Under this model, the payback period is around 12 -18 months.
Under this model, break-even sales are achievable on sales of 6.5 lac per month.
Sales volumes are expected to grow at 20%, while the prices are kept constant. This will directly increase the revenues by 20%. Majority of the costs, being variable, are also expected to rise by 20% year-on-year. The manpower cost is expected to rise at 10%. The assets are depreciated using straight line method with a useful life of 7 years. The residual value is assumed to be zero. In general, the walk-in freezer and the frozen truck has a useful life of more than 7 years. The base case scenario gives an annual profit of Rs.12 lacs in the first year of operations.
The investment required is Rs.25 lacs. Out of the total amount, Rs.5 lac will be used for purchasing a walk-in freezer & Rs.10 lac for purchasing a small refrigerated truck. Rs.10 Lac will be used for working capital requirement. The Franchisee is expected to bring in a minimum of 10% and the balance will come as bank loan and eligible incentives. The loan is repayable within 7 years. The repayments are expected as per the bank norms. The Debt Service Coverage Ratio is very comfortable throughout the loan tenure.