Anyone own a franchise???

[Dmy0013]

Just curious if anyone owns a franchise or has done research into purchasing.

Honestly I am getting a little bit tired of working 12+ hour days for someone else to make them rich...
Completely wrong reason to get into a franchise I know...

However Someone gave me the idea a few weeks back and I thought yeah that makes sense for me...  Why not look into it?

Anyone know any links or anything they can share with information?  anyone have success or horror stories?

And No I am not going to run out and buy a franchise tomorrow, just curious if anyone has some advice or point me in a direction.

not sure if this makes a difference or not but I am in Canada

[maizefolk]

Curious to see the answers. Posting to follow.

[ketchup]

I can only speak for a popular ice cream chain that rhymes with Mary Green, but I know dealing with "corporate" can be very much a pain with franchise arrangements (price requirements, must-run-ads-for-this requirements, annoying mystery shoppers making sure you "stick to the script" on many things, etc.).

[sixkids]

I've always thought I'd like to own something to do with cars. Be it a car dealership or salvage yard or something.

[Dmy0013]

I guess additional information would be the franchises I am looking at are all food related.

They are all fast food, and involve little in regards to preparing the food.  The bigger fast food chains I imagine would cost millions once you get all the deep fryers and grills etc.  So that is not what I am looking at as I could never afford it.

I am looking towards healthier alternatives, but none the less big chains.

For whatever Reasons I dont want to say these places names out of fear of legal issues... the world is a crazy place now...

For Example the city I live in is building an entire new housing area which will include a residential / commercial mix.  Lets say I want to put a popular chain in that new area.  is it that simple?  Do previous franchise owner in the area have the rights to that area?  Do they get first kick at the can and only if no one wants it I get a chance?

[BabyShark]

Been curious about this too, posting to follow

[AJ41]

Posting to follow too. I've heard Chick Fil A is cheap to open but they are very strict on who they allow purchase one. I'm very interested however and need to look into it.

[daverobev]

Everything I have read says you are basically buying yourself a job. You WILL be let down by staff, and have to go in at inconvenient times to open up, etc - unless you get and retain a VERY good manager.

[Mgmny]

One of my mentors owned something like 15 Hardee's/Carl's Jr up until about 5 years ago.

Getting into a McDonald's, BK, or anything that is a stand alone building will cost a million if everything is "perfect," but it will likely be many times that.

As for it being "simple" to put a chain in a new area near you, no. All reputable franchise/chains have very strict market requirements. This includes demographics of the neighborhoods, but also things like parking lots, accessibility, average traffic in an area, location of close similar restaurants, etc.

[Smokystache]

I don't own a franchise and don't want to violate any forum rules...

My brother-in-law works as a recruiter/educator for dozens (hundreds?) of franchises. He basically helps you whittle down the options based on the type of opportunity you're looking for, lifestyle options,  etc.  He then gets paid only by the franchise (not the new franchisee) when a deal goes through for bringing them someone who is basically "pre-screened" to meet their criteria. (In short, it is free to work with him).

He knows which franchises are up and coming, which require huge outlays of capital, which do/don't support their franchisees, etc. He works on a lot of repeat and referral business,  so is motivated to get people into a good fit. He is completely independent, so he doesn't steer people toward specific businesses because he doesn't owe them anything.

I find it interesting to hear about what's hot (cupcakes) and how much or little it takes to start one. He works with a lot of second career folks (military who retire), immigrants,  and others.

PM me if you want more info.


(Edited to fix typos and clarity)

[chasesfish]

I've financed a number of franchises, more than 20 but not quite 100.

If you go the franchise route, stick with quick service/fast food.  There's a nice list somewhere showing SBA default rates, it really helps identify the crappy franchises.  Make sure they have 50+ units/locations and read the FDD.  You also don't want to be the brand new one into a market.

I'm happy to answer any specific questions you might have.

[icemodeled]

We owned a franchise route for Snyder of Hanover. We were making great money, double what we made at our normal jobs but after awhile the company became very difficult and we're breaking their contract by force ordering products on us which cost us 2 months of pay! That was the last straw, went to a lawyer and they said best to sell. So we did. The company made it even worse to sell, they even told our buyer he should back out and it's not worth the price we're asking! They were definitely trying to stop us from selling, it was a mess actually and very stressful. Than goodness the buyer didn't back out and after months of the company loosing the signed paperwork (3x actually) it was finally done!

I would be open to another route but not with this company again. I also would love to do a different franchise in the future but not sure what kind.

[ReadySetMillionaire]

I'm an attorney at a firm that represents two very successful franchise owners (one owns about 15 McDonalds, the other owns 4 Arby's), and a bunch more very unsuccessful ones.

This seems incredibly obvious, but my number one recommendation would be to pay a CPA to take an incredibly detailed look at the financials. How much are the franchisees taking home? How much is being kicked up to the franchisor? Does it seem like a sustainable business model? Do you expect competition in the area? All things to think about.

Also, always remember that in the franchise business model, the franchisor makes money no matter how shitty the business is doing. We represent an ice cream franchisee who was losing $7-8k per month, all the while kicking up 6% of all sales to the franchisor. They didn't modify anything (i.e., reduce the franchise fee) because they didn't have to. So our clients just closed up shop and are now being sued for not taking the franchise to its term.

Bottom line: if it's a new location, I'd be very cautious. If it's an existing location, pay a CPA to go over everything.

[Lucky Girl]

We were part owners of a franchise for several years.  It did not work out.  It is a long story, but basically we were pretty naive.

We were trying to take a franchise into a new market, and looking at unrealistic numbers as to cost and sales.  We never really broke even, except that we were able to take losses on our tax returns every year which allowed us to offset other gains.  It was also a ton of work.  The primary owner was also the general manager and was working 80 hour weeks for 51 weeks a year for five years.  We were constantly dealing with personnel issues as well.  Employees didn't stick around, had car trouble, multiple other messes that you would expect with folks who would be working in fast food as a career.  (And lots of good people, too--their lives are just challenging).

I think being in a new market was part of our problem, but not all.  Restaurants are a tough business.

[ReadySetMillionaire]

We were part owners of a franchise for several years.  It did not work out.  It is a long story, but basically we were pretty naive.

We were trying to take a franchise into a new market, and looking at unrealistic numbers as to cost and sales.  We never really broke even, except that we were able to take losses on our tax returns every year which allowed us to offset other gains.  It was also a ton of work.  The primary owner was also the general manager and was working 80 hour weeks for 51 weeks a year for five years.  We were constantly dealing with personnel issues as well.  Employees didn't stick around, had car trouble, multiple other messes that you would expect with folks who would be working in fast food as a career.  (And lots of good people, too--their lives are just challenging).

I think being in a new market was part of our problem, but not all.  Restaurants are a tough business.

FWIW, this experience echos the experience of more than a handful of clients at my firm.

[creativenikki]

I looked into a lot of franchises before I bought the business I own now.  I was so sick of working in financial compliance that it was worth it to me to risk everything to leave.  I hated it that much.

First I looked into one of those wine and painting franchises.  Unfortunately, it was so new at the time there was almost no financial data.  I spent a huge amount of time looking at how many people attended each party (based on pics posted on social media by other franchise owners) in order to attempt to calculate revenue.  In the end, it seemed like if I did well I'd clear $50k a year.  Not great. 

Next I looked into a daycare franchise.  The minimum financial requirement was high ($750k), but the hours/lifestyle the franchise offered looked amazing.  I also had recently had a baby and realized how much daycare costs and what people are apparently willing to spend on it, and so the financial aspect looked good.  Unfortunately, the $750k requirement could not include any retirement accounts or real estate equity, and brokerage accounts were only valued at 80%, so I didn't have enough and that was that. 

I also looked into a home decorating franchise (my passion).  The parent company reps paid to fly me to the headquarters and paid for my hotel to attend their discovery day (every franchise seems to have a discovery day when you get close to signing an agreement; however, usually you have to pay your own way).  Everyone there told me how I'd be such a great fit, blah, blah, blah.  But, when I finally got the FDD, there was no financial data in it!  I mean, really?  Their franchise fee was $40k, plus a certain percentage of your revenues forever.  It just didn't add up for me. 

Finally, I looked into several retail related franchises.  I looked into children's resale shops, a children's resale event based business, and a couple boutiques.  At the end of the day, the financials were just not impressive for the amount of time and money required (both upfront and ongoing). 

So, that's the long way of saying I didn't find any franchises that were a good fit for me.  I wanted to own a franchise I'd enjoy working at, so many options were just not going to work because they didn't appeal to me.  I decided to shop for existing businesses where the owner wanted to retire or whatever.  I searched for a long time (years), but was most aggressive about it in early 2016.  That's when I found the furniture business I own now.  The owner wanted to retire and was asking a reasonable price for the business.  I made an offer in April 2016 and closed in August 2016 after a long and boring SBA loan/due diligence process.  But, so far, it's been great.  I've been profitable since day one, I love the products we make and (for the most part) I love my employees.  I will never go back to working for a bank, even if this place falls apart, but I don't think I really have to worry because we have a good reputation and the customers seem to be taking to me. 

[nexus]

Posting to follow.

Also curious to see if anyone has any experiences or stories with gym franchises. In particular, the types that operate 24 hours a day and don't necessarily require staff. Members have a card key and you have cameras to make sure members don't try and sneak their friends in. Other than cleaning, stocking the bathroom, and maintaining the equipment it seems pretty low maintenance. The biggest challenge would be being present to sign people up with memberships, but you could hire a handful of people* to work part-time and be present to sign people up, answer questions, and clean up/stock the bathroom. Once established, membership and tours could even be set up via phone appointment.

I suppose you could offer classes or personal training, but those providing services to members would be paid per session and just offer a cut to the gym (part of which would go towards whatever insurance was necessary to cover them if a client gets injured). Kind of like the same way tennis instructors teach at clubs, then just pay a percentage to the facility/director of tennis. Or the way a hair stylist rents a chair.

*1 person on-site at a time. I'm a member of one of these gyms and the staff sit there with nothing to do for 90%+ of their shifts.

[thedigitalone]

Don't anymore, but I owned and operated a couple of gourmet pizza franchise locations in the early to mid 2000's.

It was profitable, but frustrating for me, so many constant problems and it was always my issue to deal with since we couldn't afford to overpay and hold onto a decent manager.

"Death by a thousand cuts" and it felt like I just bought myself a job at the end of the month, it was an interesting experience but I sure was happy the day we sold off our last location!  Probably just my personality type more than anything else, but it wasn't a career path for me in the end.

[Malum Prohibitum]

Posting to follow.

Also curious to see if anyone has any experiences or stories with gym franchises. In particular, the types that operate 24 hours a day and don't necessarily require staff. Members have a card key and you have cameras to make sure members don't try and sneak their friends in. Other than cleaning, stocking the bathroom, and maintaining the equipment it seems pretty low maintenance. The biggest challenge would be being present to sign people up with memberships, but you could hire a handful of people* to work part-time and be present to sign people up, answer questions, and clean up/stock the bathroom. Once established, membership and tours could even be set up via phone appointment.

I suppose you could offer classes or personal training, but those providing services to members would be paid per session and just offer a cut to the gym (part of which would go towards whatever insurance was necessary to cover them if a client gets injured). Kind of like the same way tennis instructors teach at clubs, then just pay a percentage to the facility/director of tennis. Or the way a hair stylist rents a chair.

*1 person on-site at a time. I'm a member of one of these gyms and the staff sit there with nothing to do for 90%+ of their shifts.

  You don't really need a franchise to do that.

[chesebert]

Posting to follow.

[Rufus.T.Firefly]

On an individual business level, you'll likely be more profitable if you stick with opening your own non-franchised business. If you'll be a traditional business owner who spends every day in the operation, you'll probably not receive enough value back from the franchise to recoup your royalty expense. 5-10% off the top is a pretty hefty expense. That's the difference between the red and black for a lot of businesses.

Franchises make a lot more sense for those who want to own 5, 10, or 50 locations and be involved only passively, as an investor. These business units are not as individually profitable, but the brand recognition, training, and franchiser support makes it significantly easier to multiply your success over many locations.

[chasesfish]

On an individual business level, you'll likely be more profitable if you stick with opening your own non-franchised business. If you'll be a traditional business owner who spends every day in the operation, you'll probably not receive enough value back from the franchise to recoup your royalty expense. 5-10% off the top is a pretty hefty expense. That's the difference between the red and black for a lot of businesses.

Franchises make a lot more sense for those who want to own 5, 10, or 50 locations and be involved only passively, as an investor. These business units are not as individually profitable, but the brand recognition, training, and franchiser support makes it significantly easier to multiply your success over many locations.

^ This.

Many of the really successful franchises I've seen may only do 25k - 50k in profit after paying a manager a reasonable salary and dealing with debt service.  Its indentured servitude if you want to be that "manager".   However, if you have capital and "district manger" type leadership skills/aptitude, you can do a really good job owning multiple units of a franchised fast food franchise.   This also diversifies your risk because this business is so location driven.  You may have one superstar, five average stores, and one albatross.   I've seen franchisees have their best store become their worst because of market changes and the same franchisees be able to work the albatross up to an average store.  They just need multiple units, aptitude, and financial runway to make it happen.

[Smokystache]

It seems like many of the respondents thus far have experience with franchises where you needed a substantial investment and  had to manage a staff and had to purchase or lease a full-size store. Sometimes these opportunities are amazing (I wish I had started the local Chik-fil-a!) and sometimes they are a bust.

But I think it is worth mentioning that there are many (most?) franchises that you can start without a huge amount of capital (sometimes <$10k), and don't need a building/store, and don't need a staff to manage. A few less known examples:
- Tutoring
- Handyman/Home repairs
- Direct Mail
- Home Inspection
- Pet Services
- Cleaning
- Senior Care
- Bed bug exterminator
- youth athletic leagues
- Legos/bricks
- BBQ cleaner
- painting lines (parking lots, etc.) etc. etc.
(obviously some of these may require a store/business space, but many wouldn't).

I just think that any advice that suggests that "All franchises..." is like saying "All real estate purchases...."  ... we just don't know until we have more specifics.

Without question, individuals should carefully study the market, failure rates, etc.