Life after FI? Anyone buy into a franchise?

[obgyn65]

I would not take the risk of leaving my job to start a franchise business if you are that close to FI. Especially with kids.

So, yesterday I sat through a webinar on a franchise. $200k investment with estimated $150k annual net income projected with steady increases over the years. (...)
Kind of a rant, but I've been thinking of it as it would be nice to leave a business behind to my kids, probably a silly thought.

 

[Walt34]

DW's nephew did the franchise gig for a couple of years on a sub shop. Worked his butt off for ~3 years and exited $50k poorer but much wiser.

He was in his early 30's at the time and had time to financially recover but still an expensive lesson.

But that's my sole example of franchises. I'd run away.

 

[Tekward]

I can speak from small-business experience. I was working in the nuclear industry (and Navy Reserve) and looking for something within our control when my DW and I purchased a 2 storefront business.

CONs:
1. Worked seven days a week almost continuously for 7 years.
2. Constant tension about cash flow with personal money filling the gaps. Had the extra tension of late night phone calls following several break-in robberies.
3. It was way beyond bringing work home with us. It permeated our lives.


PROs
1. My daughters got a front row seat and I think it helped them appreciate a good work ethic and value preparing for the future.
2. We avoided bankruptcy, closing the stores with all bills paid.
3. We avoided divorce with a well-tested relationship.

Looking back, I have no regrets because I understand the reasoning behind our decision and that external market factors were at play. But I still smile broadly when I remind myself I don't have to spend the weekend at the stores.

 

[pb4uski]

I would not take the risk of leaving my job to start a franchise business if you are that close to FI. Especially with kids.

+1

We had a take and bake pizza place where I lived and we went quite often, but I guess not often enough because it closed after a few years. I liked the pizza though and it is fresh out of the oven.

I don't see that a franchisor would bring enough to the table to justify $200k investment, you could do it yourself and save $200k. How many pizzas do you have to sell to make $150k profit?

 

[Texas Proud]

This isn't necessarily true, unless you are an accountant or some other professional. Businesses often must grow or die, largely because grow is what your competitors are trying to do.

Ha

I will agree that MOST businesses want to grow, but there is nothing that requires you to grow or die... I have heard that many times and it just is not true...

There are many small businesses that just do not grow... they might have 10 or so employees and stay at that level year in and year out... sure, they change their prices due to inflation, but just do not grow...

Also, growth has killed off a lot of businesses over the years... an owner sees how successful he is with one location, so he starts opening up more... but he grows to fast and then his business is not doing the same as it was... customers get mad, they leave... and the business dies...

I am just saying that it is a decision of the owner to let a business grow where it consumes all his time like the OP said...

 

[Texas Proud]

DW's nephew did the franchise gig for a couple of years on a sub shop. Worked his butt off for ~3 years and exited $50k poorer but much wiser.

He was in his early 30's at the time and had time to financially recover but still an expensive lesson.

But that's my sole example of franchises. I'd run away.

+1

We had a take and bake pizza place where I lived and we went quite often, but I guess not often enough because it closed after a few years. I liked the pizza though and it is fresh out of the oven.

I don't see that a franchisor would bring enough to the table to justify $200k investment, you could do it yourself and save $200k. How many pizzas do you have to sell to make $150k profit?

Both of these sound very familiar to me.... back when I was turning 30 I had a friend who wanted to open a Subway shop... he said he had talked to an owner of one and got the same story of making $150K per year... and the guy said he had hired a manager to do 'all the work'.... Me, I laughed... I wondered how many subs you had to sell to pay for all the staff, food costs, rent etc. etc. including a manager and still take home $150K... my quick calculation said you had to sell over 1,500 subs a day if you profit is $1 per sub...

But hey, I could be wrong.... there are a lot of these shops around and they seem to have staying power...

 

[oldphd]

Both of these sound very familiar to me.... back when I was turning 30 I had a friend who wanted to open a Subway shop... he said he had talked to an owner of one and got the same story of making $150K per year... and the guy said he had hired a manager to do 'all the work'.... Me, I laughed... I wondered how many subs you had to sell to pay for all the staff, food costs, rent etc. etc. including a manager and still take home $150K... my quick calculation said you had to sell over 1,500 subs a day if you profit is $1 per sub...

But hey, I could be wrong.... there are a lot of these shops around and they seem to have staying power...

Years ago I recall reading an article on franchises that gave an evaluation of the potential... What stands out is they described buying a Subway franchise in most cases as spending a bunch of $$$ to get yourself a minimum wage job...

 

[Bestwifeever]

We have one of those pizza places here ("HomeMade Pizza") and I think it does pretty well--no ovens, just refrigerators and people assemble the pies. I think the ingredients are brought in already prepped (dough is made, sauce is ready, etc.), so it's nowhere near the work of a regular pizza parlor but the pies cost more! We've only gone a couple of times and prefer the regular pizza parlor pies.

But I think the concept might be coming to the end of a fad. It was an Oprah "favorite thing" in 2006.

 

[haha]

<>... so it's nowhere near the work of a regular pizza parlor but the pies cost more! We've only gone a couple of times and prefer the regular pizza parlor pies.

I suppose on if you are a harried parent heading home after work or picking up kids into a suburb, or if you are single or a couple living surrounded by really top grade pizza, including some wood fired oven stuff. I am off of pizza now for health reasons, but I was real fan earlier to the point wehre when I moved from Southern New England to the West Coast I went on a pizza strike. 60 years later, locals have still not caught up, although the places are sometimkes now calle "apizza". They still haven't learned to pronounce "abitz!"

 

[Ronnieboy]

We have a chain around here, Papa Murphey's, take and bake. They are pretty good, but they are not much cheaper than Domino's or Papa Johns. Maybe a buck or two.

 

[NYEXPAT]

I suppose on if you are a harried parent heading home after work or picking up kids into a suburb, or if you are single or a couple living surrounded by really top grade pizza, including some wood fired oven stuff. I am off of pizza now for health reasons, but I was real fan earlier to the point wehre when I moved from Southern New England to the West Coast I went on a pizza strike. 60 years later, locals have still not caught up, although the places are sometimkes now calle "apizza". They still haven't learned to pronounce "abitz!"

If I close my eye's after reading your post, I can almost smell "Wooster St".
Thanks for the memory!

 

[tryan]

The franchise was a take and bake pizza place.

A good friends BIL bought a Dominos region. Build 3 stores, hired a GM ... never got his hands dirty. And lost his shirt. He's in the .1% of failures. Now triing to sell them to no avail.

 

[nwsteve]

We did the franchise thing (print shop) when I reached satuation with mega corp BS.
Couple of lessons:
1. Unless you have the capital and desire to scale up to multiple locations, you are really buying a job and not a very well paying one at that.
2. Be sure you know what your exit strategy is--many franchises just disappear and the owners and all the so-called sweat equity just disappears.
3. If you really really want to own a franchise, find an existing going concern where you can look at actual financials and purchase assets at discount
4. Better yet, work for "free", for an existing franchise of your choosing and see what the fit is really.

We were fortunate enough to recognize the true economics of the biz and the future outlook, we got out early enough to recoup our invested capital but not any of the loss income from leaving corp life for the nearly 2.5 years we ran it.
Nwsteve

 

[Aiming_4_55]

So let me get this straight.... you go out someplace to buy a pizza that is NOT cooked And you are supposed to go home and cook it yourself?

And how much would these pizzas cost? And how are they so much better than you can buy at the grocery store? ...

Yup, almost like buying groceries at the mart to bring home to cook. Interesting concept huh Just teasing.

It's quite popular by me, first ring burbs... everytime I go, 8 - 10 customers in line, so decent business. Ingredients are cut fresh daily and better quality cheese according to sales pitch. Standard family size pizza about 10 bucks.

 

[Aiming_4_55]

I would not take the risk of leaving my job to start a franchise business if you are that close to FI. Especially with kids.

The kids are too young, so they will stay home while I work

Just teasing and I hear the overwhelming feedback. Thanks.

 

[Aiming_4_55]

2. Be sure you know what your exit strategy is--many franchises just disappear and the owners and all the so-called sweat equity just disappears.

Exit strategy is the same as my FIRECalc age when I go poof! Then I will no longer care.

Congrats on getting out.

 

[Texas Proud]

Yup, almost like buying groceries at the mart to bring home to cook. Interesting concept huh Just teasing.

It's quite popular by me, first ring burbs... everytime I go, 8 - 10 customers in line, so decent business. Ingredients are cut fresh daily and better quality cheese according to sales pitch. Standard family size pizza about 10 bucks.

At our local supermarket you can buy the same thing... I guess the difference is you have to buy what they prepared and not what you order... but they are made fresh everyday... heck, there is a bakery, food service, deli... all making fresh stuff to eat.... I have never looked at the price, so can not comment on that.... I will have to take a look next time I am there...

I would still probably buy the Domino's at $6 per pie and also save money by not cooking... but to each their own...

 

[pb4uski]

...I would still probably buy the Domino's at $6 per pie and also save money by not cooking... but to each their own...

The benefit of the take and bake over Dominos et al is that it is hot and fresh out of the oven, but if your local pizzeria is close then I guess it is a wash.

Another thing is that we have found that the grocery store frozen pizzas are much better today than in the past. Where they used to be more like cardboard with pizza sauce and cheese on top, they are quite credible today and arguably less greasy than pizzeria pizza.

 

[Texas Proud]

The benefit of the take and bake over Dominos et al is that it is hot and fresh out of the oven, but if your local pizzeria is close then I guess it is a wash.

Another thing is that we have found that the grocery store frozen pizzas are much better today than in the past. Where they used to be more like cardboard with pizza sauce and cheese on top, they are quite credible today and arguably less greasy than pizzeria pizza.

Yes, ours is close and I go pick them up when they come out of the oven..

The store bought ones I was talking about are made fresh, not the frozen ones.... but I suspect that even the frozen ones have probably gotten better... still, I have not looked at their price..

Just as a FYI... you can put a Dominos in the oven to heat it up if you want... I do that for the leftovers and they taste great

 

[Rowdy]

You're too close to the finish line, hang on; skip the franchise.

See if the 45 hour thing will work out. Maybe it's time to start shopping the resume around if things get unbearable, however, the advantage to staying on with the current employer is that at least you would likely get some severance money if things did not work out.

Megacorp can be a bummer sometimes, but I like the security of knowing that all my eggs (money) are not in a single business (e.g. franchise). Your skills are transferable; you can always use those skills at a company with a better work/life balance.

 

[SJ1_]

I looked into franchisees in the early 90's and decided to stay put in an corp job.
One problem is they make money by selling to you and you make money by selling to customer. so lets say they sell it to you for $1 and you sell it to customer for $1.50 then they run their tv ads and have a 2 for 1 so now you still pay $1 but get .75 cents. (little extreme example) so you will prob. sell more so they will make more $$ and you willlmake less

the other prob. I didn't like is they know everything about your business so if each store
gross $200,000 and you do $300,000 what do you think they will do? figure a way to cut into that business

I have friends in a franchise business and they did a lot of due-diligence and they make a lot of money but like most people above say the hours are insane esp. the first year

 

[devans0]

DW was a manager at these places for years, 'til she got a better job reading electric meters. She excelled in turn-arounds and made fortunes for owners. The downfalls not mentioned is finding good help in years that aren't in a recession, razor thin profit margins that can easily get eaten up in labor costs, and stringent(expensive) health and building codes. Long hours is only part of it.

My FIRE plans include working at the best local pizza place, then Thai restaurant long enough to learn to cook my favorites. I plan to bribe and flatter the cooks. Then it's a coffee cart. Flavored hot water at generous prices, and take a day off when the fish are biting, etc... That should net me hundreds of dollars a year past my own coffee consumption, and tax write offs, too.

 

[clifp]

At various times I've considered buying a franchise, including just a few months ago.
One of the best things about this forum is not the advice you get on what to do, but the advice you get on what NOT to do .

Is guess nobody is going to take the side that buying a franchise is an easy way to make big bucks?

So how about pay off mortgage or buy a Pizza Franchise?

 

[MichaelB]

Is guess nobody is going to take the side that buying a franchise is an easy way to make big bucks?

Easy money? The only easy money is by they guy that sells the formula to make easy money. All the rest takes hard work. A franchise can be successful, and can make a lot of money, but it is never easy.

 

[frank]

I started my own business with my wife. it wasn't a franchise ( too many fees). We made good money while we did it and when I sold it, it allowed me to fire. The thing with any independent small business is the hours. my wife and I were putting in 80 plus hours a week and forget vacations or holidays, someone always called in sick or unavailable. In order to save the marriage and family, we sold and did quite well, but If I had to do it again I would have to think long and hard. I would like to see a business where you could make 150k on a 200k investment. that would be something to see. like the man says "if it was that easy everyone would be doing it."