Franchises
- Thread starter Yoga Face
- Start date
They require money up front because enough franchisees are willing to pay it. I find that a tremendous roadblock IE to actually lose money as well as my time.
If the job becomes too onerous, the franchiser is a jerk or I am not making $$$$$$$$$$$ because of the bad marketing decisions of corporate I want to be able to walk with nothing lost except my time
What I would love to find is an expert to guide me in the overwhelming field of buying a franchise. I would gladly pay to avoid making the huge business mistake if buying a bad franchise
No, they want money up front because it costs money to set up a business.
I want to be living on the French Riviera getting sucked off by hot young women. There is no business you ca just walk away from without losing money.
You have ZERO of what it takes to be an entreprenuer/business person. ZERO.
If you are not wiling to make and risk an investment, then you have less skin in the game and are likely to just quit when running the business becomes "too onerous". And knowing how obstinate and ignorant you are, I will GUARANTEE that you will find ALL franchisors jerks and you will think they ALL make stupid marketing decisions.
You can donate my consulting fee to the charity of your choosing:
Do not waste your time going into business, franchise or otherwise. I am not trying to be insulting or mean sprited but from your posts I know you are simply not cut out for being self-employed nor founding and operating a business. I recall you saying you worked for the TTC. That is a good fit for you.
I have extensive experience in franchises and the pros and cons of such arrangements.
If the franchisor is an organization of such substance, such as MacDonald's, et al., they will always ask for a fee up front before they will even talk to you. This fee usually shows the franchisor that you have the bona fides to run one of their franchises.
For instance, a popular fast food outlet and one of my clients did business as follows; for each location, my client sent the franchisor a certified cheque for $175,000. After this was paid, the franchisor then proceeded to find a suitable location and formulate a lease with the landlord. Please note that the franchisor is the lessor of the location. Once the various agreements are in place, the franchisee is responsible for the building and the equipment therein. Generally, this would be financed through a term loan at the local bank and will run about $700,000. The bank loan, usually over eight or so years, is onerous to most franchisees. Most income subsequently earned will be used to repay the loan. The franchisee will send you off for a brief training and indoctrination class for a few weeks to learn their method of operations.
The lot of a franchisee is not an easy one. The bank loan plus interest is a killer on a monthly basis. The payments are generally over $10,000 a month. On a weekly basis, the franchisor dings you for 5% of sales as a royalty plus 2% for advertising. He also charges you monthly for rent of the space. In fact, on all franchises that I have dealt with, the franchisor makes more on royalties, advertising and rent than you, the franchisee will ever take home.
I regard the franchise operation as nothing more than the franchisee being a glorified manager. You have to work ridiculously long hours. You are not allowed to fart around with the menu, almost all purchases must be made through their anointed suppliers and no one else. The one exception that I have seen is that cleaning supplies may be purchased anywhere. Another exception was that napkins and plastic cutlery could be purchased anywhere. Otherwise all food stuffs, bread and condiments purchases are at the mercy of designated suppliers, who generally, offer to discounts or deals.
Budget figures are set up regularly, but, unless you are a super tight operator, are hard to achieve. Ideally, in one operation, food costs should be no more than 30% of sales, wages should not exceed 25-30% and overhead should not exceed 25%-30%. Based on a conservative $1.2 million sales figure, one, if he is very sharp, could net $120,000 or more, just enough to make your bank payments.
Also, be advised that franchises are notoriously hard to sell. You have to have the franchisor's blessing and you will often not be able to recover your original costs.
If the franchisor is an organization of such substance, such as MacDonald's, et al., they will always ask for a fee up front before they will even talk to you. This fee usually shows the franchisor that you have the bona fides to run one of their franchises.
For instance, a popular fast food outlet and one of my clients did business as follows; for each location, my client sent the franchisor a certified cheque for $175,000. After this was paid, the franchisor then proceeded to find a suitable location and formulate a lease with the landlord. Please note that the franchisor is the lessor of the location. Once the various agreements are in place, the franchisee is responsible for the building and the equipment therein. Generally, this would be financed through a term loan at the local bank and will run about $700,000. The bank loan, usually over eight or so years, is onerous to most franchisees. Most income subsequently earned will be used to repay the loan. The franchisee will send you off for a brief training and indoctrination class for a few weeks to learn their method of operations.
The lot of a franchisee is not an easy one. The bank loan plus interest is a killer on a monthly basis. The payments are generally over $10,000 a month. On a weekly basis, the franchisor dings you for 5% of sales as a royalty plus 2% for advertising. He also charges you monthly for rent of the space. In fact, on all franchises that I have dealt with, the franchisor makes more on royalties, advertising and rent than you, the franchisee will ever take home.
I regard the franchise operation as nothing more than the franchisee being a glorified manager. You have to work ridiculously long hours. You are not allowed to fart around with the menu, almost all purchases must be made through their anointed suppliers and no one else. The one exception that I have seen is that cleaning supplies may be purchased anywhere. Another exception was that napkins and plastic cutlery could be purchased anywhere. Otherwise all food stuffs, bread and condiments purchases are at the mercy of designated suppliers, who generally, offer to discounts or deals.
Budget figures are set up regularly, but, unless you are a super tight operator, are hard to achieve. Ideally, in one operation, food costs should be no more than 30% of sales, wages should not exceed 25-30% and overhead should not exceed 25%-30%. Based on a conservative $1.2 million sales figure, one, if he is very sharp, could net $120,000 or more, just enough to make your bank payments.
Also, be advised that franchises are notoriously hard to sell. You have to have the franchisor's blessing and you will often not be able to recover your original costs.
Thx bluecolt
That is what I was thinking
A franchisee will quickly begin to resent the franchisors monthly percentage when he (the franchisee) is doing all the work
If everything goes south because the franchisor fucked up the franchisee's life is ruined because he signed a contract that the franchisors' lawyers wrote protecting the franchisor's ass and giving the franchisor the legal power to squish the franchisee like a bug
The franchisee has bought a 70 hour a week job that may ruin him at worse and at best he will never get wealthy unless he owns several franchises ( in the best case scenario) and once the franchisee has bought it is difficult to sell and get out without taking a loss as he is at the mercy of the franchisors lawyers whose only real concern is the welfare of the franchisor
It is called the merry dance of capitalism
You are absolutely correct, Yoga. I know a couple of nice fellows who purchased three franchises for a popular fast food outlet. They were miserable for seven years and luckily, their wives worked. It was only after they sold the franchises to another franchisee that they saw any money at all. They never did recover all of their investment.
On the other hand, there is another client who has two hamburger franchises and is doing extremely well and is happy. He works about 80 hours a week, absolutely every day. Luckily, he is not married and is able to do this. He owes the bank nothing, and drives a fancy sports car and lives in a beautiful place.
Hence, the success of a franchise business is totally dependent on the individual. It can be rewarding if you own multiple franchises, as all Hortons franchisees do, but expect to work extremely hard, because you can't afford to delegate your duties with a cramped cash flow.
Seems like such a crap shoot
Such an investment will take years to see profit and years from now the competition might kill you
I discussed this with a Subway franchisee. Mexican style fast food is popular meaning less customers for him. This 10% less customers was his profit. Subways big marketing answer was to add guacamole to a sub for an extra 50 cents. After I gave them all that $$$$$ for marketing and all they can come up with is a spoonful of green goo??? I would be totally pissed
He also said it is not recession proof as customers do not buy fountain drinks during recession which are nearly 100% profit
That corporation across the street whose employees are the bulk of your noon day sales may move then you are fucked because the Franchisor did not do his homework on checking out the lease agreement the corporation had on the building but you will never win a lawsuit against the franchisor even if they were incompetent
I see too many families working together supplying free labour
Even Tim Hortons may be in trouble 10 years from now. Nothing is safe over the long term. I understand there is a huge cost to franchisors esp in start up - lawyer fees alone must be huge - but that is irrelevant to the franchisee when things go south and they lose due to no fault of their own
The risk/reward/long hours ratio says it is a bad idea
None of this is talked about during the lectures at the franchise show where you are encouraged to own your business
Paying to talk to franchise lawyer and accountants seems like money well spent before buying a franchise
On a positive note, Body Shop reimbursed all their franchisees who opened up in Orlando because they could only make a profit during snowbird season (winter)
Body Shop decided it was their poor micro economic research that was at fault but I think such amazing and ethical corporate behavior in the franchise world is rare
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Agree
you cannot walk without taking big loss
My time is loss enough, indeed I have over payed when I lost years of my life and decide to walk when no bright future looks realistic
they ask waaay too much when they want your money as well
sounds like a bad business move for the franchisee but a great idea for the franchisor
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Apart from the various cons that have been mentioned about franchise operations, there are also many advantages to being a franchise operator. If one is a neophyte in a franchise business, for instance, a fast food operation, of which I have a bit of knowledge, the franchise will provide you with quite a bit of training. For instance, the training Tim Hortons provides is extensive. A potential franchisee will know every function of his operation, from baking doughnuts to cleaning the john and everything in between, including serving coffee and hiring and training staff. The franchisor provides budgeting advice and day to day operations management.
More importantly, the franchisor provides a location that has sufficient traffic and visibility, and a timely building schedule that can have one operating in relatively short order. Since most franchises, such as MacDonalds, tend to be fairly successful, they have one major advantage. Banks will lend money willingly on a franchise operation. If one were to build a similar operation on his own, the bank would not be as co-operative, if they return your telephone calls at all.
Another major advantage is that the franchisor will do almost anything to keep you in business. If you are in distress, reduced royalties or advertising, or deferring the latter and former, may be effected by the franchisor. Also, they may help in securing additional funding. If the situation is hopeless, they may find another franchisee to take over your business. You may not recover all of your dough, but it beats filing with the local trustee.
The experience one gathers from a few years of franchise operation can also be important or relevant for a future endeavour. One becomes a part of a network that can provide one with future suppliers, tradesmen, future employees or conversely, with future employers. The skills attained through slavishly monitoring budgets and monthly reports are invaluable to running a non-franchise operation.
One has to weigh the advantages and disadvantages of a franchise operation. It is however, easy to look into. There are many for sale. I have found that purchasing an existing operation is generally cheaper, since the other guy has already paid the fee and the operation is already running. Usually, it is cheaper to buy used than new.
There are franchise opportunities that one should stay away from. Convenience store and dollar store operations are a poor return on one's labour and investment. Also, keep away from franchisors who have only a few outlets. These generally have not established good operating systems and track records.
Good luck to those who would like to visit this opportunity.
More importantly, the franchisor provides a location that has sufficient traffic and visibility, and a timely building schedule that can have one operating in relatively short order. Since most franchises, such as MacDonalds, tend to be fairly successful, they have one major advantage. Banks will lend money willingly on a franchise operation. If one were to build a similar operation on his own, the bank would not be as co-operative, if they return your telephone calls at all.
Another major advantage is that the franchisor will do almost anything to keep you in business. If you are in distress, reduced royalties or advertising, or deferring the latter and former, may be effected by the franchisor. Also, they may help in securing additional funding. If the situation is hopeless, they may find another franchisee to take over your business. You may not recover all of your dough, but it beats filing with the local trustee.
The experience one gathers from a few years of franchise operation can also be important or relevant for a future endeavour. One becomes a part of a network that can provide one with future suppliers, tradesmen, future employees or conversely, with future employers. The skills attained through slavishly monitoring budgets and monthly reports are invaluable to running a non-franchise operation.
One has to weigh the advantages and disadvantages of a franchise operation. It is however, easy to look into. There are many for sale. I have found that purchasing an existing operation is generally cheaper, since the other guy has already paid the fee and the operation is already running. Usually, it is cheaper to buy used than new.
There are franchise opportunities that one should stay away from. Convenience store and dollar store operations are a poor return on one's labour and investment. Also, keep away from franchisors who have only a few outlets. These generally have not established good operating systems and track records.
Good luck to those who would like to visit this opportunity.
thx for advice
the franchise world is overwhelming
Buying an established franchise like McDonalds or Tim Hortons seems too risky as they are so expensive it will take years to get mortgage paid off and years from now anything could happen and most of those things are bad
Concerning royalties, I get the sinking feeling franchisors sit around the corporate table discussing how to set the fees in order to manipulate the franchisee IE keep him hungry so he will never
stop working hiss ass off and never get rich
I think I will pass way too much work and they want your money as well and I hate the idea of losing my savings
Good luck indeed, they will need it and that is my point, all businesses are a risk but in the franchise world you need too much luck for the potential reward that is limited. If I saw the yacht
at the end of the 20 year rainbow that you have earned then that would be a different risk/reward ratio but I see none
Looks like I will just keep shlugging along in my secure blue collar life and keep paying my union dues
When I was young and naïve, I worked at a pizza franchise. I looked at the owners, and it seemed like the perfect job: Make unlimited amounts of money, all you need is the $ upfront and you have a cash machine spitting out $500,000 a year into your pocket! From where I am now though, it looks like a complete nightmare save for only the most business savvy and entrepreneurial among us. Even for those blessed with the aptitude for an endeavor like this, there is no escaping the difficult financial obligations of a franchisee to the corporation and to the banks, making it a less attractive business opportunity.
and there is no escaping things may implode thru no fault of your own even if you are savy (do savy business men actually buy a franchise?)
1 corporate incompetence or outright theft (you have to trust strangers to care about you)
2 technology
3 recession
4 competition
5 you get sick or injured
The list goes on
When I was a teen I worked at Red Barn (hamburger ) and the owner had 3 franchises. By the time I graduated there were no more Red Barns.
He was such nice hard working guy who made a devastating mistake trusting the Franchisor
It was all total junk food anyways
McDonalds drowned Red Barn
Call me unambitious, but I think you are unquestionably better off long term with a secure job and learning to be content with a merely comfortable lifestyle then entails less stress and headaches. The average successful business owners I have met seem to be trapped in basically the same life as the middle class, just with more headaches and liabilities to worry about. Let's say you do become successful, and then naturally you attract some greedy and discontent bitch to leech your money off you, and then come the entitled kids used to an extravagant life, all while you are working increasingly harder to keep the whole charade intact. Next thing you are divorced and living on less money than you would have had in your secure job, and then the economic market changes in some unforeseeable way (as tends to happen) and you are in an even worse position with more financial obligations.
That is called being smart not unambitious
Yup
All that time and stress I want to see a huge reward but I fear the royalties are set to keep you hungry and brainwashed working 70 hours a week and now that they got your money it is hard to walk
Where are all the happy franchisee stories?
How about Boston Pizza or Mr Lube?
They are owned by Jim Treliving of Dragons Den fame and he claims all his franchisees are "happy campers " and that happy franchisees are the key to a franchisors success
I have a client that was involved in an operation very similar to Boston Pizza. It was a franchise in a large chain of restaurants that served essentially the same food as Boston Pizza, minus the pizza. The location was a good one with lots of traffic. However, the franchisors required that, once every ten years or so, you must renovate your place to their new specifications. He still owed the bank a substantial amount from the original bank loan since the place cost him $1.2 million to build from scratch. The renovations would cost him about $600,000. All costs would have to be borne by the franchisee. A renovation would include all new and updated kitchen equipment, new dining room chairs and tables, dividers, a new bar and a new point of sale system with many terminals in the dining room and monitors in the kitchen. Control over theft and pilferage was a real problem in large restaurants, both from patrons and staff. He decided to sell the operation. He practically gave it away since the new buyer would have to renovate. He was out about $1 mil.
As Yoga had mentioned above, some people may resent the amount of royalties, advertising and rent that the franchisor netted. In his case, he took home a salary of about $10,000 a month while he paid the franchisor more than double that figure. This made it easier on him to sell. Apparently, although you owned the business, essentially, the franchisor called all of the shots, and you had to obey. You were really a glorified manager who paid all of the bills.
Boston Pizza is different from the usual fast food take-out franchise.
The operation I was familiar with, was a direct competitor of Boston Pizza and had been in Ontario for many, many years.It entailed more capital since it was a full-service (not that kind) or sit-down restaurant. Wait staff would have to be trained and supervised. Additionally, there were liquor licensing considerations to make. That would preclude young kids from being the wait and bar staff and the resultant problems with underage drinking. The weekly payroll was 60 people, including cooks, kitchen staff, delivery men, wait staff, hostesses, supervisory staff and a bookkeeper. You would have to be an experienced operator to make a sit-down restaurant work, especially since they are really busy most of the time and open late.
I was not envious of him in the least. He was open from noon to midnight seven days a week. He was even open Christmas Day. He worked all of the shifts, although his wife spelled him somewhat. It was important to be a hands on owner in such an operation since he created the goodwill and environment that made for repeat business. He was always cognizant of the kitchen also, Theft was not the only problem. Waste and portion control were also major considerations. What a tough business to run!
A business needs three main ingredients to run; labour, plant, food and supplies. In my financial services business, if my secretary is ill, the office can still operate. If the plant goes down, for instance, no hydro, gas or heat, we can come in tomorrow or bear it until the situation is remedied. When I run out of supplies, I can usually pick up the phone and order for future delivery. However, in the Boston Pizza style restaurant, if certain of the wait staff don't show up, it's panic time. If the cooks don't show up, that's really panic time. If the gas or hydro go, it's early closing time. If your food and supplies don't arrive, you're screwed. Ergo, your operation has to run almost perfectly on all cylinders without misses or blips to get through each day.
As to Mr Lube operations, I have no knowledge.
As Yoga had mentioned above, some people may resent the amount of royalties, advertising and rent that the franchisor netted. In his case, he took home a salary of about $10,000 a month while he paid the franchisor more than double that figure. This made it easier on him to sell. Apparently, although you owned the business, essentially, the franchisor called all of the shots, and you had to obey. You were really a glorified manager who paid all of the bills.
Boston Pizza is different from the usual fast food take-out franchise.
The operation I was familiar with, was a direct competitor of Boston Pizza and had been in Ontario for many, many years.It entailed more capital since it was a full-service (not that kind) or sit-down restaurant. Wait staff would have to be trained and supervised. Additionally, there were liquor licensing considerations to make. That would preclude young kids from being the wait and bar staff and the resultant problems with underage drinking. The weekly payroll was 60 people, including cooks, kitchen staff, delivery men, wait staff, hostesses, supervisory staff and a bookkeeper. You would have to be an experienced operator to make a sit-down restaurant work, especially since they are really busy most of the time and open late.
I was not envious of him in the least. He was open from noon to midnight seven days a week. He was even open Christmas Day. He worked all of the shifts, although his wife spelled him somewhat. It was important to be a hands on owner in such an operation since he created the goodwill and environment that made for repeat business. He was always cognizant of the kitchen also, Theft was not the only problem. Waste and portion control were also major considerations. What a tough business to run!
A business needs three main ingredients to run; labour, plant, food and supplies. In my financial services business, if my secretary is ill, the office can still operate. If the plant goes down, for instance, no hydro, gas or heat, we can come in tomorrow or bear it until the situation is remedied. When I run out of supplies, I can usually pick up the phone and order for future delivery. However, in the Boston Pizza style restaurant, if certain of the wait staff don't show up, it's panic time. If the cooks don't show up, that's really panic time. If the gas or hydro go, it's early closing time. If your food and supplies don't arrive, you're screwed. Ergo, your operation has to run almost perfectly on all cylinders without misses or blips to get through each day.
As to Mr Lube operations, I have no knowledge.
You seem to have lots of insight into franchises. Surely some of them - at least the big name brands like McDonalds - have more success stories than failures in terms of income generation. Perhaps involves working long hours (typical for most businesses) but well compensated for it.
Smallcock,
A big-name franchisor such as McDonalds or Time Hortons knows exactly what they are doing. A good franchisee would indeed prosper in one of their operations. For instance, how often does one find blue chip food franchises go out of business. They rarely go out of business. Good franchises are also great springboards to gather experience in managing small businesses. If one wanted to eventually open his own sit-down restaurant, the experience in running a Kelseys or Caseys , for instance, would be invaluable. The franchise operation would provide structure in daily reporting, cash flow management, hiring and firing, purchasing, food and kitchen management. These structures can be transferred to any business that you would run afterwards.
For instance, here in Windsor, a Caseys operator opened his own operation in competition to his franchise. Both spots prospered, because his new operation is run in similar fashion to the franchise, but without royalties, advertising or additional rent. After a while, he sold the franchise, but kept his new operation, which is still running well.
A big-name franchisor such as McDonalds or Time Hortons knows exactly what they are doing. A good franchisee would indeed prosper in one of their operations. For instance, how often does one find blue chip food franchises go out of business. They rarely go out of business. Good franchises are also great springboards to gather experience in managing small businesses. If one wanted to eventually open his own sit-down restaurant, the experience in running a Kelseys or Caseys , for instance, would be invaluable. The franchise operation would provide structure in daily reporting, cash flow management, hiring and firing, purchasing, food and kitchen management. These structures can be transferred to any business that you would run afterwards.
For instance, here in Windsor, a Caseys operator opened his own operation in competition to his franchise. Both spots prospered, because his new operation is run in similar fashion to the franchise, but without royalties, advertising or additional rent. After a while, he sold the franchise, but kept his new operation, which is still running well.
I have bought and sold four different franchises. I even managed to get my hands on a Tim's in a fantastic GTA location. I will tell you this. It is a young person's/high energy game. Easily 80 hours/week. Over the course of 10 years I made substantial income and did very well on the sale of the franchises. I now spend my time investing that money in the financial markets. That is a whole different racket but similar in terms of focus and hard work. My opinion? The days of making serious bank in a franchise operation are over. I would avoid going that route. I agree with much of what has been posted above.
Just as I thought
I knew there were some success stories out there if you work like a dog for ten years and you get lucky - and you got lucky as so much could have gone wrong that you have zero control over
You have to have excellent business savy in cost control etc and the ability to work hard and be willing to hand over your life for ten years and if you get very lucky then it may work out
Why is it no longer a good proposition to buy a franchise when there are more than ever to choose from?
Want to start another business? Become an advisor to fools like me who are considering becoming a franchisee and teach us how to choose a winner and how to avoid the mistakes you made
1 one thing that is a potential roadblock for me is the franchisor wants money upfront (franchise fee) that keeps me enslaved as I do not want to lose that investment
2 another thing that is an absolute roadblock is having no advisor other than the franchisor. Like I am supposed to believe their opinion is unbiased ??? WTF!!!
