A deep dive into annual budgets and where the money should be divvied out.
Now that the new year is in full swing, franchisors have finalized their budgets. That's why this is a time when franchisors have to take a deeper look at their business’ goals and expenses and make sure the money is being allotted in the right places. While each franchise is different, there are some general guidelines that franchisors can follow to ensure they don’t fall behind with the start of a new year. To get a deeper grasp on where you spend your budget once you have it, 1851 Franchise Magazine connected with PanIQ Escape Room CEO & Co-Founder Akos Gabossy.
When do you start working on budgets for the next year?
Since our market grows rapidly, we have to stay flexible and our budget has to change dynamically. Market consolidation will slowly start within escape rooms, so I expect to have some great merger and acquisition opportunities shortly, which requires more cash-flow.
What are the major areas of the budget to take into consideration?
Marketing and expansion.
It’s always a tough decision about how much to spend on online and offline marketing. ATL marketing tools are usually too expensive for us, so we have to find the most cost effective marketing tools that bring us awareness and some scalable return on investment at the same time.
The U.S. market is huge and the number of new outlet opportunities grows exponentially for us. It’s always a tough decision to decide which metro areas we should target next, and which themes will be popular over there.
How do you decide how much of the budget to put toward specific areas?
When a business grows fast, it’s very hard to set up thumb rules and follow them from year to year. We try to stay flexible and analyze the situations in details. Escape rooms are a very innovative market, so research and development and marketing spending will always eat up a significant portion of our earnings.
What time of the year should budgets be completely set? Is there any flexibility here?
We start to plan our next year in the fourth quarter of the current year. On the other hand, we are currently negotiating with at least 10 different franchise prospects, so if we sign with all of them in Q1, our next year’s budget and revenue expectations will change significantly.
Do budgets change every year based on the major focuses of the franchise?
Developing new themes and marketing expenses will always be a significant part of our annual budget. The number of company-owned store openings will depend on our profitability. It would be great to keep some of the markets for ourselves, that way we can always get direct feedback from our customers.