Inexperienced Entrepreneurs Value Business At £1M and Want To Franchise | Dragons’ Den

Foreign [Music] Hi I'm Michelle and this is my husband And business partner Peter we are here Today to ask for a hundred thousand Pound investment for a 10 stake in our Company fun fancy dress Limited We have been a limited company for over Three years and have so far generated a Turnover of over nine hundred thousand Pounds with a net profit of around 142 000. We currently employ seven people and Hold stock worth over a hundred thousand Pounds Our website receives over forty five Thousand unique visits per month with an Average order value of 29 pounds we Opened two stores across 2010 The first store was in pool Dorset our Second store in bedworth Berkshire We need your investment to help us Increase the market share of our online Business plus help us roll out a Franchise program We aim to open two pilot stores this Year with five next year and 10 the year After We feel that with an investor on board We can improve upon this performance and Become the first national branded chain Of party stores Thank you for listening and we look Forward to answering your money

Questions A colorful pitch from Peter Michelle Undersorted members of the heart family In return for a 10 stake they need a Hundred thousand pounds to franchise Their fancy dress business and turn it From a local to a national brand Duncan Valentine is first to question The couple Okay just checking this in my head do You hire costumes or do you just sell Costumes at a mixture of both mixture of Both and do you do someone on your Website and some of it in stores as well Um it's only the High costumes uh in Store at the moment right so the website You sell Yeah is purely retail No What percentage of the money you've Tuned over 900 000 come from the website Well uh year end in March this year Um the website took 100 and just over 150 000. no other stores and given them Individually Uh well only one of the stores is Complete this first year which is the One in pool Dorset and that turned over And just over 113 000. okay Kind of shocked on over 113 000 in a Year and make a profit Well yeah I mean we we have I mean the Net was around 18 to 20 percent Encouraging figures and an encouraging

Start from Peter and Michelle but what Of the business plan theoper fetus wants To know Hello I'm Theo see ya okay Told me what your franchise model is and Why it would be attractive to me as a Franchisee Um the brand which we would build in Time the brand is some fancy dress fun Fancy dress that nobody knows at the Moment what else Um Access to our supplies at the prices we Purchase at better if you're purchasing From your suppliers yes okay how much You're going to charge me in the region Of 20 to 40 000. and that would be that Would include the shop fit and then how Do you make your money from then onwards We're charging the license fee on the Term over around eight percent Okay that's interesting so what would my Margin be Well we would expect you to turn over Between 100 and 130 in the first year So you should be able to Net in the Region of 20 in the first year no no Gross margin How's it going to say well it's easy my Sales less my purchases Um You'd probably I think Fifty thousand sixty thousand and so What you're saying 40 45 is that what

You're saying If I understand you correctly yeah well It's very simple Through the till my sales Less what it cost me to buy the product That I sold uh you'll be left with about 70 so you make 70 yep okay and you're Going to charge eight percent What percent benefit would I get in my Purchasing Compared to what I could buy for myself About 15 20 percent Peter you've not thought this through The fact is what you're going to charge Me when you gross it up is practically No different to what I would get if I Didn't get your buying power Except I'm going to end up paying over The top for a shot fit Complex and somewhat tense exchange as Theoper fetus questions the deal on Offer to potential franchisees and it Doesn't look like the couple are about To find any Solace from Peter Jones [Music] Peter Michelle Peter hi hi uh if I was to invest in This opportunity I wouldn't be doing what you're doing at All I look at this model I've got 113 000 Pounds worth of Revenue And I'm going to generate about 18 net

Before I take my salary So I'm going to make 25 000 a year Or I could go around the corner and get A job without any hassle Without any worries without any Sleepless nights so your incentive for Somebody else to become entrepreneurial And go and make it happen for themselves Doesn't really make commercial sense at The moment so it's coming across a Little bit that you've sort of is a bit Of a wing and a prayer at the moment you Haven't really gone into the detail of a Franchise operation have you absolutely Not I mean we we've never launched a Franchise business we are new to Business we've only been in business Ourselves for three years yeah maybe We're showing our naivety we need more Experience if we're going to go down the Franchise route but to be honest part of Us coming here and asking that was Um that you guys clearly have Experienced how much money did you want From us a hundred thousand for how much Of the business so that makes this Business where you don't have the Experience you don't have any brand it Isn't making enough money you're valuing That business at a million pound because I have to say until that point you could Even have my empathy I could even think Oh maybe I could help here but then you

Asked me to Buy into your business for a hundred Thousand pound which values at a million Pounds well we do understand we do have A reality check how does it sound Michelle how does it sound to you Um it sounds feasible I mean we we started to stop two shops From scratch we kitted them out we Stocked them out we didn't borrow any Money that's a chain of shops two shops Actually not a chain of shops right so Far you know we do have a successful Business that we've been running for Three years and I understand that we Don't fully understand the franchise Model no no Peter it's not that you Don't fully understand you don't Understand at all I won't be investing I'm out thank you Deborah Scathing assessment from Deborah meaden And a crushing blow to the husband and Wife team An irritated theoper fetus has now made Up his mind too [Music] I'm I'm lost lost for words I invest in Businesses I don't give you my money Then go and run it for you of course not If you were to invest for example and Then say well listen this franchise plan Is not the way forward we you know You've done you've had no no I'm not

Going to tell you I'm an investor of a Hundred thousand pounds You're asking me to completely remodel Your business plan reorganize you tell You how to make money with my money if I Was going to do that with 100 Grand you Know I could hit myself So I'm going to tell you right now that I'm out Thank you sir Peter Michelle What you need to do is go and read up on Franchising Go and understand what you need to do to Be able to franchise a brand a product a Retail outlet Really you are here to precipitously We're not stood here with a with a plan In Stone's hand listen we're doing it I Know but you're not stood there with any Plan because you made the franchise Model up downstairs before you come up I'm out thank you Two more dragons walk away from the deal And Peter and Michelle have just two Multi-millionaires left to rescue their Dreams of investment Peter Jones is ready to show his hand Peter Michelle I think um I'm not going To repeat what everybody said because I Totally agree Um But I congratulate you on having a Business that at least is a the moment a

Lifestyle business and that is a Business of which two individuals can Support a family but it's not investable For me and that's the reason why I'm out Um okay that just leaves me up here Michelle How do you think it's gone so far Can we start again I think you got a really hard time there You should definitely not drop the Franchise idea it's a great idea it's on The way expand this business you do have A franchise model It's the only way I can see us growing It at the rate we want to grow it There's a lady come up here called Denise Gosney who had a franchise Business Razzmatazz stage schools yeah Yeah and all the other dragons had to go Are and they to clear themselves out I invested in her now and is International it is worldwide that Franchise model is doing absolutely Fantastic So with that in mind I'm going to make An offer Okay I'm gonna offer the full amount of Asphalt which is 100 000 pound But One thing that I'll write about is you Have value to completely too high And I can't offer you less So to offer you a hundred thousand

Pounds I need to have 60 of the company We we can't go to 60 percent I think we would really like to keep the The stake below 50 percent Um to be honest I think he was thinking More 40. was he she knows exactly what I'm what can you do Um Would it be possible for us to meet at 45 No um My best offer is a hundred thousand Pounds for fifty percent Okay we'd like to accept that offer Against all the olds Peter and Michelle Have done it I think we'll do well they Won the confidence and the money of an Experienced Dragon investor [Music] It's a lot more than we wanted to give Away definitely But um like he says he's got a lot of Experience in that sector we've got Duncan as a business partner now when we Woke up this morning we didn't Um you know so uh Good Times ahead and Hopefully very profitable times [Music]

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