Suggesting son to invest in a Franchise

[rkser]

Our son is 34yrs old, has an MBA & earns around $110k working for a University. His DW earns a little more than him & they have a 5 mo old son.
They live in a HCOL city & I do not think they have much left for savings for their future.
I think if they have to improve their financial situation & do better for themselves he may have to take up a part time hustle on the side with some business or a franchise of some kind.

Before I bring up this idea to him, I am looking for advice for some gainful franchise one may think of.
I keep looking for some suitable part time Gig.

Any help/suggestions will be greatly appreciated, thank you.

 

[RetiredHappy]

The issue with being a franchisee is that you give up a percentage of your revenue, instead of profits, to the franchisor. Much like the AUM model, you may be losing money and you still have to pay your franchise fees. It is a non-starter for most of us. We actually spoke with a franchise broker before starting our own business and explored a couple of businesses. Some of them were downright bad, ie. being sold as a "lifestyle", i.e. you lose a ton of money to own the franchise, and expect to make no money from it.

 

[OddGuy]

They are adults approaching midlife, bringing in near a quarter million per year. I understand ther HCOL part, but if you died tomorrow, are you concerned they wouldn't be able to navigate life and prosper?

 

[Spock]

I wouldn't. I've never heard of a franchise being a "part time gig"... at least not until it has reached multiple sites and grown to the point that you can hire a manager to run it for you. Running rental properties would be less work.

If getting a second job fits within his "work/life balance", he can show his own initiative to find one.

Bluntly: cut the cord already.

 

[SnowballCamper]

I'd be looking at ways to reduce costs first. You sound a little vague, so is this just your impression? At that age and income, it's a big mistake to be skipping the 401k / IRA contributions. Is there a debt problem? Buying into a franchise isn't a sure way to make more money in the short term.

 

[athena53]

It's definitely not part-time. Anecdotal, but an actuary I know bought a Cold Stone Creamery franchise. He was "passionate" about ice cream. A few years later he handed them the keys. Hard to get good, trustworthy help, he ended up spending most of his time behind the counter. I read elsewhere that Cold Stone would blanket the markets with coupons for deals that stores had to provide at a loss. He told me, "I never knew that the company assumed so little risk compared to the risk I took". He went back to an actuarial job.

At the very least, talk to actual franchise owners and ask hard questions. I think McDonald's franchises are one of the better ones but they're very expensive.

 

[RetiredHappy]

For most if not all of the successful food franchises, you have to own many in the region to be profitable, like McDonalds and Subway. You are looking at multi-million dollars in investment. Definitely not for someone hoping to make a few more dollars.

 

[COcheesehead]

I have a neighbor who owns seven locations of Subway. He said if he had to do it again, he wouldn’t.

 

[Jerry1]

When I worked at a CPA firm, the people I saw that were successful in a franchise had more than one. One that I spent some time talking to owned a few Coffee Beaneries. He said three was when he started seeing some good returns. His main point was the economies of scale. Once you had a few shops, you could order more, you could move employees around, all your administrative functions were basically a fixed cost so another store didn't increase that cost much, lowering the unit cost . . .

I'd no way consider a franchise as a part time endeavor. Successful owners put their life into it, just like any small business owner. I think the OP is looking more for a side gig that could be done. Still, I agree with an above comment - they're making good money, they just need to control their spending, that's if indeed they are struggling financially at all.

 

[RetiredHappy]

I have a neighbor who owns seven locations of Subway. He said if he had to do it again, he wouldn’t.

We have a club member who owns a bunch of Subway in the area and I remember meeting him from 12 years ago at a dinner function at the club, when he mentioned that he was a franchisee of Subway. He handed out a "free" sandwich card to us when he joined our tee time a couple of months ago. We said we didn't eat at Subway or fast food. He asked "Don't you have to eat?" We said yes, but not at Subway. He looked embarrassed.

 

[Aerides]

Early 30s both making 5 figures? Id leave them alone. Chances are they will both see those numbers rise over the next few years.

A franchise is a full time job, and people with good careers should focus there first. And if he truly still has time left over, what better place to spend it that with his son.

 

[RetiredHappy]

Early 30s both making 5 figures? Id leave them alone. Chances are they will both see those numbers rise over the next few years.

Both making 6 figures, but who is counting...

 

[Sunset]

They have no time, they have a 5 mo old and they both work.

 

[PlayinwithFIRE]

They seem quite busy with FT employment and a child in the house. They gotta work on passive income, not active income.

pwf

 

[OddGuy]

They seem quite busy with FT employment and a child in the house. They gotta work on passive income, not active income.

pwf

Yeah, take that franchise fee, stick it in an index fund, and wait.

 

[38Chevy454]

Seems to me that with his MBA and the university job, he would be better off finding some part-time 1099 type consulting side gig. I am sure the university has plenty of potential contacts?

 

[razztazz]

A known unkown: Maybe they don't have a money problem you just think they do?
Did they not take into account money on the front end of the 5 month old? Why would they start a family if they couldn't afford it?

 

[Walt34]

I knew a couple of guys who bought into franchises. Both lost their shirts, pants, and shorts. No way would I recommend a franchise of anything to anyone. It's all for the benefit of the franchise owner, not the franchisee who takes all the risk. Take that fee and put it into some index funds and have a beer.

 

[Aerides]

Both making 6 figures, but who is counting...

phone! typos happen.

Also, one detail missing from the OP - has the son asked for financial advice? If not, keep schtum!

 

[Kings over Queens]

I served that industry.

Picking needles from a haystack to find good "brands." If I were to make 1 recomendation, dont consider anything with less than 50 units. 100 is better.

Its not conducive to a side hustle or part time, unless you have the capital to buy a territory and pay people to run them.

 

[Koolau]

A business owns YOU - not the other way around. From the time I was born, our family has been in a local retail business. It's been a decent living for 3 generations. BUT periods of 16 hour days were not uncommon. To generate a living from a business, you have to forget the concept of 9 to 5. It's more like 24/7/365. That really bumps up against 30+ year olds with "real" j*bs. I know because I was 2nd generation and got pulled back into the business during times of crisis - all while trying to w*rk my 9 to 5 (which was already more like 10 hours/day). I don't recommend this approach to being able to save.

I liked what someone suggested: Have the kids explore cutting some expenses to fund their savings. WAY easier and way more efficient than trying to run a business.

Best luck.

 

[Slim11]

You can worry all you want, but I would let them libe there own lives. Its there's to live. Now if they were unhappy and miserable I would say maybe suggest something. But I don't think adding a franchise as a second job to a couple making 220k+ a year is helpful. I made less then this, and saved pleanty. They can also, but they may not want to. Its up to them. Live your life. Let them live there's.

 

[marko]

Like owning any small business, you have two choices: you or a spouse be there 110% of the time or risk the help robbing you blind. (Speaking as a silent partner in a mid-sized restaurant)

Plus YOU have to vacuum the floor when the "manager" calls in sick.

 

[rkser]

I think I got the answer loud & clear, they will have to figure it out for themselves.

I did not have any idea about franchises, thank you folks for educating me before I brought it up to them.

They just have to figure how to save for themselves, as we & lot of us did.

Thank you for your help

 

[pb4uski]

Our son is 34yrs old, has an MBA & earns around $110k working for a University. His DW earns a little more than him & they have a 5 mo old son. ...

So they have household income of over $220k and a 5 mo old son. It sounds to me that they would be better off in the long run by focusing on LBYM and some slow but steady saving for the future rather than adding another job.