
Let not forget there's 11 additional stores up for approval in Ontario with 10 being open by July (unknown if any are corporate with certainty), 12 total, and another 14 waiting to go up for approval bringing their provincial total to 26 in Ontario as of the last announcement. Also have to consider Saskatchewan has opened, plus Atlantic cultivation picked ISH to open 5 franchises in Newfoundland.
ISH has announced they expect to have 80+ stores open by end of 2020, last year they said 40+ and exceed that goal.
Not sure I follow you guys, and I could be off so would appreciate the correction. But 5% of gross sales (the other 1% for advertizing fund is likely restricted capital that can only be used for marketing, so likely cant be reported in Cash On Hand). So let say a franchisee (on average) pulls in 1m per quarter (easy roundable number). 5% of 1m is 50k. While a corporately owned store would be able to report 1m in gross sales, we would only report the 50k. There will still be a G&A overhead cost associated with managing the franchisee stores, so even that 50k has costs to it, its not like its free money. Yes far lesser than that of a corporate store, but far lesser reward when it comes to profitability. So once demand rises even further as the stigma fades and weed normalizes, the stores that start to take off in sales still only pay back at the 5% rate.
Margins across the retail cannabis sector have been in the 30% range (I think this is what you guys are relegating it to), but that being said;
Lets say a store in the GTA starts blowing numbers out of the water and does 10m per quarter. We would see 500k, that individual franchisee would report 10m in gross sales. Supposing it was a corporate store it would generate around 3million (30%) in net sales vs. 500k - whatever attributable G&A expenses are. So correct me if I'm wrong, but by the numbers it kind of looks like it would take 6 franchisee locations to = 1 corporate store if we're going by sales margins.
So back to talking about growth. When factoring in multiple stores the growth seems to be exponential in favor of corporate locations. Especially once profitable. Though I love the safety of it, and think it will be profitable, the franchise model seems to work well in this stage of our growth, but once the industry transitions into one of profit, the corporate owned route will start to pass us. Unless we can open 6 franchisee locations for every 1 corporate the compeditors open.
(assuming of course all sales are equal, but as we know, they're variables based on prime locations.)
Again, I could easily be mistaken, but trying to wrap my head around it.