Want to learn about franchises

[FreeBy2020]

I am interested in learning about franchises. Pros, cons, peoples experiences, etc. What I really would like to know is if anyone in here can truly recommend good reading/learning material on the subject. I'm especially interested in hearing from people who have owned a franchise.

Right now, my thinking is rather primitive on the subject. I know that you have to pay franchise fees and that results are not guaranteed. I also know that there is a lot to be said for having an established name on your side and the power of national/regional marketing campaigns can be incredible. I'm doing some research on the internet, trying to guage start up costs and the types of support networks different franchises offer. I'm all over the map in terms of the types of franchises that interest me right now. I think most franchises look good to me at this point because they all mean I'll be in control of my own time to some degree... So I haven't narrowed down what industry I would really like to get into.

I have a strong desire to be my own boss and be in control of my hours. I am the type who would be much happier working 15 hours a day for myself and being exhausted at the end of the day than working 8 hours a day for someone else even if the job was easy. I'm a workaholic when the work is something I enjoy. So, I've been thinking that a franchise might be a good idea for me.

Any advice, especially in terms of learning resources, is very much appreciated. Thanks!

 

[stargazer08]

DH family bought into a pizza franchise soon after we were married. Initially it was a good experience but it turned sour. Mafia is one descriptive word that comes to mind when thinking about the experience. You must buy their food supplies that can be purchased for significantly less and of higher quality on the open market.

You pay a franchise fee per store you open and then royalties there after that are a percentage of gross (not profit). Then there are the promotions they have that are not geared to make a profit. Then comes the new items that require the purchase of specialized equipment that cost an exhorbinate amount of money. I think you get the picture.

This particular chain started out good but got greedy with franchise owners. A large group got together and filed a class action lawsuit against the parent company. In-laws sold out to the parent company before anything came of the lawsuit and had to sign off on any further litigation.

I would not recommend any type of food franchise.

 

[chinaco]

On starting your own business... franchise or not.

Do plenty of (Realistic) financial analysis for best, worst, and likely scenarios for the business. Compare the classic financial ratios and returns against a normal diversified portfolio investment. Which is better?

Then factor in risk. Bottom-line, a start-up business is likely to fail. Most fail within the first 5 years.

Do some sales projections and consider the competition.

Create a realistic business plan.

The franchise that seems to be most successful is McDonalds. But you will need to have a fairly large up-front investment.

My concern about owning a small business is that I would take the financial risk, and just end up purchasing a low paying job (I would have to work in some capacity) and make a poor return on investment and possibly go bust.

That is why I spent my time getting a corporate job. But then again, I am not an entrepreneur.

 

[Martha]

By law the franchisor has to give you an offering circular that describes risks, training, fees (both royalty and advertising), termination rules, etc. However, it is very hard for them to give you estimated financial information or information about how well their franchises do because the regulations regarding financial claims are very tough. So, you get all these disclosures and still won't know if you will be making any money. That is up to you to figure out on your own.

The franchise agreement is not a matter of negotiation. It will be a take it or leave it proposition.

I do know a number of successful franchisees, but so much of it is location dependent, timing dependent and filled with so many other variables that it is difficult to predict whether the same franchise is right for someone else. I know a young man who bought subway franchises early on and ended up financially independent well before he was 40. I know someone who was very successful with Burger King franchises, and then got loans on the old franchises to do major expansions in new areas. He ended up losing all his franchises and barely got out without having to file bankruptcy. I know a guy who scrimped and saved and bought a mall food court kind of franchise. He works 7 days a week and seems happy as can be. I know a motel owner who had a motel in a fabulous location (waterfront) and dropped the flag for the motel--why pay the high franchise fees when the place was full anyway? But he keeps the flag on all his other locations. I know an owner of a golf store franchise. The franchisor got into financial trouble which ended up substantially reducing the value of the franchise. Same thing happened with a bagel franchisee I knew and he ended up closing his locations, not able to compete with the stronger Bruegger franchise.


Experiences vary. I would not cash in my 401k or mortgage my home to buy a franchise. But then again, I am not that kind of risk taker. I have seen those who have done that successfully and those who have lost it all.

 

[thefed]

you'll know the right one IF you see it. realize that the upside is somewhat limited with a franchise....on a fresh start-up YOU set the rules...all of em!

 

[Bigritchie]

If you do start thinking hot and heavy about one, I would recommend going and getting a job at one for 6 months or so, learning the ropes, pick the owners brain, and see if you like it.

They advertise these things as "be self-employed AND have our wonderful help!", but that is not the case. You will make or break on your own hardwork. You are pretty much their manager that gets paid the left over profits, and make no mistake, it is their way (no matter how ignorant it may be) or they take your place from you and shut you down. Most of them would kick their grandmothers down the stairs for a penny too.

And selling them is a utter pain too with franchise training and stuff.

I would make sure you read that contract and you understand every single word in it.

Be ready to work your ass off, 7 days + a week too.