Factors influence sales for franchises

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Reference no: EM133033815

You are thinking of buying a franchise, but competition is fierce so you need to assess whether this will be a worthwhile enterprise. Relevant data are arranged in the spreadsheet provided, comprising net sales for similar franchises in South Africa (27 in total). 

You think the following factors influence sales for these franchises: 

  • Annual net sales
  • Floor area of the business
  • Amount held in the inventory
  • Number of customer per day
  • Amount spent on advertising
  • Size of the sales district (i.e. the number of families that may purchase from the franchise) and
  • Number of competing stores, selling the same or similar goods as the franchise you are interested in.

a. Conduct a multiple regression and determine the statistically significant variables which influence the franchise's annual net sales

b. Using your regression equation, what are forecast annual net sales for a franchise with the following parameters?

Floor size m2

3 000

Inventory (R)

400 000

Advertising (R)

148 117

Competing stores in district

11

# customers/week

120

Sales district size m2/1000 families

12

 

 

c. The above franchise expands and increases its floor size to 4 000m^2. All else being equal, what is the new minimum amount that the franchise must spend on advertising to generate the same annual net sales (R3 million) per annum?

Annual net sales (R) 

Floor size m2

Inventory (R)

#customers/day

Advertising (R) 

Sales district size m2/1000 families

Competing stores in district

100 000

1 100

104 000

40

26 000

4.2

12

110 000

500

118 000

199

25 000

8.1

15

180 000

600

209 000

73

40 000

6.3

14

230 000

1 200

183 000

128

13 000

3.8

15

630 000

1 200

78 000

163

35 000

15.1

11

700 000

600

154 000

190

16 000

12.5

8

940 000

1 600

79 000

120

77 000

-1.7

10

1 010 000

800

334 000

136

33 000

11.7

14

1 520 000

2 200

140 000

41

100 000

8.5

12

1 650 000

2 600

133 000

147

100 000

21.2

13

1 920 000

2 500

329 000

13

76 000

13.8

12

2 260 000

3 000

280 000

169

89 000

17.8

11

2 970 000

3 100

497 000

2

56 000

9.6

10

3 390 000

3 500

428 000

162

95 000

14.3

5

3 520 000

3 600

454 000

168

93 000

8.4

6

3 950 000

4 300

339 000

79

55 000

23.0

4

3 970 000

3 800

382 000

120

103 000

21.4

7

4 020 000

8 600

578 000

189

54 000

14.0

8

4 250 000

4 200

485 000

53

136 000

16.2

7

4 390 000

4 400

595 000

196

92 000

16.3

5

4 630 000

4 700

552 000

3

84 000

14.9

3

4 860 000

4 800

531 000

185

88 000

20.5

4

4 960 000

5 300

532 000

167

139 000

15.9

1

5 080 000

5 100

514 000

128

134 000

29.2

0

5 220 000

5 500

616 000

199

151 000

26.8

1

5 230 000

5 600

674 000

143

99 000

22.7

0

5 670 000

5 400

740 000

42

173 000

22.2

1

Reference no: EM133033815

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