Kona Ice Vs Tikiz Cost Comparison

Start-Up Costs and Fees
	Tikiz Franchise	Kona Ice Franchise
Investment	$132,500 – $146,000	$145,600 – $169,200
Franchise Fee	$20,000	$15,000
Royalty Fee	$6,000/yr	$3K-$4K/yr.
Advertising Fee	–	$500/yr.
Year Founded	2011	2007
Year Franchised	2012	2008
Term Of Agreement	–	–
Term Of Agreement	–	–

Kona Ice vs Tikiz Ice Shaved Ice and Ice Cream cost comparison is quit different. If you have never looked into buying a franchise you have to be careful on the numbers.

A potential franchisee has to look at the current cost and the opportunity cost. The Current cost is what they need to pay today to get a franchise, the opportunity cost is what will they lose in sales based on constraints. This one graphic above shows the most important cost with out showing the most important cost. We will explain

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1. Franchise Fee

This is the most important cost. However when looking at Kona Vs Tikiz, Kona Ice appears to have a lower cost, when it comes to franchise fees. If that is what a potential franchisee see they are wrong. Kona Ice is much more expensive! Let me explain;

Kona Ice Franchise fee is $15,000 for a territory of 150,000 population. Tikiz Shaved Ice and Ice Cream is $20,000 for 200,000 population. That is a difference of $5,000 in current cost. On the surface someone might think Kona Ice is the cheaper option. This would be true if they where comparing items from a normal purchase, such as a car or boat.

When buying a franchise the loss of income due to territory restriction is your biggest cost. If we look at the size of the two territories we will see Tikiz Shaved Ice and Ice Cream has a 50,000 larger population over Kona Ice for just 5,000 more dollars.

The average small town in America is less than 50,000 in population. The average small town has on average 5 to 6 schools ranging from preschool to college or trade school.

If we Just use the schools and daycares for average population of a small town of 50,000 population. It is a drastic difference in potential revenue. See the chart below.

	Schools
	Student	Number of	Average	Potential	Avg Booking	Potential
	Population/school	Schools	Transaction	Revenue	per year	Revenue
	500	5	$4.25	$10,625.00	5	$53,125.00
	Day Cares
	Student	Number of	Average	Potential	Avg Booking	Potential
	Population/school	Schools	Transaction	Revenue	per year	Revenue
	45	15	$2.50	$1,687.50	8	$13,500.00
			Expected Missed Revenue Per Year			$66,625.00
						x 5 yrs
			Over a 5 year period			$333,125.00
						x 10 yrs
			Over a 10 year period			$666,250.00
	These numbers are based on national averages.

This chart above only takes into account for schools and daycares. It does not factor in other organizations such as non profits, sporting events, car shows, fairs, festivals, parades, and much more. This example only shows what we would call the low hanging fruit.

It is only natural for people to look strictly at what it will cost us today. This is how a normal consumer buys goods and services. However, buying a business is not a normal purchase. Most goods are services you purchase lose value overtime. Most good and services cost us money.

Buying a business is a purchase that will make someone money if run correctly. If a person opens a business in one town and are successful, they normally what to open another in another town. Tikiz is giving its franchisees an entire town for 5000 more than Kona Ice. If the numbers on the chart above are only 10% correct for a perspective territory it would still be

$66,260.00 over 10 years

$33,125.00 over 5 years

$6,625.00 in just one year

If the numbers above are only 10% accurate for a potential territory, it is still $1,625.00 more per year for the the Kona Ice franchise over the Tikiz Shaved Ice and Ice Cream Franchise.

Here is a scary thought what if these number are 10 to 20% too soft for a give territory. What if the sales numbers were much greater. With Kona offering a smaller territory for only $5,000 difference in price Kona’s up front cost seems a little high. Or another way of looking at it, is the 50,000 more population for only $5,000 more is a deal. The cost different on the franchise fee runs much deeper than just the cost of today.

The actual Franchise fee cost that a franchise has to pay today is not that important any way. This is an asset that a franchisee will hold and over time it will appreciate as a franchisee grows their business.

This is a number that will only make a franchise more valuable when it is sold later. Think of it this way. If a franchisee build there business with many clients and proven revenue.

Do we think they would sell their business and only sell it for what they bought if for? Once the business is growing it is infinitely more valuable than when first started.

2. Tikiz is Less Total Investments

	Tikiz Shaved Ice and Ice Cream total investment range				$132,000 to $145,000
	Kona Ice total investment range				$145,000 – $169,000
	Total Investment Difference				13,000 to 24,000

The total investment is quite a bit more to get the Kona Ice Franchise over the Tikiz Franchise. When territory and potential loss of revenue due to territory constraints is factored in the Kona Ice seems to much more expensive as compared to a Tikiz Franchise.

3. Over Population

A person never much care which Burger King they visit but they do care if they are deciding between McDonalds or Burger King.

In most cases this would be ok. In terms of a small business this is not ok. Most people will not distinguish one Kona Ice truck from the other Kona Ice Truck.

Then when a franchisee has a smaller territory and Kona ice trucks are stacked on top of each other it is harder for an individual franchisee to find their revenue streams.

This is an unseen cost that does not show up until a franchisee is fully vested and out selling. With Tikiz Franchising they are a young franchise and very sparse.

A potential franchisee has a better chance of growing a franchisee into multiple trucks with a younger franchise. Ask yourself, what would you want to own 1 Chick-fil-a or would you want to own all the Chick-fil-a within a 50 mile radius? It is just common sense a younger franchise has more room for growth.

Conclusion

We need not look at buying a franchise like buying a car. There is much more to buying a business than meets the eye. In our cost comparison the biggest cost between Kona Ice and Tikiz Shaved Ice is the loss of territory of 50,000 population for only $5,000. This is a huge factor that unless the potential franchisee is a savvy business minded individual they may over look.

The next large cost, that a franchisee will never see until they are out selling, is an over populated Kona Ice franchise network. With smaller territories a franchisor can put more franchisees in the market place. The more Kona Ice trucks in the local market the less likely a franchisee can stand out to maximize their revenue.

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