First started in 1991, The Cheesecake Shop now has over 200 stores worldwide and sells over four million cakes per year. If you've always dreamed of running your very own bakery, a franchise for The Cheesecake Shop franchise could be right for you.
See how the franchise works and when you're ready, compare your Cheesecake Shop franchise loan options now.
How does a franchise for The Cheesecake Shop work?
If you want to own and run a bakery or dessert shop but have no previous business experience or expertise, a franchise for The Cheesecake Shop may be worth considering.
You can purchase a new franchise location offered by The Cheesecake Shop franchisor or purchase an existing franchise directly from the current franchisee.
You will be required to undertake a six-week training course and will receive ongoing training, management and marketing support. You will also be expected to run the business day-to-day.
You do not need to be a qualified baker to become a franchisee, and you can purchase the required ingredients through The Cheesecake Shop's supplier.
Costs and profitability
The initial cost to purchase and set up a brand new The Cheesecake Shop franchise is $400,000, with a total initial capital investment of upwards of $1.25 million depending on the intended location of the new franchise.
The purchase price of an existing The Cheesecake Shop franchise will ultimately vary depending on its location and previous financial performance. As a guide, the asking prices for a current The Cheesecake Shop franchise in various areas of Australia are as follows:
- Victoria Point, Queensland – $225,000
- Willoughby, New South Wales – $268,000
- Guildford West, New South Wales – $289,000
- Northern Beaches, New South Wales – $389,000
- Mount Barker, South Australia – $389,000
- Coorparoo, Queensland – $440,000
- Campbelltown, South Australia – $460,000
- Munno Para, South Australia – $550,000
- South Morang, Victoria – $920,000
- Cairns, Queensland – $1.1 million
As part of the franchise agreement, The Cheesecake Shop franchisees are required to pay royalty fees of 9% of gross sales. Additionally, franchisees pay another 3% of gross sales towards a national marketing fund that supports national advertising campaigns and administration fees.
While The Cheesecake Shop does not publish profit figures for their individual franchises publicly, studies and surveys of current and previous franchisees reveal an estimated 5.4% profit margin of gross sales.
In addition to the 9% royalty fee and 3% contribution towards the franchisor's national marketing fund, this estimate allows for approximately 9% for rent and 12% for wages. The largest expense by far goes to the cost of goods sold – the purchase price of stock and ingredients to create the products – which is estimated to be 66%.
A 5.4% profit margin means that of an average $30 personalised cheesecake, only $1.26 is kept as profit by the franchisee. It is up to individual franchisees to come up with strategies to increase their profit margins, either by reducing costs or increasing the volume of products sold.
How to finance a franchise for The Cheesecake Shop
The Cheesecake Shop is on the list of franchisors that have special lending arrangements with ANZ. While ANZ does lend to prospective franchisees, there is no guarantee that finance will be approved simply because the finance is intended for the purchase of an approved franchise system.
In other words, as a potential franchisee, you will still need to satisfy ANZ – or any other lender – that you have done your due diligence, and that you have the skills and experience necessary to establish and run a profitable business.
When applying for finance for a new The Cheesecake Shop franchise, consider whether one of the following finance options could be a good choice for you:
- Unsecured business loan. Big banks tend to ask for a residential property as security for a business loan, prompting smaller alternative lenders to offer unsecured business loans that do not have a residential property requirement. Instead, lenders will need to prove that they can service their loan by showing proof of business revenue and operations over a minimum period, with the full loan to be repaid within a loan term of five years or less. Generally, you can borrow up to $500,000 with an unsecured business loan.
- Secured business loan. The main feature of a secured business loan is that the applicant must have residential property of sufficient value to put up as security for the loan amount. In return, lenders will offer a loan term of up to 30 years, after professionally appraising the residential property's value. Depending on the property's worth, the lender may also require additional security for the loan, which may be in the form of a director's guarantee, an external guarantor or a fixed and floating charge.
- Franchise loan. While a secured business loan involves offering a residential property as security, a franchise loan involves borrowing against the franchise value itself. The lender will have their own methods of determining the perceived value of the franchise, which may not be the same as the amount stated in your franchise agreement. Franchise loans are not offered for all franchise businesses and are reserved for accredited franchises only.
How to get approved for finance
To get approved for finance for a new The Cheesecake Shop business venture, you will need to present a strong case to your lender. Your negotiations objective is to convince the lender that you are in a solid financial position, have a good credit history, previous relevant business experience and can offer an appropriate asset to secure the loan.
A well-thought-out and comprehensive business plan, including profit and cash flow forecasting, is a key element to the finance approval process. In addition, a large part of the decision whether to grant your application for finance will come down to the lender's satisfaction that you personally have the skills and experience needed to run a profitable business. As such, treat the application process as you would a job interview and provide an updated resume that highlights your relevant business experience, education, qualifications and skills.
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