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Started By
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re: Thinking about buying a franchise
Posted on 7/16/22 at 9:43 am to PatrickVance
Posted on 7/16/22 at 9:43 am to PatrickVance
quote:
you must recognize that there are two main types of franchise relationships, the most common of which is business format franchising.
Well, hell, what's the other one? Don't come in here with a first post to bump a two-year old thread and leave us hanging.
2
Posted on 7/16/22 at 10:15 am to Twenty 49
That’s what I was thinking too ??????. Like the teacher that gives the answers to the test but leaves 2 of the 4 questions off
Posted on 7/16/22 at 4:47 pm to Ramblin Wreck
Beware of risk in franchise model. The licensor gets theirs right off the top via royalty. That leaves not insignificant risk to you. While they have created a brand and operational process, they get ~10-15% return on capital via royalty and you have to make up top-line loss of ~10-15% before your costs are considered, to make your own ~10-15%.
Now, not all businesses, brands and operations are created equal, but know your share of the risk in the franchise model.
Now, not all businesses, brands and operations are created equal, but know your share of the risk in the franchise model.
Posted on 7/17/22 at 9:53 am to Ramblin Wreck
Posted on 7/17/22 at 10:09 am to PimpDaddyHustleStack
quote:
bad location I let myself get talked into
What you looking for in good location?
Posted on 7/17/22 at 2:58 pm to Ramblin Wreck
Your time will be drained away with a franchise. It will own you.
If you are willing to invest at least 50 hours a week to make it your primary income source, then pull the trigger.
If you are willing to invest at least 50 hours a week to make it your primary income source, then pull the trigger.
Posted on 7/17/22 at 3:49 pm to Ramblin Wreck
quote:
one of the partners wants to quit his day job and run a business full time.
Quit the day job for a day and night job?
Posted on 7/17/22 at 3:55 pm to soupboy10
quote:
I am a business banker in Baton Rouge and have financed a few of these.
You should be posting more here.
Posted on 7/17/22 at 4:03 pm to I B Freeman
Mondays are the worst and CFA would print money if open that day
Posted on 7/17/22 at 5:00 pm to jmarto1
25+ yr banker and have seen more franchises than I can imagine. Some good and take care of their franchisees and some suck the ever living shite out of their franchisees (ie quizzno’s).
Better get that FDD (franchise disclosure document) and study it upside down and inside out. Then, you better set up interviews with at least 10 different franchisees to meet and discuss strengths and weaknesses with the system too. And don’t just meet the ones they give you for references in the FDD.
If you are starting one of these fads franchises out there (think cookies, cupcakes etc), then you better set the debt to be paid back in 5 years. Otherwise you’ll probably be paying debt on a business that’s closed. Sorry to be so negative but……if it was easy, everybody would do it and in a (some) businesses with tight profit margins, that franchise royalty may make the difference in you keeping the lights on or not. Remember their royalty is usually off the top line so they don’t care if the bottom line is red or black.
Better get that FDD (franchise disclosure document) and study it upside down and inside out. Then, you better set up interviews with at least 10 different franchisees to meet and discuss strengths and weaknesses with the system too. And don’t just meet the ones they give you for references in the FDD.
If you are starting one of these fads franchises out there (think cookies, cupcakes etc), then you better set the debt to be paid back in 5 years. Otherwise you’ll probably be paying debt on a business that’s closed. Sorry to be so negative but……if it was easy, everybody would do it and in a (some) businesses with tight profit margins, that franchise royalty may make the difference in you keeping the lights on or not. Remember their royalty is usually off the top line so they don’t care if the bottom line is red or black.
Posted on 7/17/22 at 5:59 pm to Im4datigers
I know this board is all about finances but something to consider is the politics between franchise and corporate. It can very much turn us vs them and put you in a bad spot but be prepared to do so
Posted on 7/17/22 at 7:51 pm to Ramblin Wreck
I would pump the brakes hard on investing in any type of retail in this current economy. Until we see inflation take a hard dive down, and consumer confidence return it’s risky. Many franchises cost of goods are rising every month, and their profit is diminishing. Combine that with less guest traffic they are contracting. I think you have the right idea, I would wait a year to see if market conditions improve.
Posted on 7/17/22 at 9:59 pm to Twenty 49
(no message)
This post was edited on 8/29/22 at 10:49 am
Posted on 7/18/22 at 12:45 am to Ramblin Wreck
One of the niche markets I found that's real estate adjacent was a guy who bought full-size office parks and split them up into single and double offices that a solo practitioner could rent when they were starting out.
This was pre-pandemic, but he was getting premium square foot rents on some huge places that way. His occupancy was routinely 100%.
It was a good deal for me at the time. Convenient location and didn't have to sign a long term lease on more than the single office I needed. If I hadn't found him, I would've been renting something stand-alone that was slum-adjacent and paying more money.
One thing that I learned was he had a number of those single offices leased/rented to the State of LA for various departments/agencies. They needed a physical office, but they left them largely vacant, lowering his maintenance costs considerably.
I've got some commercial zoned property that I'll definitely consider for this when I get closer to retirement.
This was pre-pandemic, but he was getting premium square foot rents on some huge places that way. His occupancy was routinely 100%.
It was a good deal for me at the time. Convenient location and didn't have to sign a long term lease on more than the single office I needed. If I hadn't found him, I would've been renting something stand-alone that was slum-adjacent and paying more money.
One thing that I learned was he had a number of those single offices leased/rented to the State of LA for various departments/agencies. They needed a physical office, but they left them largely vacant, lowering his maintenance costs considerably.
I've got some commercial zoned property that I'll definitely consider for this when I get closer to retirement.
Posted on 7/18/22 at 1:52 am to Ramblin Wreck
OP, its been 2 and a half years, did you start a franchise?
Posted on 7/18/22 at 5:47 am to Ramblin Wreck
One of my buddies owns two European Wax Centers and has the rights to three of four more.
He likes it and makes good money.
He likes it and makes good money.
Posted on 7/18/22 at 10:39 am to Ramblin Wreck
barber shop if you can get good barbers. Booth rental is easy passive income.
Posted on 7/24/22 at 9:20 am to MizzouFan13
Little fricking Ceasars
Posted on 7/24/22 at 1:07 pm to Ramblin Wreck
Storage facilities. I am a district manager for a company that does them. Cash cows.
Posted on 7/25/22 at 6:27 pm to Palm Beach Tiger
As I understand it, storage units require a lot of capital for a relatively low return. Owning only one of them isn't enough. You would need several to make a good income. I've seen some for sale through Sunbelt, Loopnet, etc. They rarely make more than 30-40k per building. Those could be mismanaged or in bad areas though. I'm not sure.
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