Buying a Franchise

[Space Mountain]

Hi All:

I am considering purchasing a franchise. Recently, I hooked up with a "franchise broker" who qualified me and we agreed on 3 franchises to investigate. I realize this "broker" works for the franchises and receives a commission for any franchise I buy.

Has anyone gone this route or have an opinion about franchises in general? I have always had a reluctance towards franchises with regards to ongoing royalties and other fees such as advertising and other start-up related expenses. All this with NO guarantee of success.

Are there any franchise owners out there? Any comments from folks would be appreciated.

I have the financial means to explore this but given our current economic times, feel a little nervous.

FYI- One of the franchises is in the "hair cutting" industry (retail) while the other 2 are more home based. (service related)

Thanks, everybody!

Space Mountain

 

[Walt34]

A nephew tried running a franchise sub shop. He sunk every dime he had and all he could borrow on it. Worked his butt off for three years. Finally threw in the towel and lost it all.

I realize that's a sample of one and others have done well, but it's not something I would try.

 

[Kronk]

There are good and bad aspects to franchises.

Some of the Good: Better name recognition, help from franchisor, and a plan that has worked in the past.
Some of the Bad: fees, can't necessarily do what you want.

If you are a "real" entrepreneur, you'll probably feel constrained by what the franchise allows you to do. You might think of a great advertising idea, but then you have to run that idea by the franchisor, who may or may not approve it. You might not be able to expand when you want. If you wanted to sell your franchise down the road, you'll have to get approval from the franchisor. If you go under, you might still owe ongoing franchise fees. Read the UFOC carefully.

I don't know. You might be getting in over your head. For example, if you don't know anything about hair cutting, you might still be able to do that hair cutting franchise by following their plan. But jumping into a business you don't know might not be a great idea.

In our case, we bought an up-and-running franchise that we intended for DW to run part-time (with a full-time manager) and to bring in some decent cash. It completely bombed, and was the most miserable two years of our lives. At least we managed to sell it, albeit $175,000 less than we paid for it. And we learned that DW hates the pressure involved in running a small company (and there will almost certainly be lots of work and lots of pressure).

Really try to figure out whether you're cut out to do hiring, firing, payroll, accounting, marketing, managing, HR, etc. Even on a small scale, those things can be hard to deal with.

 

[Nords]

Recently, I hooked up with a "franchise broker" who qualified me ...

The broker qualified you? What a wonderful life-affirming and ego-enhancing validation they must deliver. Do they have a waiting list or can they only handle certain types of clients?

I guess you'll know how much faith & trust they have in their clients by the amount of low-interest loans they're willing to offer to entreprenerial franchisees. But this type of broker attitude tweaks a warning flag.

I'm not sure what advice an early-retirement board can offer on franchising. You might do better looking for other discussion boards on that subject, especially websites concerning your candidate franchises whose URLs include terms like [franchisename]sucks.com. You don't want to read about happy ER franchisees-- you want to read about the disasters and how to avoid replicating their misfortunes.

 

[BunsGettingFirm]

A nephew tried running a franchise sub shop. He sunk every dime he had and all he could borrow on it. Worked his butt off for three years. Finally threw in the towel and lost it all.

I realize that's a sample of one and others have done well, but it's not something I would try.

Would this be Subway's? I believe they were getting sued a while back for opening up shops really close to each other.

There is no short cut. Trying to replicate a business that you think you know well from the outside in is a lot of work as well. It will take you a couple of months of full-time work to write the business plan.

Have you read the Myth of Entrepreneurship? The author's study shows that you don't want to go into perfectly-competitive industries where any Joe or Bob can open up a shop to compete with you. Think of something that's an extension of your existing work because a) you already have a lot of implicit knowledge of the industry just by being part of it and b) you can pick up niches that are too small for the mega corp but plenty big enough for you.