Wednesday, 21 September 2011

Franchise finance 2

Wimbledon fans will remember how we had it bludgeoned into us by Koppel and co that the club wasn't getting enough income to survive, so with Franchise challenging for promotion back to where all Koppel's dire predictions were made (division 2, 'The Championship' for you branded yoof), how are Franchise's finances stacking up against what is now required in div 2?

Quick reminder first of some of the Franchise's most recent published figures, taken from their 2009-10 accounts:

Turnover: £6.26m (put in perspective by these figures for the top 30 clubs from 2008 - Franchise isn't even half the turnover of the 30th club -
Operating expenses: £7.71m
Operating loss: £1.45m
Net liabilities: £8.01m {an overall debt figure}
Staff costs: £4.7m {this includes 47 full-time playing, training and management employees}

Now, let's do some 'fag packet' maths based on the most recent yearly salary figures we have for players, based on 2006 numbers from The Independent:

Average 'League 1' player yearly salary: £67,850
Average 'Championship' player yearly salary: £195,750

Based on a small squad (to be very conservative) of 20, that would mean this:

20 players at L1 average: £1.35m
20 players at Champ average: £3.9m

Difference: £2.55m

And remember this is based on 2006 figures and wage demands in football have gone up, not down over those five years, so the wage increase of £2.5m to go from div 3 to div 2 is probably an underestimate. And I haven't even factored in loan players in this or the cost of assembling a squad capable of surviving in the higher division, which would mean Franchise buying players, not selling them.

Then let's look at how you fund that (excluding TV revenue for now). Across a 23 home games league season, using a ticket price of £25 (excluding costs for now), that's an extra 4,300 required on every attendance. In other words, Franchise would have to average over 14,000 (home gate average was over 10,000 for the 2009-10 season covered by the latest accounts) for its home games to even remotely cover the increased wage costs - and this is before all other increased costs have been taken into consideration.

Bear in mind that season tickets will reduce the amount received per game well below the £25 ticket price I've used, the high percentage of child tickets further reduces income and there are a host of other costs to consider too - additional stewarding, policing and so on... £25 per head is extremely generous.

The big plus for Franchise, of course, would be TV money, with each div 2 side receiving about £2.5m, compared to just £440,000 in div 3, so that's an extra £2m received.

While the increased TV revenue will offset a lot of the increase in wages, it certainly won't completely cover it, and that's without taking into account the additional costs that don't relate to player wages. And this is a club that was already losing £1.5m per year (minimum in the last 6 years). Also, take into account that for the year 2009-10 when it made the £1.5m loss, Franchise averaged a home gate of more than 10,000, but it currently only gets about 8,000, so the real break-even number is likely to be around the 15,000 mark.

All of the projections are, of course, guesstimates, but the existing accounts and current statistics are solid for basing them on. You can probably find a similar story at quite a few clubs, Franchise isn't unique in this by a long chalk, but the bottom line is that Franchise has a huge problem. In order to progress, it's going to have to spend more, much more, at a time when it is still losing money heavily. And even if it gets promoted, the costs keep rising without any guarantee of being able to cover them. Unless it could boost attendances to around the 15,000 mark, the numbers simply don't add up. Where's Charles Koppel when you need him? He'd be threatening to liquidate them based on the 8,000 gates they're getting!

Oh, and one more thing, Franchise's current loan facility from the Clydesdale Bank of £5.5m is a term loan that is repayable in July 2012. I wonder how much of the Baldock transfer fee is headed in the Clydesdale's direction? And where's the rest of that loan repayment going to come from? The clock is still ticking on Franchise's future.

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