Anyone own one?

Lately, I've been really tiring of my job, and that exit plan out of IT has never looked better. I've been putting in a good amount of diligence, and have already started the intial phases (applying, submitting my financial statement, meeting with the regional director) of securing ownership in a franchise.

Just looking for anything and everything about it....pros/cons, struggles/rewards, etc.

 

What franchise?

 

Your paying way more then its worth, if you have true entrepreneuarial skills build your own business with a good idea and solid business plan. You will never recoup enough to make it worth while and more imortantly, its not like being your own boss, you'll have corporate watching you and telling you what to do. I've looked into purchasing franchises in the past, its much more profitabl to pitch them ideas of new locations, to do the development(assuming you have enough capital and/or cash flow to make it happen) and walk away. Running a business is not what its cracked up to be, the only thing that makes it worth while is not answering to anyone you don't want to. The down fall is you that you must have all the answers, you don't get to have bad days(or you will fail) and you'll spend a majority of your time doing managing tasks and less doing what it is your business set out to do. In this day and age, the process is more important then the end product(assuming the end product is constant, average or above and easy to replicate).

I currently own two businesses one is a retail company dealing with the public, and it wears you down. I've worked full time for this company for over a decade now with no vacation, 60+ hour weeks. A couple sick days, a few long weekends, other wise I am a slave 6 days a week, in the trenches. Catering to the public who are so fucking stupid you want to strangle each and every last person, just to remove them from the gene pool before they further polute this planet. Sure there are some great people out there, but you deal with 20 ass holes for every honest, decent hard working human. Everyone is out to fuck you, from your customers, to your suppliers, to sales people, to your employee's and you have to watch them all like hawks. People think, you open a business a million dollars shows up the next day, bull shit. Yes I am doing very good now, but I am doing things I never wanted to let alone set out to, my friends think its a piece of cake and was handed to me on a silver plate. Yes a franchise will give you a customer base, and a house hold name right of the back, but typically, your paying a fortune for that - and you'll still have the problems of running a business.

My other business is in development, pitching the big companies and smaller personal projects on the side - I work with two other people(my father and brother) and only deal with people I want to work with. I make WAY more, it requires WAY less effort and is actually fun. Taking the public out of the equation makes it a much easier choice, but then if your not dealing with the ignorant public you don't need a household name, in fact you probably don't want a household name.

The franchise I was serious about was Krispy Kreme, after the initial meeting with those people I realized they were out of there fucking minds if they thought there donuts were worth what they felt they were. Your not running a business with a company like that, your a manager that owns the building, and takes on all the liability - brilliant! I could make more letting what it would cost to get into a kripy kreme sit in ING direct then open the place, and that would be a sure thing with no problems.

The benefit of going through the trouble of building a name for yourself is that its cheaper, should it fail you'll save a bundle and you can one day sell it and all your hard work will be paid for. IMO - the only reason you should start a business, is to sell it.

 

tireguy, thanks for providing the "cons" perspective. may i ask how much the franchise fee was for a single krispy kreme, and what the anticipated the initial costs were going to run (initial inventory, first few months rent, decoration, equipment, contract work, etc)?

doopstr, i'd rather not divulge the exact franchise just yet, but it is a strong brand, and has a solid product. the franchise fee is only $25K, and the initial costs run right around $200K. operating expenses are relatively low in comparison to other franchises.

 

k, tireguy has a valid point in that is not as profitable as you might think it is, but dont let that deter you. i think he has a bitter opinion towards them and i dont think you should completely let that bring you down hah. it really depends on your situation. entrepreneuring in itself sounds like a right option for you right now, but you need to find out if franchising is right FOR YOU. i cant help you in that area bc i do not own one so i cant contribute in that area. however, ive considered the idea myself and then discussed this aspect in my entrepreneurship classes i took.

but ya like it was mentioned earlier, what franchise are you interested in? i think this matters a lot as you need to consider if you know anything or nothing about the given business, if it is saturated in your area, or if there are other opportunities that would be better suited for you. it almost sounds like an entrepreneurship idea would be better than a franchise in your situation... but then again we dont know what franchise it is! so maybe give us some more info on what you were thinking of and we can give ya some feedback

general pros of franchising:
own boss (to an extent), still under the franchisor
get rid of old job (which you dislike)
opportunity for multiple franchises (saturate the area yourself)

cons
having to do what franchisor wants you to do
fees, royalities, etc etc
long hours initially in start up, if employees dont show up, youre workin
not making money for a while (depends on franchise and area)
liability

 

To get a KK off the ground would have taken $1.5-2.5 million, for land, development, building, franchise and initial start up costs. I don't mean to seam bitter, but running a business is not as easy as most think it is. I would love to work for someone else at some point, it would be fun. The grass is always greener on the other side.

$200k to get into a business is not bad at all, but to most its still a large chunk of change, also keep in mind that most businesses are worth 1-1.5 times annual revenue plus real estate and any specialized equipment, would you be able to get that back should you want to sell in 5 year, 10 years? If your going to make what you do now, in addition to having this investment and assuming the liability I think you would be out of your mind to seriously consider it. If there is a chance for growth, more income then you make now and a potentially large pay out at the end, then by all means its a winner, but in reality that seems far fetched. There is information in most all area's of the country as to what numbers certain businesses do, look into that before you get to far ahead of yourself to make sure its worth while. For example the highest volume sub shop in this area is Subway, there best store does around 300 subs a day, granted that's not the only thing they sell but damn near. Do the math on that, paying rent, insurance, employees, suppliers, doesn't really seem worth it to me. I'd rather have that money tied up in a mutual fund and get a job working for someone else.

 

You bring up some valid points, its not all bad, but there are peaks and valleys when running a business. The peaks are never as high as you would have guessed them to be and the valleys lower then ever imagined, it happens with all businesses.

What really has me at a loss is the highlighted comment, if a business is not at least as profitable as you estimated, why in the world would consider going into it? The sole purpose of running a business is to make money, sure you want to do a good job, make sure people on all ends are happy and offer a valuable service, but the bottom line is.... the bottom line, if you are incapable of turning a consistant profit your wasting your time and money - two things very few have enough of.

 

oh i was merely making a point that some people have some preconcieved notion that franchising is the a way to make tons and tons of money. so i was just reiterating the fact that you pointed out that its often not AS profitable as people think... HOWEVER, thats not to say that profit cant be made, so that shouldnt completely drive him away just bc he cant make as much as he might have thought he can make, there is still an opportunity there, and thats what entrepreneuring focuses on, opportunities.

i was just tryin to convey the aspect about having high expectations and that just bc we say its not a walk in the park that he should abandon the idea completely. because, as i said earlier, we dont know all the specifics about location, kind of franchise, fees, etc. each individual franchise and franchisee has a diff story.. i know ppl who have made a ton and ppl who have made hardly any and even lost... leveling my consensus about franchises to "its not as good as you might think, but opportunity is still there given certain circumstances."

if this is something he personally really wants to do, then the fact that he might not make AS much as he expected should not completely drive him away from franchises. don't get me wrong, i'm behind you in what you said... heard numerous stories in my classes and from owners i knew. just tryin to let him know that profit can be made, even through the negative points we've harped on. aka its not going to be some huge cash cow, bc obviously everyone would be doing it if it was.

hah, basically just get some financials from other local franchises of the same franchisor and check out if its what you were estimating... bc a level of profit can be there, it just depends on what kind of level you were anticipating, thats all. if its a few grand off of what you thought, no biggie... if its tens of thousands of dollars off... then you might wanna reconsider.

 

If you want a Franchise without any restrictions, you could look into SnoBiz. I currently work there for my summer job. It is an initial $5000, and no restrictions from corporate after purchasing. The owners that I work for have owned their franchise for 10 years now and are only open April-September. I know they make pretty decent money, but the only reason is because of the dedicated customers who come atleast 3 times a week to purchase (some honestly come 4-5 times a week).

The owners have stressed that the reason they do such good business is because of their loyal customers. Being in a college town doesn't hurt though. Hot girls come in bikinis to order a shaved ice, while laying out by the pool during the day. If you can find a good market, that will be steady enough, Sno Biz would be a great choice.

This would obviously only work during the hotter months, so I wouldnt consider it a full time year long job. My owners are retired, so this is a good source of income 6 months of the year for them. It does, like any other ownership responsibility, take a lot of work on their part.

I hope that helped somewhat. Good luck with your decision.

 

The wife and I actually purchased a franchise in May and we're in the process of securing a location as we speak. Without revealing the name yet (I'm superstitious and have been witholding until we secure a locale) I can say that there are many cost effective franchises out there. Our franchise had a fee of a little bit over $30k, and the initial startup costs are estimated to be $250k-$300k (we're setting aside $350k b/c you always go over budget).

There are a few things to keep in mind with a franchise....

The biggest is to not expect to get rich off of it... especially if you're just opening one store. Our strategy is to open a main store, then several satellite stores (low overhead, less equipment, similar sales figure). This way we'll have the main store which supplies the satellite locations with product so the satellite locations can be smaller, carry much less inventory, and not have the need for all of the equipment. By doing this my wife should be able to stop working and we'll simply be able to run the franchise business and make a nice annual salary. Again, won't be rich, but will be pretty well off and making more then we do now. Additionally we'll have a monopoly on the county, which is the fastest growing county in the state (and 24th in the country), so we'll pretty much corner the market down here. We're also looking to expand into other franchises so we don't put all of our eggs into one basket. We'll probably end up with 4 stores total... with 2 being the franchise we're in now, and 2 of another.

After speaking with several franchisees in the area as well as some not in the area, we can expect to make anywhere from $40k to $80k net per year. Also from speaking with several franchisees around the country we expect to be debt free within 3-5 years from opening our doors, and that seems to be on the high-end of the average. Of course that would put our net profits towards the lower end of the range over that same time period, but we want to be debt free as soon as possible. Location has a lot to do with it as well b/c if you're in a consistant locale you'll obviously make more money then someone who has waves (example, the stores located near colleges experience highs and lows, while the ones in malls are pretty steady). So if you can find a steady location you'll be debt free closer to 3 years. The actual net profit number also depends very much on expense management. If you can manage your expenses and run an efficient store, you'll make more money. You also need to put a lot of your time and effort into advertising for the business. While the franchise takes care of some of the marketing in your trade area, it's really up to you to think outside of the box and bring in business yourself as well. One thing we noticed is that many of the franchisees are content with their storefront, while we have a completely different strategy in mind which will cost us hardly anything but time, and has the potential to really increase gross profits by substantial amounts. Another key for us is that we hooked up with a franchisee through a friend of my wife at work who owns 4 franchises plus several buildings (so he doesn't have to pay rent himself, and he rents out the other store fronts in the buildings). This guy knows his shit, and he has taken us under his wing offering anything and everything we need... so that will be key and give us a HUGE leg up over other franchises in the area.

The other thing is what was mentioned above... and that is costs. We've seen other franchisees open for around $200k, but they were located in other states. After speaking with many owners around our area we felt $300k would be the highend, but wanted to be prepared which is why we budgeted $350k. Better to be safe then sorry.

You'll notice a common theme in my reply is that I spoke to existing franchisees. This is key if you're even considering purchasing a franchise. We actually changed companies from one to the one we're doing b/c of feedback we got from existing franchisees. If they are not happy, the odds are you will not be happy. So you should speak to as many as possible. You'll also want to go through the UFOC and call the franchisees that closed over the last year to see why they closed their doors. THey may be tough to get a hold of, but they can be the key to your decision. With us, out of the 14 that closed last year, only one was in our state, and one was the next state over. One closed b/c they had unrealistic expectations of income (they were pulling in about $50k annually, but were expecting to make about triple that) and another one sold b/c of a family emergency that forced them to use their money elsewhere, so they sold. Of all of the franchisees who closed their doors, some had minor complaints, but most were positive about the overall experience. After speaking with all of these people we felt very comfortable with our decision and went ahead and visited the corporate offices. After receiving the contracts and having a lawyer review and an accountant look over their financials we signed and here we are.

So, in short, don't expect to get rich quick off of franshises. You can make good money, but, as with any business, it takes work, time, and effort. The biggest advantage to opening a franchise is having the name behind you from jump. Any business will cost quite a bit to start... however, paying that franchise fee is well worth it to have name recognition immediately IMO. I mean, try opening a sub store on your own, then try opening a Subway. I guarantee even with the franchise fee (which isn't that bad) startup costs will be almost the same, but when you open your doors, that Subway will be in the black well before the independant sub store. And no... we didn't open a Subway, it was just an example ....

Good luck with whatever you do... but be sure to do tons of reading, make tons of phone calls, and do your research big time before even committing to a franchise. You really need to commit yourself to it if you want it to be successful. Even with the big name behind you, you're still taking on the normal risks of business ownership, so if you're not prepared, it will eat you alive very quickly.

 

So if that retail business is such a pain for you (long hrs, not as much money as the development one, etc) do you plan on selling it sooner rather than later?


Oh btw, about Subway, my friend's dad owns a few in CT. He started with 1 of course and grew to a few over time. I think he said his dad profits about $1 for every sub they sell. So take that for what it's worth.

 

^ Ouch, that's low. Could be the high fixed expenses in CT. The franchises down here are making quite a bit more then that per sub...

 

This applies to franchises as well. I've spoken with several former franchisees who sold their stores for very, very nice profits.

You have to remember a franchise is still a business. The only difference is you pay a franchise fee and royalties, but the start-up costs, day to day ops, and opportunities to sell etc. are the same as any other business...

 

juniorbean...wow! good stuff, i definitely plan on calling up existing franchisees, and picking their brains. i've got some solid ideas for marketing and advertising this franchise, should it come to fruition. also, the locale i have in mind is centric to the franchise's product, and there is definitely a steady stream of traffic.

 

The retail business is not ready for sale, but we are working hard to get it to that point. With out everything in line, you will cost yourself a ton of money, sort of like fixing all the little things with a house before you sell. Except in this case all actions have to be taken slowly and with great caution so no one is wise to what is going on. Running a business to make you money and running a business to sell it are two very different things I come to find out

Having learned from the retail business, we are creating our development company into something that would be easy to sell. In addition to large real estate holdings, the process and approach will be defined clearly with some very clever and helpful tools. I suspect when the development company is sold I will retire, and it will happen with in ten years. We are also working on trademarking a few of our terms and patenting a few of our ideas, while expensive to get going it will pay for itself many, many times over when the time to sell arrives.

 

We're on the same page as far as that is concerned, I just want to stress your ability to not only pull out what you've put in, but make enough when all is said and done to really make it worth your time.

 

I think we're pretty much on the same page across the board. There are definitely some franchises that are not worth the time, effort, and money you put into them. That's why it's key to do as much research as possible before committing to anything. But I think the same goes for any business. Flying blind is not the way to go, but any sucessful business, franchise or not, will be profitable if and when the time comes to sell.

 

Happy to help.

FYI, when you contact the franchise they'll send you the UFOC (Uniform Franchise Offering Circular). When you get that you'll have a list of name and numbers of every single person/entity that owns a franchise, as well as those that closed/sold/transferred over the last fiscal year. That is the best place to start and where I did all of my research from. I created a Word document and had a list of about 15 questions or so that I asked each owner. Basically each owner had their own answer sheet that I could use to go back and compare answers to assist in my decision. I also met one at his store and went out to dinner with another (the guy mentioned above who kind of took us under his wing). That way I could ask even more questions in a more personal environment. Keep in mind that not all owners will be forethcoming with info... especially financial info. But keep calling b/c more often then not the existing owners are happy to help. Ask the franchise who you should call first b/c they typically know who the most helpful owners are. Start with them so you build your confidence and style of asking quesitons, then just start "cold calling" the other owners in the UFOC.

Another good place to go for help is Entrepreneur.com. I did a ton of reading, and one of the most helpful links was the one below. I had never read a UFOC before, so the breakdown that site provided made it much easier for me to read the UFOC, but more importantly.... understand the UFOC. Most of the questions the franchisees came from the UFOC to be sure what was printed was indeed truth. Entrepreneur.com has a whole franchise section which I read pretty much "cover to cover"... but the section explaining the UFOC was one of the most valuable to me....

http://www.entrepreneur.com/article/...287194,00.html

 

Juniorbean brings up an idea that early on I had no grasp of and now wish I did much better. Keep a diary/log of every step along the way, the people you contact, the experiences and the process - it will be invaluable as your grow into more locations, new ventures or one day want to sell. Having a map of how the business was created and grew is very important.

The only thing that saved me in this department is my memory, I got into business at a young age and always had a great memory, so I had all the information I needed stored in my noodle, I just had to get it out onto paper. Which was very time consuming and required me going page by page through my schedule for the last 13 years. I did keep a log, but it had ALL of my days events mixed in and I had to extract the important information.

 

yes, their UFOC is already in the mail.

good idea on the journal/log.

 

How about cartridge world?

 

^^^^^ By the time those publications come out rating a franchise or stock or anything related to money chances are high you've missed the boat. You have to secure the deal before information like that is published, now prices, I am sure, have gone through the roof. I also can't see a cartridge refilling company as something I would personally get involved with, way to muc of an unknown niche market.

A few things I've learned over the years. One, get into a field that has extremely high prices so you are paid for your work even if its through a limited demograph, i.e. not a dollar store, with this type of business it always pays to target middle to upper class America. Or get into a field that has a HUGE market this way you have a huge customer base. An example of what I wouldn't do, woman's jeans... right off the bat your wiping 50% of the worlds population off as consumers. But this is just my experience I am sure other's would disagree...

 

Canadian Tire. You're a guaranteed millionaire within 3 years or so they say. But there's a lot of bullshit you have to put up with and need to invest a lot of money into the company and have to move where ever they need you.

Matt

 

^ The odds are that is BS. There are very, very few franchises that will make you rich. Even McDonald's and Burker King's won't make you rich unless you own more then one.

Plus, a Canadian Franchise in the US is a pain in the ass to do...

 

My friend's Dad owns 16-17 Wendy's around here along I-85 and he makes roughly 25-28 million a year. You probably won't make millions off one franchise, but you could make a substantial amount of $$.

 

Where did you get that?

 

Interesting. I'd assume that's because you can eliminate some redundant back office expenses as the # of franchises increases (i.e. using economies of scale to your advantage)??

I know a couple familes that each own a few McD's, Friendly's, etc and they're pretty well off, but not pulling in that kind of dough.

 

He's not a real close friend so I don't know the specifics. I know a bunch are located near I-85 which would account for a lot of sales to travelers. I'd assume owning more would have an affect of reducing costs in certain areas.

 

^

We will be owning several of the franchises we are opening, and after you have one you can significantly reduce expenses by sharing resources. The first one is "full cost", but after that you can share many things which reduces the overhead and makes you more profitable...

 

true, a friend of mine that owns multiple mcdonalds, is doing extremely well...