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franchise ideas?
Old 11-18-2006, 03:32 AM   #1
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franchise ideas?

my step son is interested in buying a turnkey franchise and we are just starting to look at ideas, man there are hundreds of real good ones out there.

franchises when you read about them are like resumes, " i never met a resume i didnt like"

we are pretty much open to any ideas and after much thought may go into something involving kids depending if the area demographics where we can get a building can support a gymboree or something along those lines.

nothing is out though, food, business services, we are open to all ideas

right now he is a graphic artist for the NFL and the NBA but he dosnt really want to revolve the business around that career


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Re: franchise ideas?
Old 11-18-2006, 07:24 AM   #2
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Re: franchise ideas?

What a difference in perspective. When I was between idiots that paid me a salary, I looked at opening a franchise. Yes, there are a vast multitude but I wasn't happy with any of them. Beneath the glossy pictures and smiling faces, the pitch was always the same. "Send us money. We'll sorta train you. We hope you'll do ok." They all also looked like a lot of work. Egads!

The one that interesed me the most was an oil change franchise. It seemed pretty straight forward and didn't involved weird hours. It's something most everyone needs that owns a car. The labor required needs minimal skills except for a "shift lead" or a "certified" vehicle inspector (Texas).

Many years ago I worked in the food industry. That's the toughest business I can imagine. It truly has no barriers to entry but the government regs will drive you nuts if you are trying to do a good job. The failure rate is very high. The "name" fast food franchises have very high fees. The story of starting a McDonald's on a shoestring and being a millionaire in a few years is ancient history.
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Re: franchise ideas?
Old 11-18-2006, 07:35 AM   #3
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Re: franchise ideas?

Okay. Here is my 2 cents..........once I made the entreprenuerial break
(around 1987) I looked pretty seriously at several franchises. That little voice said "Don't do it!" I was tempted. I now believe your chances are much better in buying an operating business (more options - less risk).
Of course, it is way more difficult to find one to buy as opposed to signing
up for a franchise. Anyway, recommend looking for a business for sale
before going with a franchise, if you have the time.

JG
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Re: franchise ideas?
Old 11-18-2006, 08:34 AM   #4
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Re: franchise ideas?

Do a search on fat wallet finance forums....

http://www.fatwallet.com/forums/mess...ord1=franchise

I thought there was a few subway stories somewhere there where people ended up working a lot of hours (60-80hrs/wk) for middle class salary....and complaints of too many stores....
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Re: franchise ideas?
Old 11-18-2006, 08:48 AM   #5
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Re: franchise ideas?

I'm not a big fan of franchises, although some do very well.

Owning a franchise is similar to having a financial planner. Each dollar you earn in some franchises has to filter through the franchise machine whereby they take a cut much like a financial planner takes a cut of your investments, thereby cutting into your profits.

Also, having a turnkey operation cuts both ways. They give you a winning formula, but don't allow you to be creative and put your own personal touch to mold the business to your liking. Sometimes they even force you to do things you would rather not do. It's the price your pay for instant name and product recognition.

A true entrepreneur will be creative enough to start his own business from scratch. That takes liking what you do and being good at it, being persistant and determined, getting up when you fall down, believing in yourself, being able to wear all the hats (at least in the beginning), and of course having the funding to start along with a touch of good luck. Having a good lawyer and CPA as your guides from the start is also very important.
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Re: franchise ideas?
Old 11-18-2006, 09:52 AM   #6
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Re: franchise ideas?

Buying a franchise is a take it or leave it proposition. There is no negotiating with the franchisor. Most every franchisor requires a person to be individually on the hook for the obligations under the franchise agreement.

Every franchise owner I know works very very hard.

Even proven franchises can go bellyup. I know a person who had a couple of decent Burger King franchises. He built another. The location just wasn't right. He ended up losing everything, even the successful locations. So the risk can be high.

I also know people who have made a lot of money with franchises. I know a young man who bought a subway franchise and then ended up with about 10 of them. He is very well off today and he is not yet 40.

Franchise agreements typically run for about 10 years. Under most states' laws the franchisor will have to renew your franchise but it need only be on the same terms as new franchises. If expensive improvements are needed to meet current standards, you will have to make them. For example, a few years ago Hallmark upgraded to "Gold Crowne" stores, that were bigger and had considerably more offerings than older stores. If you were a Hallmark franchisee you had to upgrade on renewal, whether or not it made business sense at your location.

Watch out for the newer untested franchises. Remember bagels were hot a few years ago. Breugger's Bagels made it. Chesapeake Bagels did not. http://www.chesbagel.com/fd1.htm

He should look carefully at the offering circular for any franchise offering he is considering. One problem is that franchisors are not too inclined to provide any sort of projections on how you will do financially. This is because regulators have a number limitations on what you can disclose and how you must disclose that information.

I am only mentioning a few things here, there are numerous issues to consider in buying a franchise that I can't even begin to go through. Will you have an exclusive territory? How will advertising work? Etc.

Subway remains the top franchise, but that doesn't mean it is best for where you are and what you want. http://www.entrepreneur.com/franchise500/index.html

I kind of like the Curves for Women franchise. The equipment isn't too expensive. Not a lot of build out requirements at the locations. The concept appeals to middleaged women who are out of shape. But it appeals to me only on the surface--I haven't read the offering materials or their franchise agreement.
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Re: franchise ideas?
Old 11-18-2006, 12:58 PM   #7
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Re: franchise ideas?

There must be business owners who'd like to retire. I know my brother will be looking to sell his business some time in the next 5-10 years or so, and it's a great business.
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Re: franchise ideas?
Old 11-18-2006, 01:28 PM   #8
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Re: franchise ideas?

Quote:
Originally Posted by astromeria
There must be business owners who'd like to retire. I know my brother will be looking to sell his business some time in the next 5-10 years or so, and it's a great business.
Yeah, there's somebody selling a coin-op laundry in the next town. He's asking about 3X earnings, which seems like a pretty good deal. The perfect low-maintenance money machine for semi-ER. If it were less than an hour away from me, I'd probably buy it.
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Re: franchise ideas?
Old 11-18-2006, 03:17 PM   #9
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Re: franchise ideas?

Quote:
Originally Posted by wab
Yeah, there's somebody selling a coin-op laundry in the next town. He's asking about 3X earnings, which seems like a pretty good deal. The perfect low-maintenance money machine for semi-ER. If it were less than an hour away from me, I'd probably buy it.
I looked at a coin operated car wash. They wanted $600,000 for it. They had all the info I would need to apply for a SBA loan with them ready for me to fill out. They had "certified" receipts of over $300,000 per year. "It's all cash -- wink, wink."

Being the engineer, I pulled out my calculator. Let's see...$300,000...$1 a wash...365 days....24 hours....6 bays..... Oh my, that means you have at least 5 cars every hour in each bay, all day, every day. On a nice Saturday afternoon, there was one car washing.

You need to do your homework on buying a business. Many people selling a business are looking for the next sucker. They are selling for a reason but don't expect them to tell you the truth. Everyone I talked with when I was looking was either "retiring" or "wanting to spend more time with their other investments." The financials were usually in a mess and could never be audited ("but they were all making lots of money" per the owner). There seemed to be confusion between "receipts" and "profit." The businesses usually would "run themselves."

I read a lot of descriptions on businesses for sale. I only talked with a few people but I figured out it was a jungle. The best way is to probably work for someone in the kind of business you are interested in and learn what's really going on. Then you'll know enough to evaluate similar businesses that are for sale or what it takes to start the franchise.

If you go out waving cash and saying you're ready to be your own boss, the sharks will be circling in a matter of minutes.


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Re: franchise ideas?
Old 11-18-2006, 03:37 PM   #10
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Re: franchise ideas?

Quote:
Originally Posted by 2B
I looked at a coin operated car wash. They wanted $600,000 for it. They had all the info I would need to apply for a SBA loan with them ready for me to fill out. They had "certified" receipts of over $300,000 per year. "It's all cash -- wink, wink."

Being the engineer, I pulled out my calculator. Let's see...$300,000...$1 a wash...365 days....24 hours....6 bays..... Oh my, that means you have at least 5 cars every hour in each bay, all day, every day. On a nice Saturday afternoon, there was one car washing.

You need to do your homework on buying a business. Many people selling a business are looking for the next sucker. They are selling for a reason but don't expect them to tell you the truth. Everyone I talked with when I was looking was either "retiring" or "wanting to spend more time with their other investments." The financials were usually in a mess and could never be audited ("but they were all making lots of money" per the owner). There seemed to be confusion between "receipts" and "profit." The businesses usually would "run themselves."

I read a lot of descriptions on businesses for sale. I only talked with a few people but I figured out it was a jungle. The best way is to probably work for someone in the kind of business you are interested in and learn what's really going on. Then you'll know enough to evaluate similar businesses that are for sale or what it takes to start the franchise.

If you go out waving cash and saying you're ready to be your own boss, the sharks will be circling in a matter of minutes.


It's like I said, very hard to find a good one.

JG
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Old 11-18-2006, 04:50 PM   #11
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Re: franchise ideas?

Quote:
Originally Posted by 2B
I The best way is to probably work for someone in the kind of business you are interested in and learn what's really going on. Then you'll know enough to evaluate similar businesses that are for sale or what it takes to start the franchise.
This is great advise. I am in the "Been there Done It" categpry having started up a turnkey printing franchise as my liberation moment from mega corp.
Key learnings, if you know the business you want to be in (seeabove), buy someone's who is ready to get out of it. Any going concern will have better cash flow from an existing customer base and depreciated assets than you will with a start-up. Going concerns are much more bankable and you often can get owner financing to make it work. Make sure you require as a term of sale, an appropriate period for the selling owner to help with customer transition and resolving issues with Franchisor--they will be a bunch. Most importantly any going concern will already have employees who know something about how to do their job. This was a big deal in hind sight, starting a new franchise in an area without previous experience, the tuition for finding and qualifying employees was way to hgh.
If there is specific franchise you want to be part of, the franchisor will always have a list of resells, but it is generally better to go talk to a couple of existing owners--they usually know who wants out. This approach may keep you out of having to sign a new franchise agreement (buy as a going concern), and a likely "commission" to the franchisor the exiting owner will have to eat.
If you want more details, pm me as I could probably write a book on the experience. As always, note Martha's excellent remarks
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Re: franchise ideas?
Old 11-18-2006, 05:41 PM   #12
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Re: franchise ideas?

Here's an opportunity to buy a Quizno's franchise at a discount. Amazing what shows up on Craigslist...

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Re: franchise ideas?
Old 11-18-2006, 06:46 PM   #13
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Re: franchise ideas?

Franchises and retail businesses really "scare" me. The franchise fees seem so high. There seems to be so much saturation in my area of retail/food/service shops.

When the economy dips, I don't see how all these latte shops, day spas, subways, nail shops, $1.99 garment cleaners, etc can survive.

I've been looking for a business to buy - two criteria:
1. Something "non retail", and
2. Transition situation where the owner would stay on for a couple years, I would join in a minority equity position, earn some "sweat equity" through working there a couple years, and buy remaining equity 3 years out.

This kind of arrangement can take years to find. The ones I've looked at either were:
- Businesses that didn't interest me, and/or
- Overvalued, and/or
- "Unworkable dynamics" with the owner on structuring a deal

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Re: franchise ideas?
Old 11-19-2006, 10:43 AM   #14
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Re: franchise ideas?

I wouldn't buy a franchise from someone who wanted to sell it.

I'd want to buy a franchise from someone who hated to sell it, or whose survivors/beneficiaries didn't understand it and just wanted to get rid of it.

As for picking a particular franchise, I'd start learning about what makes a good one vs a not-so-good one. There has to be a logical reason for the success of McDonald's over Burger King, Subway over Quizno's, and Midas over Jiffy Lube. Perhaps it would even make sense to be employed at one of those franchises for a while just to understand what the rank & file had to deal with or how the corporate HQ treats the managers.

Once I'd chosen a particular franchise, then I'd wait for someone who hated to have to sell theirs. Or I'd offer to invest in it.

"Cartridge World" makes my antenna twitch. Its local franchise is owned by two guys who've just opened their second location. I've been using their products for over a year without a problem. They have a huge business taking care of other businesses. And they're only on Oahu, with three major neighbor islands left untouched...
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Old 11-19-2006, 10:53 AM   #15
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Re: franchise ideas?

Been there - done that. Never again...

(It's not the business - it's what it did to the family)...

Simple question - R U ready to be "involved", 7/24/365? If not, work for someone else...

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Old 11-19-2006, 11:01 AM   #16
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Re: franchise ideas?

Quote:
Originally Posted by Ron'Da
Simple question - R U ready to be "involved", 7/24/365? If not, work for someone else...
Or let someone else work for your money.

I'd love to be one of the shareholders supporting a good franchisee in their expansion.
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Old 11-19-2006, 12:11 PM   #17
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Re: franchise ideas?

I know one franchise I wish were available in my area: Pods (or something similar).
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Old 11-19-2006, 10:25 PM   #18
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Re: franchise ideas?

Franchises never had much appeal to me either although I kinda wonder how most of the Star Bucks Franchisors are making out (assuming it's franchised). Businesses I would favor are unglamorous services especially those with exclusive arrangements (transportation, distributorship, etc) and more B-to-B.

Some references that I found helpful:
The 2005 Business Reference Guide by Tom West (really good for understanding how to evaluate and price a business)

Quickie web article:
http://www.businessbookpress.com/art...article148.htm
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Old 11-20-2006, 01:26 AM   #19
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Re: franchise ideas?

For a retail franchise, just walk in and ask for a job. After a while, if you are still delusional, inquire about purchasing one.
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