Franchising - anyone owns one or thought about it?
 

Toying with an idea of buy a franchise, preferably like a UPS store and not a Subway/Moe's. I'll keep my day job but get my wife/in-laws to work it.

Doing some research on the web but thought I would ask if anyone here has experience with buying a franchise or thought about it. Any advice appreciated.

Ping Neuqua.

I have occasionally tried referring to myself as "the franchise", but I haven't been able to find anybody else willing to 'invest'.

PM me, if interested.

My wife said she'd be open to advertising on her pregnant belly. {shrug}

Only thought about it ever in the very briefest & vaguest of sense. Soon as I see the startup costs/franchise fee that's the end of my consideration of it.

+1 I live in a town of about 6,500 with great interstate traffic. There's not an Italian restaurant within 25 miles. I always believed a Fazolli's placed by the highway would rake in the money....till I saw what it cost to get a franchise to start with. The risk seemed to outweigh the rewards.

If you're going to franchise you need to be willing to file bankruptcy. You also have to be confident enough in your plan/abilities that you won't need to, but if you can't deal with the potential for economic ruin, don't do it.

You also need to take legal steps to protect as much of your personal assets as possible before you get going.

This is going to sound silly but bear with the ignorant foreigner please - but wouldn't your set your chanchise up as a limited company (or LLC or whatever they are over here) so that you'd avoid bankrupcty or any knock ons if it failed - just leaving you out the 'seed capital' you put into the business?

Or is this not possible in America for some reason?

Bought my wife a Curves....
Feel free to ask away or PM personal questions I will help all I can.

Well you will form an S-Corp or LLC...but you will have to personally guarantee any loans as almost no bank will loan to a corporation without a credit history

Thanks for the offer. Here is a list of my questions:

1. How did you decide on "franchise" vs something else. What was your internal decision making method?
2. Did you go into a franchise thinking about an end-game e.g. sell after x years.
3. Once you contacted "franchise", what were the major steps from initiation to completion?
4. Has whatever financials "franchise" showed you, come to pass? Were they accurate in income, expenses, etc.
5. Has whatever support "franchise" sold you, come to pass? Training, help with SBA etc.
6. Is running "franchise" what you/wife expected? I suspect it is harder than you thought but would you do it again?
7. What are the top 3 things you would tell a newbie to watch out for.

Thanks again for offering to share your experience.

I've run a small consulting business before and understand "personal gaurantees" for an S-Corp. Pretty scary the first time but think I'm over that now. Hedging my bets by wanting to (1) get an established franchise e.g. UPS and (2) keeping my day job and having spouse/inlaws run the franchise.

Restaurants scare me ... food is not my thing. I drive by restaurants that open and close 4-6 months later.

Need a picture of the belly before even considering. :)

I very strongly thought about. I looked into what it would take to bring Chik-fil-a to Kansas City because that was just a license to print money. The investment required wasn't really as bad as I thought it would be but the idea of putting my life's savings and then some in the hands of 16-year-old kids proved overwhelming to me.

A friend of mine has done some franchising. I know from his experience that comparing the margins and the franchise fees is critical. Not all franchises are alike, and some will make you work for very thin margins.

I will say though, with regard to Chik-Fil-A, that they have the most amazing knack for hiring quality people I've ever seen in any business. Never mind food service or franchise, I mean any business period.

You'll see the occasional dud sure but their rate of dud employees has to be the lowest I've ever seen by far. I'd really love to know what they teach their franchisees about that because it's so consistent I think it has to be part of their model that they teach & not just having super similar owners.

Curves, eh?

They are a deeply rooted Christian organization (duh, hence the no Sunday deal) and they are actively taught to recruit teens from their congregation....BTW I have also heard that you will need year end statements from your church verifying titheing....


The first statement comes from my visual observation, and questioning...the second is a rumor from the church secretary.

But yeah, I agree it works.

She had those on her own, this was the one where I got to visit and (theoretically) see dozens of more curves come and go...unfortunately all I saw was grammas

Actually, if I was a little less tired...I would have asked "why did you settle for A Curves and not C or D Curves".

Time for my old ass to get to bed. :)

Agreed about chik fil-a. Even in the most ghetto of neighborhoods it has been great. Worlds above other joints nearby.

And Moes is >>> chipotle

I bet their training is above average as well. I've done a little freelance writing for restaurant training manuals and it's shocking how poor some restaurants are at training their staff. A lot of restaurants don't even have a regimented training system.

1. How did you decide on "franchise" vs something else. What was your internal decision making method?

It fit our background. My wife had a background as a retail store manager/district manager. And had been out of the work force for a few years to stay home with our son. She had grown bored without adult interaction and wanted to rejoin the work force. For personal reasons she didn't want to work for me (didn't feel like she contributed as much as 3rd party and if she was honest wanted time away from me Im sure) She didnt get any offers we liked financially, so we bought her a business to manage. At the time it was rated very highly if not tops by several mags (Forbes and entrepreneur come to mind)


2. Did you go into a franchise thinking about an end-game e.g. sell after x years.

No, we did look into it. But at the time it was something she wanted to do for the foreseeable future.

3. Once you contacted "franchise", what were the major steps from initiation to completion?

Application
Qualification
Interview
Sales Pitch to us
Franchisee contact list review

4. Has whatever financials "franchise" showed you, come to pass? Were they accurate in income, expenses, etc.

I did not trust the numbers they pitched at all and I totally disregarded them to be honest. I contact about 12 (initial goal was to talk to 20...never got that many to respond or share)other franchisees randomly both locally, regionally and a bit further "nationally" and bought several lunches and traveled a bit to see their operations and ask some frank questions.

Discovered what I expected the numbers they presented were best case scenarios sales pitch numbers. That said it exceeded all our expectations.

5. Has whatever support "franchise" sold you, come to pass? Training, help with SBA etc.

hmmm tough question. There were some specific to that franchise (equipment supply and costs) that were and some generic stuff that was not so much.

For example, they promised this expert and elaborate help with layout and plan-a-gramming (which wife was more than comfortable with on her own) which amounted to nothing more than a video, and 4-5 page flayer. Most everything in this category was supplied, but nothing to wow you. Most of the "software" and forms you and I could whip up in Excel in 15 minutes tops.

6. Is running "franchise" what you/wife expected? I suspect it is harder than you thought but would you do it again?

No, it was not any harder than we thought, it was definitely more restrictive. In our specific case when my daughter was born she was ready to return to full time stay at home and we kept it for 4-6 months to make sure she wanted to for real this time and she was involved very minimally (we hired an experienced manager, etc.)

At that point we began looking for and found a buyer at a multiple we never expected. All in all I dont look back to fondly at the experience, but it turned out fairly lucrative (comparatively)for us.

The biggest thing that was not as expected, was the franchisor was very restrictive in what we were "allowed" to do. Promotions, marketing and branding were very restrictive...some of this is common sense (sure they would not want us sponsoring amateur night at the local strip joint) but...not allowing us to give away more than XXX free months or XYZ dollars off membership even if we recounted it off the bottom line, etc. didnt feel like it was my business at that point.

I have often described it as all the hassles of corporate management only with my money on the line. Again though this is coming from someone who is used to running his own company and doing things purely my way often by the seat of my pants.

7. What are the top 3 things you would tell a newbie to watch out for.

1) Disregard everything you are told, and talk to every other franchisee in THAT franchise you can find. Remember, if it is so damn profitable, why dont they just run the stores themselves? They can make more off franchisees than hey can clients in many cases

2) If it is your first time running a business, and you will have employees: You need a business line of credit equal to 1 months pays of all employees that is never touched for anything but emergency payroll. There will be rough times, some things can be juggled, be late 1 day with a paycheck and you are done. I learned this lesson from the guy I worked for before starting my electric/home tech business...I could write a book on this subject. But I would stick with the 1st 2 lines as a golden rule. That is not franchise specific but this is my golden rle of business to anyone who asks.

3) Develp a good relatonship with an attorney. Everything you are promised needs to be in writing and he needs to verify that the franchise contract includes these promises and that you fully understand any conditions...if they balk at having your attorney present during finalization meetings RUN....
in most cases these are big businesses...with a team of attorneys that will gladly find a way to screw you if it makes them an extra dollar.

4(because I cheated and 2&3 are applicable to any business not just a franchise) You are NOT a partner to them, you are a customer....do not forget that.

And I would have replied because I already have DDs....;)

We have a very regimented week-long training program, but during interviews you (well, maybe not you in particular) would be amazed by how many people expect to be thrown out on the floor either right away or after just a day or two of training. I couldn't imagine trying to manage employees that have that little training, it's a setup for failure.

CU Tiger. Did "franchise" help you

1. determine ideal location
2. find the building
3. negotiate the terms
4. buy the inventory/equipment
5. find financing (SBA?)
6. in advertising for your "new store opening"

My dad runs a Pakmail store in the Dallas area. It's a struggle. Location is of utmost importance. Hard to find quality people to help run it - he's had a couple of good high school kids, but they were so good they went off to college. Older follks willing to earn next to nothing...you get what you pay for. So, as a result, the only vacation he's been able to take in a couple of years was thanks to the college kids coming back and runnign the store while he was gone. Otherwise, he has no one else but himself who he trusts.

I'm not too concern about finding good people to help run the store but am interested in your location statement.

UPS store would be very similar to Pakmail. What are the factors to consider when picking a location?

My job is to support franchisees. I work in the disaster restoration field. (not any of the retail things you are mentioning)

Here are just some quick fire thoughts about it:

1) You need to ask yourself what the franchise gives you. Is it advertising, name recognition, support? Also, and this is critical, ask them what their market expansion policy is. You don't want another start up guy opening up a store 4 blocks from you unless you are in a heavily populated area.

2) This can't be a half assed thing. If you want to run a franchise, you have to put blood, sweat, tears into it. I've seen people who use them as side gigs or afterthoughts, it doesn't work.

3) If you choose to use a franchise, please, for the love of God, don't turn down whatever support they offer you. I don't care if it's training financial advice, systems/processes. . . whatever. If you want to do it on your own, then do it on your own. Part of being in a successful franchise is listening to the people who started one ahead of you.

I'll answer your questions from a franchisor perspective:

1. How did you decide on "franchise" vs something else. What was your internal decision making method?

As I said above, you simply need to figure out what the franchise gives you for the fees you'll pay them. The main advantages of a franchise are name recognition and a set process. If you know it all already and don't care about the name, go ahead and go your own way.

2. Did you go into a franchise thinking about an end-game e.g. sell after x years.

I don't think it's necessary to have this 100% thought out at the start. When/if the business is buitl up to a successful, profitable one, you need to start looking at those things.

3. Once you contacted "franchise", what were the major steps from initiation to completion?

In ours, it goes like this:

application
UFOC (followed by 2 week waiting period)
financial review
Our sales pitch
Contract

4. Has whatever financials "franchise" showed you, come to pass? Were they accurate in income, expenses, etc.

The only way you can know this for sure is to met with other franchisees. Ours is accurate, but it can change wildly depending on market size.

5. Has whatever support "franchise" sold you, come to pass? Training, help with SBA etc.

Again, talk to other franchisees before deciding this. There are plenty of places on the web to find out about these type of things.

6. Is running "franchise" what you/wife expected? I suspect it is harder than you thought but would you do it again?

If I polled my 30+ franchisees, 75% would say it was tougher than they thought it would be. Most of those would do it again. The 25% who said it was as expected or easier than expected already owned previous businesses and knew what they were getting into.

7. What are the top 3 things you would tell a newbie to watch out for.

1) Find out what the franchisee does for you.
2) Make sure you are prepared for some financial difficulties. It usually isn't easy.
3) What CU Tiger said at the end. You are part customer, part friend and part worker bee for the franchisee, depending on the day. Never forget this. The franchise has either stockholders or a board to answer to. They are obligated to look after their best interests and will do so. It's why I put to ask the about their market expansion policy up front. The company I work for is extremely fair. I've seen other companies that say "we'll put in anyone, anywhere and let the market sort it out"

I guess the best advice I can give is to go into this with your eyes open. it will be a challenge. You said you'd have your wife and in laws run this business. Are they 100% into it? do they REALLY want to do it? If they don't, you are making a mistake by going into it.

I think Pumpy is "the franchise".

Strictly anecdotal but I'll throw it out here anyway. That quoted bit above is strikingly close to what a franchisee in a totally different industry said to us in a very candid conversation a few months back.

Of all the aspects of being a franchisee, he said the difference between the support he was promised / what he expected those promises to mean and the quality of the support he actually received was probably the biggest surprise/disappointment of his experience of a couple of years with them.

He was an exceptionally bright guy in my estimation, with a professional background that did not make him seem at all prone to taking too much for granted, so for him to be so disappointed reflected more on the franchiser than it did on him in my mind.

I really want to open a strip club but Im afraid I would be killed by the 'mob'....actually I think it's the bikers that run them down here.

Well, I read up on the UPS franchise and there seems to be some contention with franchisees with UPS competing with its franchisees. Not good.

CU Tiger, what is your opinion on the future growth/viability of the Curves franchise? Do you see alot of new business (assume yet) and retention/renewals?

Anyone else care to make a prediction on the best type of franchises to own?

Okemos exit(think just before East Lansing) has a BK that went out of business due to rumored mismangenent because seriously how do you not keep a BK open? It would be one of the first if not the first restaurant somebody could drive into. Exit also has gas and logging within walking distance, and is highly used for MSU games. And yet, nobody has bought it to open up a BK again, or another restaurant. There's hardly any Chik-Fil-As in the state and no KFC until you drive further in and only the Cracker Barrel would be considered similar target base. MSU means you have a default college student workforce. Outside of mismanagement, how it, or another properly placed restaurant doesn't work there is beyond me.

Actually, I've seen them close numerous times, always driven into the ground by a combination of lackadasical management, unspeakably bad service, and typically cleanliness issues.

edit to add: I'm also taking a leap of faith here that you meant "lodging" instead of "logging", otherwise what passes for a tourist attraction up there is even more different than here than I ever realized ;)

And while I'm editing, I have to admit I'm confused. By BK, I'm thinking you mean Burger King. But you go on to mention CFA, KFC,and Cracker Barrel and mention similar target bases. Down here, Burger King is typically toward the bottom end of the burger chain in terms of quality & customer base & bears no resemblence to the ones you mention (except KFC's in certain places I guess). BK's I recall in several states (a lot in GA plus several in TN and a few in FL) are almost all in lower income areas and have a customer base to match. Are we talking about the same BK here or am I just confused?

I love flame-broiled Whoppers (and Jrs). I think they have better products but you are right, their bad service, lackadasical management *and staff* seems to be more prevalent than McDonalds.

...which doesn't even touch on the horrible food. Curse you, 'flame broiling'.

Huh? Nah, its great!

THE GAUNTLET HAS BEEN THROWN!

1-3 We were kinda unique and its a piece I left out of my first post.
I owned the retail location out right, as I had previously housed my model home/demo area there for our home tech business. We had moved to a larger location and had this space and went looking for a business to put in said space.

4 This was included in the start up cost...the one thing I thought they did right. I have often wondered if the whole franchise isn't just a colluded distribution system for inferior workout equipment manufacturer

5. It was offered but I turned it down

6. initially yes, but dried up very quickly....


My thoughts on Curves individually are divided. I think there are 2 ways to make a fair sum of money at it and many to go broke. The first is being the first a semi-rural or remote area as we were. We literally had 65-70 year old ladies joining, because it was "that new fitness place just for ladies" and had high school cheerleaders alike hanging out after school. It blossomed very quickly and we sold it right before it's apex, somewhere around the 1.5-2 life cycle.

The only other model I have seen work is the multi location metro area model. Where you may only profit 40-50k/year per location but 4-8 locations make it a viable business.

The people who bought us out were flat broke within 3 years and out of business (actually a 3rd owner limped it along for a few months but the writing was on the wall at that point)

Same BK.


But it's pretty much the only place that does flame-broiled burgers and there are times I just get a craving for it. Default place I go for fast food is Wendy's. Top notch burger places in Okemos is rather lacking. Any place I can think of is deeper into E. Lansing/Lansing area. Why at least somebody else hasn't popped into there has me shaking my head.


Which all fall under being poorly managed. Granted we had a Big Boy in the same area go out as well and that's been there forever. The people who replaced it is pretty much the same thing underneath a mom and pop type umbrella. I've been far from impressed with it, so I don't see how it would stick around.