Applying investment appraisal techniques to assess profitability of franchise purchases as major capital budgeting expenditures
Kostritsa, Maria (2014)
Kostritsa, Maria
HAAGA-HELIA ammattikorkeakoulu
2014
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2014111115477
https://urn.fi/URN:NBN:fi:amk-2014111115477
Tiivistelmä
This Bachelor’s thesis examines the profitability of an investment project in franchise pur-chase decisions. The study primarily aims at analyzing the investment projects that have al-ready been, or are about to be implemented at Trade House “Europa”, a retail fashion com-pany operating all over Russia. The main objectives of the research are to provide well-grounded suggestions on realizing the investment project, and define further investment rec-ommendations for the company in the form of guidelines for the company’s investment strat-egy.
The study is divided into two main parts - a theory part and an empirical part. The theory part discusses various investment appraisal methods used in investment decision-making pro-cesses. The empirical part deals with applying appropriate investment appraisal techniques to assess the profitability of the franchise investment project.The study was based on dis-counting investment appraisal methods. Two face-to-face interviews with a representative of Trade House “Europa” were conducted to get familiar with the investment decision process of the company and obtain necessary information on the franchise investment projects. The first interview included eight open questions, and was carried out in the form of a dialog. For the second interview, a preliminary financial checklist was formed. The company’s financial data of the first half of 2014 is used for the research purposes.
The interviews highlighted good investment practices that already existed in the company, as well as opportunities for improvement. According to the results of the interviews, the company had serious problems with one of their franchise investments and was seeking for the most efficient solutions for it. The findings indicated that the main problem of the investment lay in poor location decisions and insufficient customer analysis.
Using the investment appraisal methods to assess the profitability of the potential investment, the study demonstrated that store relocation would be the best solution for Trade House “Eu-ropa”. Moreover, as a result of the research, investment strategic guidelines for the company were developed. The guidelines were created to optimize the investment decision-making process at Trade House “Europa”. The guidelines were developed specifically for a company working with franchise investments and they may not be commonly applicable to companies in other industries working with different investment types.
The study is divided into two main parts - a theory part and an empirical part. The theory part discusses various investment appraisal methods used in investment decision-making pro-cesses. The empirical part deals with applying appropriate investment appraisal techniques to assess the profitability of the franchise investment project.The study was based on dis-counting investment appraisal methods. Two face-to-face interviews with a representative of Trade House “Europa” were conducted to get familiar with the investment decision process of the company and obtain necessary information on the franchise investment projects. The first interview included eight open questions, and was carried out in the form of a dialog. For the second interview, a preliminary financial checklist was formed. The company’s financial data of the first half of 2014 is used for the research purposes.
The interviews highlighted good investment practices that already existed in the company, as well as opportunities for improvement. According to the results of the interviews, the company had serious problems with one of their franchise investments and was seeking for the most efficient solutions for it. The findings indicated that the main problem of the investment lay in poor location decisions and insufficient customer analysis.
Using the investment appraisal methods to assess the profitability of the potential investment, the study demonstrated that store relocation would be the best solution for Trade House “Eu-ropa”. Moreover, as a result of the research, investment strategic guidelines for the company were developed. The guidelines were created to optimize the investment decision-making process at Trade House “Europa”. The guidelines were developed specifically for a company working with franchise investments and they may not be commonly applicable to companies in other industries working with different investment types.