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Maybe it’s my penchant for financial analysis, but I was particularly drawn to Jeff Gannon recent post, Alternatives to Expansion in Today’s Economy.

Jeff lays out two scenarios for a hypothetical enterprise to increase earnings by 22%.

1. Build 11 new stores - Upfront cost $9.4 million – Annualized profit $1.1 million
2. Implement a video solution – Upfront cost $0.3 million – Annualized profit $1.1 million

Does anything jump off of your screen?  How about the astonishing difference in invested capital! 

I’m not an expert in the restaurant operating costs, but maybe a reader could help us pinpoint the typical costs of opening a new store.  Changing these costs assumptions would certainly impact the analysis.  However, I do know that customers our our MVaaS solution at Envysion have reported an increase of 1.5% to 2.0% of revenue to their bottom lines.  This is an increase of profitability of approximately 20% (depending on their pre-video results).

In my opinion this is not an either/or question.  Rather the merits of the video solution should be evaluated separately.  And the merits are very compelling:

• Payback Period ~ 4 months
• IRR ~ 319%
• NPV ~ $2.3 million (at 10% discount rate, 50 store enterprise)
• ROI ~ 323%

Any way you look at it, this is very efficient capital.