How to evaluate an EV charging franchise offer

Franchise offers are sold on a small number of attractive figures: a monthly guarantee, a payback period, a total return. Those figures are often arithmetically correct. The problem is that they answer questions which do not determine whether you should sign.

Rather than argue that in the abstract, here is a real acceptance case — one actual offer, supplied to us, which our ROI calculator ships as its reference scenario. It is a single deal, not a market average, and we are using it because it is unusually instructive about how a good-looking offer fails.

The offer

On the face of it this reads well. A guaranteed monthly income, maintenance covered, and half your money back at the end. Total cash received over the term is ₹53.20 L against ₹39.90 L invested — a net profit of ₹13.30 L and a total ROI of 33.33%. The monthly income alone is a 17.1% annual cash yield.

What the model says

Now the same deal judged against a 12% required return:

Why the headline and the verdict disagree

Both are correct because they measure different things.

33% total ROI adds up all the money over five years and compares it to what went in. It ignores when the money arrives and what else you could have done with it meanwhile. IRR of 9.12% accounts for timing — and once you do, a return spread over five years with a lump at the end is worth far less than the total suggests. Against a 12% hurdle it is negative value; against 5% inflation, a real return under 4%.

And the concentration risk is the part no headline metric shows at all. More than a third of everything you receive rests on the franchisor honouring a payment five years out, with no escrow, no bank guarantee and no deposit behind it. If that promise fails, you do not lose 36% of your return — you lose the entire capital recovery, because the income leg was never sized to return your money.

The four questions to ask any franchise offer

1. What secures the terminal payment? If a buyback or exit payment is part of the case, ask what stands behind it: escrow, bank guarantee, deposit, or nothing. “They are a large company” is not security. This question alone reorganises most offers.
2. Exactly how is the payout calculated? Guarantee plus excess-unit income and the greater of guarantee or actual entitlement are very different deals. Our model makes you pick one interpretation and never silently combines them, because sales material often blurs which one applies.
3. Does income alone recover the capital? Run the case with the terminal payment set to zero. If the answer is no, you are not buying an income asset — you are buying a five-year unsecured credit exposure with an income coupon.
4. What is the return against your own hurdle, after inflation? Not the total, not the payback. If it is below what you would accept elsewhere for this much risk and illiquidity, the answer is to renegotiate, not to admire the headline.

Before you circulate any of it, verify four things

Every number above is a projection until the underlying facts are checked. Our calculator refuses to call a result anything but indicative until four diligence items are confirmed, and we think they are the right four:

• The agreement draft has been read — waterfall, guarantee formula, term and termination clauses, in the actual draft rather than the brochure.
• Buyback security has been sighted — the escrow, guarantee or deposit document itself.
• Unit economics verified — station price, energy cost and opex against operator data.
• Tax treatment reviewed — GST on the investment and the income-tax position, with a CA.

Note also that a franchise case is bounded by the same regulation as any other station: your service charge per unit is capped, so a weak case cannot be rescued later by raising prices. We cover that in what a station actually costs.

Sources and basis

Model-derived figures are computed outputs on stated assumptions, not guaranteed returns; only terms in a signed agreement are contractual. Change the inputs and the verdict changes — that is the point of running your own. Nothing here is investment or tax advice. Found an error? Tell us.