Simple answer: by "Grand Opening" you will have around $15-20k invested in an independent studio like our clients do, or at least $50-130k plus if you go the franchise route.
You may have noticed the growing trend in the past few years -- many studios jumping on the paint & sip franchising "bandwagon". The franchisor's claim is that if you pay to use their brand and model, your studio will be a guaranteed success. But you're not buying McDonald's "golden arches" that everyone knows, TV advertising and all -- most of your local potential customers just want to "paint & party", they couldn't care what flag it flies under as long as you are exceeding in customer service and have a nicely branded studio space.
The franchise fees, royalties, advertising, and other expenses that most paint and wine franchises charge franchisees cuts too far into the profits for any studio owner to make a decent return on investment (ROI) and good profit margins and doesn't provide franchisees with all of the glimmery implied guarantees of fun, success, and class volume that they experienced on their "discovery day" trip to a franchised studio or during a phone call. This article explains the business and financial dynamics of investing in a "paint and sip" studio, both independent and franchised.
How Much is the Profit for a Paint & Sip Franchisee?
Profit, defined: difference between the purchase price and the costs of bringing the service to market.
Profit margin, defined: a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue.
In other words, the lower your costs, the higher the profit margin can be.
Example: Jane wants to be an entrepreneur. She plays with this, and buys a pre-made candle for $5 and then sells it to a friend for $10. It was a lot fun, and she made money doing it!
Cost price = $5
Selling price (revenue) = $10
Profit = $10 − $5 = $5
Profit percentage (profit divided by cost) = $5/$5 = 100%
Now, onto "overhead". Jane has no overhead, so her profit margin is high--
Business overhead, defined: an ongoing expense of operating a business.
If Jane pays to advertise her candles and a fee to sell them from a booth at the local market, her profit margin will go down because of the newly added "overhead". However, if she makes this move / expansion, there could be increased volume and revenue that may offset her expenses... or not, it depends on the demand, which can never be guaranteed. All small business is a risk, never a guarantee. Jane can expand, but it's in her own best interest to do this slowly, at the lowest cost and risk possible -- Rome wasn't built in a day.
What is the Monthly Overhead (Cost) of a Paint & Sip Studio?
An independent studio, like the ones we co-create, has many costs, but a franchise has even more, and customers just want to "paint and party" -- flying the flag of the franchise at your location isn't going to guarantee customers. Here's a list of common basic expenses for any sip and paint studio--
*Studio lease / rent
*Utilities (heat / cooling, electricity use, sometimes water / sewer fees).
*Internet
In addition, there are monthly "variable costs"--
Variable costs, defined: costs that change in proportion to the service that a business produces.
Common variable costs of paint and sip studios include--
*Art materials
*Art instructor pay
The more tickets you sell, the higher your variable costs of materials and payroll will be. But making sales is good, and these variable costs are a predictable percentage of each ticket price, although we want to keep them to a minimum because that cost cuts into profits.
Franchises add another expense to their studios, the "royalty"--
*Royalty fee, defined: payment made by one party, the franchisee, to another that owns a particular asset, the franchisor, for the right to ongoing use of that asset (using their brand, use of the paintings, etc).
There are no fees to pay with an independent studio -- you own it! Royalty fees for paint and sip franchisees are typically set at 5% to 8%, but they are also known to tack a 2% to 6% "advertising" royalty, or assess fees on alcohol sales, per sold painting, or other factors, it all depends on which paint and sip franchise.
So, with a franchise, not only do you pay $15-30k upwards for the use of their name, logo, and other benefits claimed in their "franchise fee", but you pay them a portion of every dollar you earn, as a "royalty fee", for the duration of your contract, normally 5-8 years. This adds to your costs and lowers your profit.
Return on Investment (ROI)
When you make an investment, you do so in order to profit from a "return". You expect to earn back the money you invested, within a reasonable amount of time, plus a profit for the act of investing in it--
ROI, defined: in purely economic terms, it's one way of considering profits in relation to capital invested.
When we speak of the paint and sip industry, your investment is what you put in "on the front end" -- business licensing, obtaining the lease space, buildout and improvements, inventory, initial advertising, hires and training -- every dollar you spend to get into business. With a franchise, add their fees to it and you will find that most franchisees spend $60k to $130k by the time they have their "grand opening", that's their investment. Our independent studios spend $15-20k on average, total, depending on costs in their local market.
Naturally, each studio owner would like a "good return on investment", the question is, how long it takes until that investment, plus a return, the profit, comes -- all the while paying the monthly overhead, variable expenses, and royalty fees in a franchise?
We have given you the facts--
*customers just want to "paint & party", the flag you fly under is of no consideration to them as long as you offer a good brand and high level of customer service.
*a franchise will cost you at least five times as much an independent paint and sip studio, at a higher front end investment and variable monthly expenses, with no guarantee of more customers.
Simple story -- you can open faster and on a better budget with us, and get just as many customers as your "next door", high cost franchise as long as you follow our step-by-step advice. We've opened 30 studios in the US since 2010, who will be next?
Click the link for a side by side comparison of independent vs. franchise requirements, benefits, and costs.
How Much Does a Paint & Sip Franchise Cost vs Independent Studio?
