Franchises

[Piobaire]

No, I'm not selling them

I am wondering if anyone here has experience owning/operating a franchise? How do you find dealing with the head office? Do they supply your products? Ever any problems there? Profits (as in, are there any)?

Any input welcomed, just scratching my head about ways to create some ownership of income producing assets.

 

[lee_44106]

I'd like an answer too, so I'll give it a "bump"

I'd like to get into the Olive Garden restaurant franchise.

 

[GQgeek]

Why not do a wine bar? ;p

 

[FidelCashflow]

I've met people who have looked into or owned all kinds of franchises from gas stations, to donut stores, electronic stores, to dollar stores, etc. There seems to be no consistent experience as every franchise can have a totally different level of communication and support provided to franchisees. Some will train you, provide the product, and really just make you a cog in their system. Other's will give you the name, and make you responsible for figuring out most of it. Profits are just as variable.

I don't think there's any one consistent answer for franchises in general, so you gotta do your homework on specific ones you're interested in. Some of them want massive franchising fees plus a cut of sales, plus a promise to buy exclusively from them, some are lenient to the point where they only expect that you buy all your merchandise from them, but don't even expect a franchise fee.

 

[matadorpoeta]

Originally Posted by FidelCashflow

I've met people who have looked into or owned all kinds of franchises from gas stations, to donut stores, electronic stores, to dollar stores, etc. There seems to be no consistent experience as every franchise can have a totally different level of communication and support provided to franchisees. Some will train you, provide the product, and really just make you a cog in their system. Other's will give you the name, and make you responsible for figuring out most of it. Profits are just as variable.

I don't think there's any one consistent answer for franchises in general, so you gotta do your homework on specific ones you're interested in. Some of them want massive franchising fees plus a cut of sales, plus a promise to buy exclusively from them, some are lenient to the point where they only expect that you buy all your merchandise from them, but don't even expect a franchise fee.

what he said. every franchise is different.

 

[Piobaire]

Thanks guys for the replies.

I was looking for more in depth information though I think. Specifics about say, due diligence hints, items in the UFOC that are "red flags", any actual owners here and their experience with the main company, from supply chain to training to financing to systemic changes in the franchise business model and their impact(s), etc. Correlation between company pitch and reality. Amount of owner involved time, etc., etc.

G33k, no wine bar! After a rash of them opening in my market in the last three years, two have folded in the last six months and I think one is teetering. And the best way to turn a hobby into something you can't stand any more? Make it your job!

 

[FidelCashflow]

Originally Posted by Piobaire

I was looking for more in depth information though I think. Specifics about say, due diligence hints, items in the UFOC that are "red flags", any actual owners here and their experience with the main company, from supply chain to training to financing to systemic changes in the franchise business model and their impact(s), etc. Correlation between company pitch and reality. Amount of owner involved time, etc., etc.
I wish I could help you with these, but again, they're totally variable for every single franchise. I mean we can't even begin to talk due dilligence or supply chain, or changes in business models if you don't even specify and an industry (e.g. electronics retail, familly restaurant, etc.) Best thing to do is talk to someone else who specifically owns one of the franchises you're interested in. I know people who have done that just by walking into their store when they're not busy, and striking up a conversation with whoever looks like they're in charge (manager/owner.)

 

[Piobaire]

Originally Posted by FidelCashflow

Best thing to do is talk to someone else who owns one of those franchises. I know people who have done that just by into their store when they're not busy, and striking up a conversation with whoever looks like they're in charge (manager/owner.)

I plan on doing that IRL, but along those lines, that is why I was specifically asking if anyone here has actual ownership experience. While each franchise is different, I think that if someone has experience, they might be able to toss out some universal pitfalls, such as I mentioned above, "red flags" in the UFOC.

Just idle planning at this point, but I like to start early in my planning. I will probably go to multiple conventions, etc. in the next several years before I commit.

 

[GQgeek]

Originally Posted by Piobaire

Thanks guys for the replies.

I was looking for more in depth information though I think. Specifics about say, due diligence hints, items in the UFOC that are "red flags", any actual owners here and their experience with the main company, from supply chain to training to financing to systemic changes in the franchise business model and their impact(s), etc. Correlation between company pitch and reality. Amount of owner involved time, etc., etc.

G33k, no wine bar! After a rash of them opening in my market in the last three years, two have folded in the last six months and I think one is teetering. And the best way to turn a hobby into something you can't stand any more? Make it your job!

I don't agree. I'd love to have a restaurant or a wine bar when i have real money some day. I loved it when my parents had one and i was quite involved with it for a couple of years. Overall, it was an enjoyable experience, and it didn't decrease my appreciation of food. ;p

One thing I used to really like was hanging out in the bar and talking to all the business clients. I'd imagine that for someone with a passion for wines, owning a wine bar would be similar and that it could be a lot of fun, but if several have folded in your area, that's another story....

 

[Piobaire]

Originally Posted by GQgeek

I don't agree. I'd love to have a restaurant or a wine bar when i have real money some day. I loved it when my parents had one and i was quite involved with it for a couple of years. Overall, it was an enjoyable experience, and it didn't decrease my appreciation of food. ;p

One thing I used to really like was hanging out in the bar and talking to all the business clients. I'd imagine that for someone with a passion for wines, owning a wine bar would be similar and that it could be a lot of fun, but if several have folded in your area, that's another story....

YMMV, but for me, I know intimately what it actually takes to run a successful business. It would certainly come to cool my relationship with wine. If I start worrying about inventory velocity, AR/AP, are my bathrooms ADA compliant, cash position, staff turnover, etc., I stop having fun.

If I could just hang out and talk to the clients while sipping wine, yeah, it would rock.

 

[Hard2Fit]

Little bump.
(This topic came up in conversation I had earlier today.)

 

[why]

I own a franchise. I don't have any first-hand experience outside my own, but I think a solid plan of where money paid to the franchise goes will tell a lot. Some fat cat franchisors sit on the money and some will reinvest a lot into their franchisees. It really depends.

I've never had an issue with making an interest my job, but I think the biggest mistake a lot of franchisees make is 'buying a job'. In other words, they invest into a franchise and end up running the joint for eternity. Businesses are made to grow and sell. Money should be kept working. If you're worrying about if Joe will be able to cover Sally's shift instead of profit margins then you've bought a job.

 

[EL72]

My brother owned a DVD rental machine franchise and it was nightmare dealing with the franchisor. He had to close up shop within a year, lost $$, and is still suing the company.

If you want income producing assets, buy a rental property - seriously.

 

[AintDatRite]

I've owned a SubwayÂ

franchise but I did not run it 'day to day'; I am not a restaurant manager. When I dealt with the 'home office', it was not complicated - they were very helpful and wanted their franchisees to succeed. I found Doctors Associates, Inc to be a great company and if I was in the market to get back into that type of business, I wouldnt hesitate to call them to open another Subway. It was VERY profitable.

 

[AintDatRite]

Also, there are initial capital requirements. For Subway, the initial 'investment' ranges from $100K to $250K. You also pay advertising fees for coop ads, royalty fees, etc.

For a McDs franchise:
Total investment: $950K-1.8M
Franchise fee: $45K
Ongoing royalty fee: 12.5%+
Term of agreement: 20 years, renewable
Renewal fee: $45K
Cash liquidity requirement: $250K

Do your homework to find out what your costs will be for whatever type of business you are interested in... there are some franchise opportunites that have a simple fee of $5K or whatever.