Franchisee opinions
- Thread starter Yoga Face
- Start date
I don't remember the statistic but of all business started in Canada franchises were many time more likely to be around 2 years after the opening. As red mentioned you are buying the opportunity to use an established brand. Don't you think there is value to having Tim Horton's on your coffee shop? If you do you have to pay for the right.
I know of a business group that took on several franchises to establish themselves and learn the business then went out their own way at the same or nearby locations. Seems to be successful for them.
At a million a pop it is one hell of a risk
It seems to me if they are such solid business models the franchser should come up with the capital and accept the risk
Why do you even start these threads asking questions you've already made your mind up on?
Seems like a total waste of time to me.
Obviously franchises make economic sense to some people or else they wouldn't buy them, would thay?
My mind is open
I am asking hard questions as one should, no ?
Some people buy them because they never asked hard questions
and then they feel it is a success because they barely make a middle class living for all their risk and hard work
It seems to me if you cannot expect 6 figures easy along with staff to give you time off after a few years of labor it is not worth the risk
Some franchisers make millions, owning multiple franchises. One family might own all the Burger Kings in a town for example.
Some go out of business and are replaced.
Some go out of business and are replaced.
Franchises are good in the sense that consumers will shop at a recognizable brand first before they shop elsewhere. Also, franchises are able to get locations that non-franchise operations are not able to secure - as you know, location is extremely important in business. Franchises are also able to negotiate favourable prices, terms and source products or services that non-franchise operators can't.
One of the problems with franchisors is that they treat their franchisees as customers instead of business partners. The problem with this is that as a franchisee, you are bound to 'buy' from the franchisor and can't, like a regular customer out in the marketplace with many options, 'shop around' when you feel the franchisor is providing you with bad value.
Secondly, frachisors surcharge you for many things - both in the setup costs of the business - construction costs for the most part; and in the ongoing operation of the business - rent and many input costs. For example, many franchisors will become the primary leasee (one who leases or rents a premises) and then re-rent the premises or sub-lease the premises to the franchisee. What happens in many circumstances is that the franchisor will rent a unit for, say, $4,000, and then sub-lease it to the franchisee for $5500. This increases the cost for the franchisee, takes would-be profit out of the franchisee's pocket and increases the chances that the franchisee will not be profitable over the longrun, thereby losing the original investment the franchisee made.
In summary, if you are going to open a business, specialize in something over doing everything within a particular industry and also, from day one, have a plan to grow your business so you can compete with your competitors who also are trying to grow. If you don't grow, your competitors (and inflation) will make you uncompetitive over the long run.
One of the problems with franchisors is that they treat their franchisees as customers instead of business partners. The problem with this is that as a franchisee, you are bound to 'buy' from the franchisor and can't, like a regular customer out in the marketplace with many options, 'shop around' when you feel the franchisor is providing you with bad value.
Secondly, frachisors surcharge you for many things - both in the setup costs of the business - construction costs for the most part; and in the ongoing operation of the business - rent and many input costs. For example, many franchisors will become the primary leasee (one who leases or rents a premises) and then re-rent the premises or sub-lease the premises to the franchisee. What happens in many circumstances is that the franchisor will rent a unit for, say, $4,000, and then sub-lease it to the franchisee for $5500. This increases the cost for the franchisee, takes would-be profit out of the franchisee's pocket and increases the chances that the franchisee will not be profitable over the longrun, thereby losing the original investment the franchisee made.
In summary, if you are going to open a business, specialize in something over doing everything within a particular industry and also, from day one, have a plan to grow your business so you can compete with your competitors who also are trying to grow. If you don't grow, your competitors (and inflation) will make you uncompetitive over the long run.
I have a couple of aquaintances who own Tim's (both own several). If they aren't doing well, they sure are putting on a good show.
That's not the way it works.
Usually a decent franchise chain, say in the food industry, owns the land or holds the lease and makes the entire capital investment of the purchase and store build. The franchisee pays a fee up front which only covers a portion of the capital cost of the location and then royalties. In return the franchisee gets the use of an established brand, its reputation and business formulae and pays a royalty. In good chains you are buying huge goodwill and often established locations with cashflow already established which is one of the hardest things to do in any business startup.
In a good chain you run your business - yes subject to certain necessary parameters to protect the brand reputation - but you don't have to do any of the upfront R&D, location research or investment in physical plant or technology. The harder you work the more money you make. Delegate it to managers and laze about expecting the money to roll in like a typical failure and sure you will fail. You also have the benefit of the good faith and fair dealing legislation here in Ontario.
But, your comment is right for fly-by-nights. A fool and his money are soon parted. Just like anything - do your research. Be cheap and buy into a crap chain and you get what you pay for.
A Tim's franchise starts at $650,000 if they even consider accepting you. Even Cora's franchises are over 500,000., and they only serve breakfast and lunch.
Timmy's issue is saturation, they are everywhere. No new good places to open except in new subdivisions north of the green belt/905.
while in my heart i have a very hard time understanding why people would shell out the money for a franchise, there are a slew of good reasons why they would:
1) branding/marketing: alot of immigrants have an amazingly hard time doing this, buying a franchise gets you that. ie: any idiot can open a pizza shop but people will stop at a pizza pizza over the idiots place because they know the brand.
2) real estate: franchiser's that are large enough get the pick of the litter when it comes to real estate, and this can make or break a restaurant. picture a busy corner, one might believe that you could be at any corner and make money, but realistically, if you were a breakfast spot situating yourself at a corner off the 401, you would want to be where the traffic is coming off hte highway, not coming on. ie: picking the right corner means a great deal to your biz.
3) menu, foodservice etc: they do all this for you, you do not need to do any of it and the profitability of each item has been calculated for you.
So there it is, it may seem small but point 1 can easily cost you upwards of 50 grand, point 3 is make or break to your business and dont even get me started on point 2. now on the other hand, if you pick a shitty new franchise model that doesnt make sense then yes you are risking alot, but since the majority of franchise buyers are immigrants even a shitty model with 1/3 taken care of, it is still pretty invaluable to them (you know those shitty indian/chinese/jamaican/etc. places you walk into and wlak right out of because the place looks like hell, the service is bad, the menu is weird to read,etc. these are all make/break in the qsr biz
1) branding/marketing: alot of immigrants have an amazingly hard time doing this, buying a franchise gets you that. ie: any idiot can open a pizza shop but people will stop at a pizza pizza over the idiots place because they know the brand.
2) real estate: franchiser's that are large enough get the pick of the litter when it comes to real estate, and this can make or break a restaurant. picture a busy corner, one might believe that you could be at any corner and make money, but realistically, if you were a breakfast spot situating yourself at a corner off the 401, you would want to be where the traffic is coming off hte highway, not coming on. ie: picking the right corner means a great deal to your biz.
3) menu, foodservice etc: they do all this for you, you do not need to do any of it and the profitability of each item has been calculated for you.
So there it is, it may seem small but point 1 can easily cost you upwards of 50 grand, point 3 is make or break to your business and dont even get me started on point 2. now on the other hand, if you pick a shitty new franchise model that doesnt make sense then yes you are risking alot, but since the majority of franchise buyers are immigrants even a shitty model with 1/3 taken care of, it is still pretty invaluable to them (you know those shitty indian/chinese/jamaican/etc. places you walk into and wlak right out of because the place looks like hell, the service is bad, the menu is weird to read,etc. these are all make/break in the qsr biz
