franchise thread

[Yoga Face]

anyone ever been a franchisee - one that is granted a franchise, as to market a company's goods or services - from a franchisor






i went to the franchise show and was discouraged from the possibility of buying a franchise


1 They want you to take all the money risks and you have to keep your fingers crossed that they know what they are doing

it seems to me if they are so confident in their product they can sign the mortgage and also take no money up front


2 you get your information from a master franchisee who has paid the franchise company a significant initial fee for the rights to develop the territory and then retains most or all the initial fees and royalty fees paid over time by the individual franchisees in the territory. IE he is a salesman

3 they have the lawyers and they have written the contract


4 i suspect you will be working 70 hours per week to save your life savings with no guarantee of anything except failure unless you work your ass off then maybe after several years you may make a profit that will never be six figures because the royalties are geared to keep you hungry

 

[wazup]

1. They took all the risk initially to build the brand and proved it works.

2. Why would they build a brand, prove it works, then take on more risk with some buffoon who will drive it into the ground.

3. Salesmen make money.

4. 70 hours a week, gee sounds like any business owner, 5-6% royalties are roughly the norm, if you make 1 mil in revenue per year, they take 50 g's, the rest is yours. Why wouldn't they take a cut.

Alot of franchisees are doing quite well, they know there is a price to pay to buy into a proven system, usually when it gets to the franchising stage it's a proven business model.

I don't think you're cut out for business.:frusty:

 

[Yoga Face]

1. They took all the risk initially to build the brand and proved it works.

true and it is a lot of work and risk to become a franchisor so they deserve a profit - no argument here

2. Why would they build a brand, prove it works, then take on more risk with some buffoon who will drive it into the ground.

do not sell to buffoons. If it is a great franchise and someone is fucking it up then take it away, send in some corporate boys until you can resell it

3. Salesmen make money.

a master franchisee is highly motivated to lie especially if the business is going no where

4. 70 hours a week, gee sounds like any business owner, 5-6% royalties are roughly the norm, if you make 1 mil in revenue per year, they take 50 g's, the rest is yours. Why wouldn't they take a cut.

no problem here especially in the start up but i question the payoff in the end game which is why i am asking to hear from franchisees

the royalties seem geared to keep you hungry

i think the norm is closer to 20 percent

a lot of franchisees are doing quite well

are you making this up ?

what does " doing quite well" mean in terms of profit and hours worked

to me i would expect an easy six figures after a few years of 70 hour weeks and all that risk and a much easier workload as I gradually hire more employees

i talk to franchisees when i have a chance IE I have never heard a franchisee say anything good about Mr Submarine

don't think you're cut out for business.:frusty:

i disagree. My natural skeptical nature makes me a promising businessman who makes decisions based on facts. Any solid franchisor should be prepared for strong skepticism

i felt the presentations at the franchise show were pathetic

It is their job to prove it is a good business and my job is to be skeptical

they just set up their displays and looked pretty handing out flyers

 

[explorerzip]

I guess it would greatly depend on the type of franchise. If it's anything to do with food or retail then it would be crazy hours. Not to mention the health and equipment inspections. I would carefully look at the market for the particular product or service the franchise is providing. Obviously, the restaurant business is the toughest out there not matter what the brand. There seems to be a lot of social media, web design and print shop franchises out there so that's probably not the best business to get into either.

A proven system is irrelevant if your employees don't follow it to the letter or if you happen to pick a bad location in the case of restaurants or retail.

 

[Yoga Face]

A proven system is irrelevant if your employees don't follow it to the letter or if you happen to pick a bad location in the case of restaurants or retail.

exactly

a franchisee must follow the rules as customers expect the exact same service no matter where they go

that is why they come back

as far as location goes it is chosen by the franchisor for which you paid him well in the start up monies

they are the marketing experts so you have to trust their opinion

if franchisor has made a bad marketing decision the franchisee takes the loss

this does not seem like a good business move on the part of the franchisee as you cannot sue the franchisor for incompetence as they wrote the contract and they got all the lawyers and you are broke and have lost everything

 

[TeasePlease]

Most franchises are about buying yourself a job. Someone else has figured out how to make a business work; you're just helping them grow it by using your money to expand their market. They are essentially taking the entrepreneurship premium through the franchise fee. Don't believe me? Ask a Tim Horton's owner how much they make from one location (the key to making serious money is to own multiple locations and build your own pyramid).


I've been looking into a franchise myself recently. The marketing materials are slick. The financial disclosure appears thorough. It looks great on its face. But probed a little deeper, the cracks appear. They claim that most of their franchisees are succesful professionals who left their high paying careers to pursue this opportunity. Yet, if you run the math, they must have been shitty professionals because they're earning, on average, $50,000 in gross revenues now. Asked about trademark and patent protection, they said that they dont' care about infringement. That's the nature of the free market. The smart businesses always survive, and thrive, in competition.

To which I asked "...so why am I paying you the franchise fee and royalty again?" lol

 

[Yoga Face]

Most franchises are about buying yourself a job.

agree

the key to making serious money is to own multiple locations and build your own pyramid

i agree so you have to triple your exposure to own 3 franchises

the work load will never end

I've been looking into a franchise myself recently. The marketing materials are slick. The financial disclosure appears thorough. It looks great on its face. But probed a little deeper, the cracks appear. They claim that most of their franchisees are succesful professionals who left their high paying careers to pursue this opportunity. Yet, if you run the math, they must have been shitty professionals because they're earning, on average, $50,000 in gross revenues now. Asked about trademark and patent protection, they said that they dont' care about infringement. That's the nature of the free market. The smart businesses always survive, and thrive, in competition.

To which I asked "...so why am I paying you the franchise fee and royalty again?" lol

you are supposed to accept what they say at face value ??????

u can try to talk to franchisees but few will admit they made a mistake, if indeed they have

i am stumped as to where to go for honest advice

perhaps a tax accountant, or lawyer, who specializes in franchises

then there are so many out there it is overwhelming

never, ever make a business move unless u know WTF u r doing !!!

 

[explorerzip]

perhaps a tax accountant, or lawyer, who specializes in franchises

Talk to a business consultant specializing in franchises or better yet someone who's actually running a successful franchise assuming you can actually get a hold of them.

 

[explorerzip]

Most franchises are about buying yourself a job. Someone else has figured out how to make a business work; you're just helping them grow it by using your money to expand their market. They are essentially taking the entrepreneurship premium through the franchise fee. Don't believe me? Ask a Tim Horton's owner how much they make from one location (the key to making serious money is to own multiple locations and build your own pyramid).

Even better, own multiple unrelated business. I know someone that runs a Boston Pizza franchise that also has a totally unrelated business.

 

[Yoga Face]

Talk to a business consultant specializing in franchises

there are none that I am aware of

or better yet someone who's actually running a successful franchise assuming you can actually get a hold of them.

that is a start

i would not have total trust in such a person

they would not be willing to admit they made a huge blunder


besides, all they know about is one franchise and there are thousands out there

there are franchise magazines but can they be trusted ? ???


it is a matter of finding someone knowledgeable u can trust

 

[explorerzip]

there are none that I am aware of




that is a start

i would not have total trust in such a person

they would not be willing to admit they made a huge blunder


besides, all they know about is one franchise and there are thousands out there

there are franchise magazines but can they be trusted ? ???


it is a matter of finding someone knowledgeable u can trust

Attend some business networking events (BNI, LeTip, etc), conferences or chamber of commerce events to find the consultants and franchise owners and get to know them personally.

You're right that people don't usually share their biggest mistakes, but once there is mutual trust it can happen. You just have to be willing to talk to enough people for a long enough period of time to build that rapport. If you expect that most people cannot be trusted business will be very hard. There is always some faith needed when taking someone's advice. If you think that most people cannot be trusted, how do you expect people to trust you?

You're right that each franchise has its own set of operational issues, but the fundamentals are still the same; deliver good products and give excellent service to your customers.

You can read plenty of books, magazines and web sites about franchising, but can you talk to the author directly and ask questions? Are they going to know your particular concerns about franchising? Have these people actually run a franchise before or are they just consultants? Remember anyone can call themselves a consultant these days yet never have run a business.

 

[wazup]

Whenever someone is snooping around and asking questions about anyones business, that business owner is going to talk down the business because he/she may want another franchise that may become available. Talk to any business owner about their business and they will give you a guarded negative response for fear of competition. Why would anyone say 'Man I'm raking it in.'

20% royalty is ludacris, who told you that, 7% is the average, do some research.https://www.google.ca/url?sa=t&rct=...noHoCg&usg=AFQjCNHxsYInXPnhnVr3h_mQf_kES6755Q Of course you're buying yourself a job, and hopefully it will be worth something when you actually sell it.

If you don't like the cost of buying and paying the royalties of a Mcdonalds, and open your own burger shop, don't you think in ten years you will make 100's of more % income over the long haul under the Mcdonalds brand.

The start up costs of a franchise or your own same type business will be about the same, minus the franchise fee. A good franchise will make up that difference fairly quickly. A Little Caesars store will make money the night it opens, your own pizza shop might take months to get their name out. The Little Caeasars near my place is insanely busy.

 

[Yoga Face]

Whenever someone is snooping around and asking questions about anyones business, that business owner is going to talk down the business because he/she may want another franchise that may become available. Talk to any business owner about their business and they will give you a guarded negative response for fear of competition. Why would anyone say 'Man I'm raking it in.'

20% royalty is ludacris, who told you that, 7% is the average, do some research.https://www.google.ca/url?sa=t&rct=...noHoCg&usg=AFQjCNHxsYInXPnhnVr3h_mQf_kES6755Q Of course you're buying yourself a job, and hopefully it will be worth something when you actually sell it.

If you don't like the cost of buying and paying the royalties of a Mcdonalds, and open your own burger shop, don't you think in ten years you will make 100's of more % income over the long haul under the Mcdonalds brand.

The start up costs of a franchise or your own same type business will be about the same, minus the franchise fee. A good franchise will make up that difference fairly quickly. A Little Caesars store will make money the night it opens, your own pizza shop might take months to get their name out. The Little Caeasars near my place is insanely busy.

7% royalty of the gross is around 20% royalty of the profit OK??? Plus add 4% marketing fee and we are at over 10% of the gross not net




so what profit should you expect ?



this profit has to cover personal insurance, retirement ,holiday pay, vacation pay, sick pay and all the other goodies worker ants get by labor laws

u r no longer a worker ant and have no labor law protection so it has to show in the profit

i would expect an easy 6 figures after a few years of start up and all that risk

I do not see it being there but I may be wrong so I am asking anyone out there who actually has a franchise


i am not asking if the franchisors are being fair


i am not asking if it is a better risk than your own store


i am asking if it is worth it, period

 

[IM469]

anyone ever been a franchisee - one that is granted a franchise, as to market a company's goods or services - from a franchisor

I thought at first that you were describing pyramid sales aka multi-tier sales. I have seen so many people pulled in by similar schemes whether soap, miracle medicine, knives, etc, etc. A friend brought me into one of these promotional meetings. They were promoting more membership building for generating personal revenue than the actual product that they were suppose to be selling.

You best bet is research. The most expensive franchises have brand recognition, the do the promotion, supply the food you purchase, and you are set up so that the is little effort in setup.

 

[Yoga Face]

I thought at first that you were describing pyramid sales aka multi-tier sales. I have seen so many people pulled in by similar schemes whether soap, miracle medicine, knives, etc, etc. A friend brought me into one of these promotional meetings. They were promoting more membership building for generating personal revenue than the actual product that they were suppose to be selling.

You best bet is research. The most expensive franchises have brand recognition, the do the promotion, supply the food you purchase, and you are set up so that the is little effort in setup.

stay far, far away from pyramid sales

that is how tony robbins got his start IE he learned how to manipulate people with his feel good crap

research is what i am doing right now


i want to talk to someone who has a franchise

 

[explorerzip]

stay far, far away from pyramid sales

that is how tony robbins got his start IE he learned how to manipulate people with his feel good crap

research is what i am doing right now


i want to talk to someone who has a franchise

Sooner or later you're going to have to put your money in harms way to buy a franchise. No manner of research will prepare you until you're knee deep in the thick of it. You know this already, but business (even franchising) is not a cake walk. If your only motivation for opening a business is the money, then do something else with your time and money. You should have a passion for what you are doing. So much so that it can override all the shit you will have to deal with: equipment failure, staffing, inspections, etc.

 

[Yoga Face]

Sooner or later you're going to have to put your money in harms way to buy a franchise. No manner of research will prepare you until you're knee deep in the thick of it. You know this already, but business (even franchising) is not a cake walk. If your only motivation for opening a business is the money, then do something else with your time and money. You should have a passion for what you are doing. So much so that it can override all the shit you will have to deal with: equipment failure, staffing, inspections, etc.

hard to have a passion for making submarines, pizza, changing engine oil etc

the passion is to make excellent money

that is passion enough

i suspect only the franchisor has a chance to get rich ( he may not get rich but at least he has a chance)


i suspect it is impossible for the franchisee to make excellent money

he will just get by or loose it all is my fear

to get rich become a charlatan like tony robbins

 

[explorerzip]

hard to have a passion for making submarines, pizza, changing engine oil etc

the passion is to make excellent money

that is passion enough

i suspect only the franchisor has a chance to get rich ( he may not get rich but at least he has a chance)


i suspect it is impossible for the franchisee to make excellent money

he will just get by or loose it all is my fear

to get rich become a charlatan like tony robbins

Then why go into franchising when you already know the headaches?! Plenty of people have made "excellent money" outside of franchising. They were just willing to build their own business and were willing to put in the sweat and years necessary to make it big. Start your own franchise to make "excellent money." Like someone else said, you're just buying yourself a job when you buy a franchise.

The grim reality of business and investing is that you might not make money for quite some time until you get the business and all its systems in place, employees trained, etc. I don't think it's impossible for a franchisee to make excellent money, it's just a matter of sticking it out no matter what and having a 10 to 20 year business plan for what you want to do with the profits of the business i.e. invest in other business, real estate, etc. You can't just wing it to make "excellent money."

 

[needinit]

A friend of mine owns 7 Tim Horton locations - he was pressured into starting their failed Metro outlet option as it was in his 'territory' - every time they wnt a new location in his area, he has first 'choice' ...if he doesn't take it someone else will and will start to erode his market.

Having said that he is an excellent manager and people developer so has reaped the reward of multiple locations as he can repeat the system efficiently and is now wealthy - I think he would have got there with or without Tims, but probably just saw results quicker with the Tims Name attached.

PS Choose a franchise wisely - pick a business you are interested in and remember you are paying for their system - I myself develop business systems and processes for my own work, so would never pay someone else for one . One of my favorite business books: E myth by Michael Gerber

 

[Yoga Face]

Here is a tally of the ongoing costs from the Tim Hortons website:

a weekly Royalty fee of 4.5% of gross sales for the term of the License;
a monthly Rental fee (which is the greater of a fixed minimum rent or 8.5% of gross monthly sales);
a monthly Advertising levy of 4% of gross sales for the term of the License.

This works out to be a 17% royalty of total gross sales per month – that is before any other expenses are paid! Holy fuck!! How much of the profit is that !!!???

Here are the startup costs:

The cost of a full Canadian franchise varies from $430,000 to $480,000* (CDN$) (plus all applicable taxes). At least $144,000 of the franchise cost must be cash, in addition to $50,000 in working capital (cash). The remaining amount will be a bank loan

Included in the cost of a franchise is the following:

all equipment, furniture, display equipment and signage
7-week training program in the Oakville, ON Tim Hortons University
a store opening crew to assist in the opening of a Tim Hortons restaurant (for a maximum period of two weeks)
the use of all Tim Hortons Manuals
right to use the Trademarks and Trade names
support from the head Office personnel


How much does a Tim Hortons Franchise make?

Information on franchise profits is not openly shared information!!! WTF!!! I have to buy blind!!

A big court case between franchisees and the parent company in 2011 made some of the numbers public.

In 2008, the average Tim Hortons franchisee profited $265k after all expenses. They disclose that between 2002 and 2008, the average franchise earned (before interest and taxes) $1.5M which fits franchisee profit range of 16%-20%.

so you need 500,000 to make 250,000 minus taxes and interest ???

money lost on $ 500,000 INVESTMENT means what ???? you pay taxes on 180,000 - tax accountant fees ?

Now pay yourself (and any free family help) and subtract cost of benefits that come with a regular job and what profit have we got ???


Bear in mind we are talking established franchises. To buy an established franchise cost more $$$$$$$$.


Tim Hortons has no patent so competition could wipe them out anytime

I say no thanks because the my name is on the 500,000. I would want Timmys to take the loss if the franchise fails

Their argument is they want to ensure the franchisee is highly motivated

my argument is it is not worth the risk


they would never sell one to me anyways as i have no business expertise


http://www.milliondollarjourney.com...s-franchise-make-cost.htm#LzAB7AMKmKxi41MW.99