Thinking about a franchise

Mistake Not...

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Mistake Not...
Tired of software, and looking for a self employment sitatution (NOT software). Anyone have any experience good or bad, with buying / running a franchise of some sort? I'm thinking food related, but wouldn't have to be.
 
I know a couple people who own/owned franchise restaurants. It can be good, depending on chain and contract. Mandatory renovations can eat a lot of money.

I have several friends who own routes to sell cookies, bread etc for Pepperidge farm and a few other companies. They "own" the franchise rights for a given area. If any new stkres are built there they sell to them and see growth. Ni worries about getting paid, very little capital required, etc. Seems like a lot less hassle and has good profit and potential.

Good luck
 
We had a food franchise (will refrain from stating which one) in the early 90's. What started off as a symbiotic relationship soured toward the end of year 1 with us dissolving the relationship about 14 months in.

If you don't have experience in the food industry my recommendation is to obtain experience prior to franchising. Guess that goes with any franchise operation. We learned a valuable, and expensive, lesson.

Others will opine about their success stories so don't let our experience dampen your enthusiasm.
 
Long story.

My first wife and I owned a Subway for a little over a year. It was her idea as she had worked in a couple and helped manage one. She convinced me to buy one and we did. The system works well and if you do things per their formula, you stand a good chance of success. The reason we got out of it had nothing to do with the company but had to do with the time we were both putting in. I was working fulltime plus for an airline at the time and helped out at the store on my time off. The wife ran the day to day operations and was very good at it. The problem was that she could not find an employee she trusted well enough to leave in charge in our absence so one of us were always there. She was a bit of a perfectionist and maybe even a little bit over controlling so no employee ever met her standards. Eventually I told her she had to loosen up or we needed to sell the business as I was getting seriously burnt out. She agreed to sell. It sold pretty quickly and we made money on the deal.

So, yes franchises can be a good business but just like any other business endeavor they are not for everybody.
 
I have looked into franchises. Most seem to want me to pay for everything with the only guarantee would be I get to put their name on the sign.

Some were restaurants. One car wash wanted me to write them a check for $400,000 just to start talking.

Not saying all (restaurant) franchises are bad, but have someone practiced in reading contracts read and explain the contract to you. Some require you to demolish the building after a certain length of time and build new all on your dime. Some contract require you to pay the franchisee even if you go out of business. Find out the default rate of the franchise.

Good luck to you. They are not all bad. Just be careful and learn what they do not want you to know about the contract.

A friend of mine, his wife started a house cleaning business. Not with a franchise. She started by just being nice to a dear sweet old lady at her church. Soon after the recommendations came in. A year latter she is so busy that she had to hire others. And business is still picking up. So much in fact that she quit her teaching job to start the house cleaning business.
 
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Start a Bojangles in Houston. You'll make a killing.

Please do, anyway! I go there pretty often and need some Bcn'Egg'Cheese!
 
Lots of businesses can run under a "franchise" umbrella. Anything from McDonalds and Applebee's-type places down to a guy in a van with a carpet cleaner. And anywhere in between.

My observation is that a franchise is "buying a job". You have to want to run it, hands on, and work 70-hours a day. It will consume you the first few years. If you just try to "own" it, and hire a manager, and all the staff, your overhead will likely eat up any chance of profits. If you get past the first couple of years, open up a 2nd or 3rd location, you are likely on the road to riches.... or, a divorce, a bankruptcy, and a new set of life choices....

The good parts of owning a franchise is that lots of the issues/decisions are already solved for you, you follow their formula. I think this results in a much higher success rate than starting your own "Joe's Bag of Burgers Emporium and Car Wash and Hair Salon". But, it comes at a cost, the Franchise Fee and the continuing fees.
 
I looked at several franchises when I retired from the Navy. What struck me was the overwhelming feeling that I had to have a huge amount of capitol, on top of the huge amount I had to take out it loans in order to pay someone else for the privilege of working 16 hour days, putting up with the hassles of trying to recruit and train employees and then retain the good ones (and fire the bad ones, which ain't easy), all while adhering to strict guidelines on how the business was operated, who I could purchase inventory and supplies from, and how I could promote my business.

In the end, I figured if I was gonna tie up that kind of capital, and take on a huge amount of debt, I wasn't going to share the profit with anyone.

It just seemed easier to me to get a good paying job with benefits and sock away as much cash as I could until I could afford to quit. 15 years later, I'm almost there. I work 3 days a week. And, I don't have to put up with no BS when I'm not on the clock.
 
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Some folks have good luck becoming a cell phone dealer.
 
Not personal data, but my youngest son and his wife bought a franchise. They had it for about three years. In the end they sold it primarily because they didn't follow through on their plan and my DIL got tired of putting the hours in to run it. They were able to find a good assistant manager to take some of the pressure off, but they were a young family with very young kids.
 
One of the trends now is for franchisees to open multiple locations, which can be out of reach of most. One of our local success stories (Moe's) recently awarded an entire state to a franchisee. They no longer accept owners with a single location. Even in a fairly simple operation such as Moe's is (it's a burrito place), the investment is more than half a million per location.

I'm in software, too, I get sick of it sometimes, but if you're good at it, it's tough to find something better, especially if your risk capital is limited.
 
My wife and I owned and operated a multi-location franchised national tax service ( not Liberty) franchise for ~13 years. We sold it on January 1, 2015.

The business was pretty good to us until the last couple of years. Many years we made a respectable profit and never lost money.

The retail tax business is kind of a legacy thing, and we were uncomfortable with the direction the franchisor wanted to take the brand. Our franchisor made a number of changes that took money right out of our pocket. Just one small example, we used to be able to pay our fees on our Amex Card, generating a boat load of Amex points for us. They stopped taking credit cards and instead required direct withdrawals from your bank account on the first of every month. :(

Personally we were tired of managing so many employees, that was getting tiresome also.

We had a reasonable good franchise agreement, but over the last 6 years or so the courts have given franchisors almost unlimited power to require franchisees to do darn near anything they are told, and to spend any amount of money to satisfy the demands of the franchisor. Franchise agreements these days are thick as paper NYC phone books, and totally favor the franchisor. Many franchisors have profit centers based on suing franchisees for things like not making enough money for the franchisor.

Having said all that, there are good franchises out there.

My advice to anyone looking at any sort of franchise is to work as a worker bee in a similar type of business, preferably the Big Dog in whatever space you are looking at entering.

You may find that you could take that big franchise buy-in and royalty money and just compete directly with the Big Dog, and you'll get to keep all your profits.
 
An alternative point of view:

I've owned four businesses. The first two were newspaper distributorships, back when that was a thing. These agencies were very similar to franchises, in that we had a tightly regulated territory, the product was produced by others, and the newspapers retained tight control over virtually everything.

Advantages: These businesses were very profitable. Disadvantages: Everything else. You couldn't fart without breaking some covenant. The franchisor held all the real power.

The last two businesses have been hotels. We looked very, very closely at joining a franchise chain, and found that none of them would allow the flexibility we needed to do things our way. We had a unique vision for our hotel (a vision that some felt would not work), and the franchisors looked askance at these ideas. For example, none of them would accept our ideas for delivered breakfast or metal key door locks -- two very popular features that have helped to make our repeat guest sales phenomenal.

Most hotel franchisors dictate everything, from furniture style to shampoo. Since each of our rooms is differently decorated to reflect different eras of aviation history, that wouldn't work for us.

So, we've happily gone it alone, owning proudly independent boutique hotels for the last 13 years. It's been a fine run, and we are having a record year.

My advice: If you have a strongly independent streak, if you're interested in being an entrepreneur, skip the franchise and open a business you love. If you do, you'll never work another day in your life!
:)
 
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Why would "metal key locks" for rooms be a plus?

As a guest, I find it nice to not worry about returning (or losing) those plastic keys.


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My observation is that a franchise is "buying a job". You have to want to run it, hands on, and work 70-hours a day. It will consume you the first few years..

Jose has it spot on. If the above statement is not how you feel then it probably is not for you.
 
Just random thoughts:
Did The Donald own franchises during his rise up the economic ladder?
ok, I'm back after doing some searching and I cannot find evidence that he did. So, I suspect it should be a caution that there is more work than profit in franchising - the donald is not into work.
Now, Buffet does - except he owns The Franchise, the clean end of the dirty stick.
When I was forcibly retired in 2010 I needed something to occupy my mind. Looked hard at various franchises. Quickly figured out that they get my $1.5 mil in cash up front and I get a contract that says I have to buy everything from them at their price on their terms for the life of the franchise and that they retain the unilateral right to change the contract at will. Heads I win tails you lose.
ummm, cept I got a lesson on that one in the 3rd grade (I still miss my cats eye shooter)

I'm not sure that doing software prepares you for a whole lot else - except you are very likely detail oriented, which is a big asset for running your own business. Now if you have other skills, merging that with your skill at detail would be the way to go as opposed to jumping into the great unknown in the restaurant business, or whatever.

I was always amazed at the ways many of my patients made a living without being employed. Yeah, there were the house cleaners and the lawn mowers and the handiman types, and most were just scraping by.
But there also were the oddballs, like the fella who hit the yard sales and bought electronic games, game boys and the like. He looked for the ones that were 25 cents because they didn't work. He repaired and then resold them - said it was almost always a cracked solder joint on the mother board, a 90 second repair. Then he started trading in used games (the plug in cartridges of that day) Eventually he opened a store front for that business and did well - cept he confided in me that it was no longer fun once he had employees. This business hinged in his knowledge of repairing electronic devices.
Another was a fishing fanatic who got into buying and selling classic lures and collector items. Bet ya didn't know that like baseball cards there are valuable lures. The old stuff from 50-60-70 years ago. He too hit the yard sales and estate auction sales to buy old fishing tackle boxes stuffed with lures.
And there is the couple who were collecting Tee shirts, from rock band concerts and stuff, as a hobby. They scouted the yard sales, the GoodWill, etc. That led into printing and selling their own designed tee shirts at venues. They were making a tidy living and traveling the country last I saw of them.

Now notice that these successful folks went into doing something they were already 90% expert at as far as knowing the market, what stuff is worth, where to find it, etc. The thing they added was doing it in a novel way that others had not noticed.

Anyway, good luck and write often :D
 
Just random thoughts:
Did The Donald own franchises during his rise up the economic ladder?
ok, I'm back after doing some searching and I cannot find evidence that he did. So, I suspect it should be a caution that there is more work than profit in franchising - the donald is not into work.
Now, Buffet does - except he owns The Franchise, the clean end of the dirty stick.
When I was forcibly retired in 2010 I needed something to occupy my mind. Looked hard at various franchises. Quickly figured out that they get my $1.5 mil in cash up front and I get a contract that says I have to buy everything from them at their price on their terms for the life of the franchise and that they retain the unilateral right to change the contract at will. Heads I win tails you lose.
ummm, cept I got a lesson on that one in the 3rd grade (I still miss my cats eye shooter)

I'm not sure that doing software prepares you for a whole lot else - except you are very likely detail oriented, which is a big asset for running your own business. Now if you have other skills, merging that with your skill at detail would be the way to go as opposed to jumping into the great unknown in the restaurant business, or whatever.

I was always amazed at the ways many of my patients made a living without being employed. Yeah, there were the house cleaners and the lawn mowers and the handiman types, and most were just scraping by.
But there also were the oddballs, like the fella who hit the yard sales and bought electronic games, game boys and the like. He looked for the ones that were 25 cents because they didn't work. He repaired and then resold them - said it was almost always a cracked solder joint on the mother board, a 90 second repair. Then he started trading in used games (the plug in cartridges of that day) Eventually he opened a store front for that business and did well - cept he confided in me that it was no longer fun once he had employees. This business hinged in his knowledge of repairing electronic devices.
Another was a fishing fanatic who got into buying and selling classic lures and collector items. Bet ya didn't know that like baseball cards there are valuable lures. The old stuff from 50-60-70 years ago. He too hit the yard sales and estate auction sales to buy old fishing tackle boxes stuffed with lures.
And there is the couple who were collecting Tee shirts, from rock band concerts and stuff, as a hobby. They scouted the yard sales, the GoodWill, etc. That led into printing and selling their own designed tee shirts at venues. They were making a tidy living and traveling the country last I saw of them.

Now notice that these successful folks went into doing something they were already 90% expert at as far as knowing the market, what stuff is worth, where to find it, etc. The thing they added was doing it in a novel way that others had not noticed.

Anyway, good luck and write often :D

Trump started out from a very advantageous position. That's not where 99.9% of us are, plus his level of wealth is extremely uncommon, not something to realistically aspire to.
 
There are ways to invest/be involved in a franchise without being the owner/operator.

for example, I hear Subway is looking for a new pitchman.
 
The idea that franchises are a bad investment or are miserable to own is obviously not true, otherwise no one would do it. There's no question that you could do better on your own IF you were able to duplicate all the advantages that the franchise affords you, which is far easier said than done. The franchise gets you a huge jump start with the core business functions that would otherwise represent a significant threat to success. There is tremendous value in that, but there's a long-term cost, too.

It's no surprise to hear that owning a franchise can work you to the bone and that good help is hard to find. That would be no different if you were on your own, except that owning the franchise would more or less help force you to be successful. When you're on your own, you can decide to only be open Tuesday through Friday from 8am-noon and sell whatever you want, but Chick-fil-a for example isn't going to let you off that easy.

I've looked at franchises and know people who own franchised stores. It can be good as long as you understand the long-term commitment. It isn't a plan to get rich quickly.


JKG
 
I have has the opportunity to get to know a lot of franchise owners of varying businesses across the spectrum...and owning my own business and being an entrepreneur since high school I am always looking to learn about opportunities.

My own non scientific observations: Everyone that owned a single location as mentioned bought themselves a job...and many had the same sentiments...they didn't own the business, the business owned them. I know many more people that have sold their single store operations than still own them.

For those that try and open two or three locations on limited resources, they are even more miserable. There are often slim margins and they have usually mortgaged something or taken out absurd loans which puts them in a mind set of MUST succeed at any cost..and running a business from that mind set usually cost them the business.

The folks that I know that are successful are those that own 5 or more locations. They are the only ones I have found that are making money in the franchise system.
 
Why would "metal key locks" for rooms be a plus?

As a guest, I find it nice to not worry about returning (or losing) those plastic keys.


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Always remember: Hotels went to magnetic swipe keys for THEIR convenience, not yours. The fact that these infernal devices fail regularly, forcing the guest to schlep back to the lobby for a working key card never seems to bother them, because, hey -- they don't have to change locks when a key is lost.

Metal keys *are* a PIA for us, but they have the singular advantage of working, every time. Swipe keys were our #2 pet peeve about hotels and a top priority to be eliminated when we got into the business.

Our guests have almost universally voiced approval of this decision. It seems that our pet peeves about hotels (which ultimately became our business plan) align closely with most peoples.
 
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Always remember: Hotels went to magnetic swipe keys for THEIR convenience, not yours. The fact that these infernal devices fail regularly, forcing the guest to schlep back to the lobby for a working key card never seems to bother them, because, hey -- they don't have to change locks when a key is lost.

Metal keys *are* a PIA for us, but they have the singular advantage of working, every time. Swipe keys were our #2 pet peeve about hotels and a top priority to be eliminated when we got into the business.

Our guests have almost universally voiced approval of this decision. It seems that our pet peeves about hotels (which ultimately became our business plan) align closely with most peoples.

I've had very good success with them, but I guess I'm atypical, being contentious of the metal stripe and all.
 
The idea that franchises are a bad investment or are miserable to own is obviously not true, otherwise no one would do it.

There are a ****-ton of people who think "Man, I'd love to run my own business!" who have no idea what they're getting into, and look at franchising as "the easy way" to a lifestyle.

These are the folks who see me sitting on the front porch of the hotel, watering the lawn and sipping a gin & tonic while greeting guests. All they see is something that looks easy and fun. They fail to appreciate the many years of 80-hour weeks, working at sub-minimum wage pay, it took to get here.

Owning your own business ain't for *******. If it's not something you absolutely love, it can and will kill you.
 
There are a ****-ton of people who think "Man, I'd love to run my own business!" who have no idea what they're getting into, and look at franchising as "the easy way" to a lifestyle.

These are the folks who see me sitting on the front porch of the hotel, watering the lawn and sipping a gin & tonic while greeting guests. All they see is something that looks easy and fun. They fail to appreciate the many years of 80-hour weeks, working at sub-minimum wage pay, it took to get here.

Owning your own business ain't for *******. If it's not something you absolutely love, it can and will kill you.

:yeahthat:

My dad went into business for himself (as an accomplished tradesman) when I was a Junior in HS. Mainly because he was laid off and needed to do something. He finally sem-retired after about 30 years. He fully retired in another 5 or so. I remember times when he had stocks of his own paychecks in his dresser drawer because he didn't have cash flow to cover them and the employee's checks. I read a quip (that my dad loved to quote) "The secret to running your own business is working half days-whichever 12 hours you want..." After watching his progress and being part of 3 start-ups (the last one very successful) I believe it!

John
 
Always remember: Hotels went to magnetic swipe keys for THEIR convenience, not yours. The fact that these infernal devices fail regularly, forcing the guest to schlep back to the lobby for a working key card never seems to bother them, because, hey -- they don't have to change locks when a key is lost.

Metal keys *are* a PIA for us, but they have the singular advantage of working, every time. Swipe keys were our #2 pet peeve about hotels and a top priority to be eliminated when we got into the business.

Our guests have almost universally voiced approval of this decision. It seems that our pet peeves about hotels (which ultimately became our business plan) align closely with most peoples.

Word!

No but - as someone who spends around 100 nights a year in a hotel. I have atleast 10 cases where I have to take action because of the damned keycards, every year.
Nothing like traveling for 30 hours, getting your room card for your 17th floor room, where you find with your 8 suitcases that the card ain't working, or the batteries on the lock are dry...

A big benefit big chains/franchises have for us frequent travelers, I appreciate my free suite upgrades and executive lounges :) They are the reason I don't stay in boutique hotels :/
 
Trump started out from a very advantageous position. That's not where 99.9% of us are, plus his level of wealth is extremely uncommon, not something to realistically aspire to.

Correct. The Donald's father, Fred owned one or two bags full of apartments, mostly in Queens. The Donald was born on third base, but he thinks he hit a triple!*

That line shamelessly stolen from Andy Kraus.

-Skip
 
Donald also hit rock bottom in 1994, but built his empire back up again. That is respectable. He's not just daddy money.
 
I have yet to see a Chik-Fil-A franchise that didn't look like it was printing money. Tough to get, they only select a very few applicants, but not that expensive if you make the cut.

Plus, you get Sunday's off.
 
I have yet to see a Chik-Fil-A franchise that didn't look like it was printing money. Tough to get, they only select a very few applicants, but not that expensive if you make the cut.

Plus, you get Sunday's off.

x2 on that, Chik-Fil-A is raking it in around here
 
I have yet to see a Chik-Fil-A franchise that didn't look like it was printing money. Tough to get, they only select a very few applicants, but not that expensive if you make the cut.

Plus, you get Sunday's off.

Long lines don't mean they make that much profit.
How much of those sales they have to share to the HQ?
 
Long lines don't mean they make that much profit.
How much of those sales they have to share to the HQ?

Rather a lot, but the investment is very low. It's more like there is a principal operator, and he gets a share of the profits. I believe title remains in the hands of Chick-fil-a corporate.

In case anyone's interested in this, I hear that of all the applicants, somewhere between 1 in 200 and 1 in 400 actually get a store.
 
Word!

No but - as someone who spends around 100 nights a year in a hotel. I have atleast 10 cases where I have to take action because of the damned keycards, every year.
Nothing like traveling for 30 hours, getting your room card for your 17th floor room, where you find with your 8 suitcases that the card ain't working, or the batteries on the lock are dry...

A big benefit big chains/franchises have for us frequent travelers, I appreciate my free suite upgrades and executive lounges :) They are the reason I don't stay in boutique hotels :/

I only amass about 50 hotel nights per year over the past 5 years, but I have yet to have a key card not work. I put the key in my wallet and forget about it. I know the cards fail or get wiped for some, I just haven't ever experienced it. Many attribute it to carrying the card in the same pocket as a cell phone, but I dunno.
 
Rather a lot, but the investment is very low. It's more like there is a principal operator, and he gets a share of the profits. I believe title remains in the hands of Chick-fil-a corporate.

In case anyone's interested in this, I hear that of all the applicants, somewhere between 1 in 200 and 1 in 400 actually get a store.



Chick-fil-A has a distinct franchise business model. The franchise fee to join Chick-fil-A is a very accessible $5,000. Chick-fil-A corporation will pay for land, construction and equipment for a restaurant, then rent it to the franchisee for 15% of sales plus 50% of pretax profit remaining. Therefore, startup costs are very low, in exchange for higher-than-usual monthly payments.

You are buying a job for $5k.... 50% pre-tax royalty would hurt....
 
Donald also hit rock bottom in 1994, but built his empire back up again. That is respectable. He's not just daddy money.

Not only was he born to a rich slum landlord daddy, he's gone bankrupt four times leaving the stockholders hanging. Most recently in Puerto Rico. He's a nickel rocket. As for a franchise, I'd read up on mr. Els, who has had phenomenal growth with his chipotle Mexican resturants. It might be worth a look.
 
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I only amass about 50 hotel nights per year over the past 5 years, but I have yet to have a key card not work. I put the key in my wallet and forget about it. I know the cards fail or get wiped for some, I just haven't ever experienced it. Many attribute it to carrying the card in the same pocket as a cell phone, but I dunno.

You obviously stay in nicer hotels than I do :)

No but - I often adjust the lenght of my stay, every time you do that, they need to recode the keys. And You are really lucky if you've never had a door lock with dead batteries..
 
I purchased a motorcycle store April 1, 1987 in a small agricultural town.
It was technically not a franchise but came with a district manager and a lot of corporate overhead.
A made a good living for 17 years and worked an average of three and a half days a week.
I sold it for nine times what I purchased it for.
I now make good living licensing proprietary software and work a couple of hours a week.
I have had six small businesses since 1970 and all have been profitable.
Part of the plan is to not work more than three and a half days a week and I have been successful at that. If there is more work to do than that I hire it done.
In my experience there is always something to not like about every business just as there is a dark side to every job.
My advice is to make sure you understand the value of the franchise to you and what the true costs are.
 
I've looked at a couple of franchise opporunities. The PROs are that it's a proven system and you typically get a lot of support. The CONs are that it's expensive up-front, you have very little control over a business that you only kinda-sorta own, if you're going to make it succeed it will become your life for at least a few years, you will pay a substantial percentage of your intake to the franchisor every month, and the rug can be pulled out from under you with little warning.

When I looked at DHL I didn't see the down side. Because of the investment I wanted a lot of info. and spent two weeks almost non-stop on the phone with the territory mgr and was just about to commit when he told me someone else landed the territory. A month later I read that DHL was all but pulling out. The poor bastard lost everything, and that was so close to being me. I still can't imagine why they went to so much effort to recruit a new franchisee in the area knowing full well what was coming.

The one I may have blundered was The Lawn Doctor. I have had a lawn/landscape business for 18 years so I know the business inside and out and this really is one area of the industry with incredible potential. The guy who bought the franchise only lasted a couple of years. I have no idea what went wrong. My concerns were the high cost of materials and substantial fees to the franchisor, so maybe that's what got him. Or maybe he was someone who didn't want to devote his life to his work.

It's been my experience that someone who owns his own business and does well financially typically works his ass off. Looking over from the other side of the fence the grass does indeed look greener. But that lawn has been well tended. And fertilized.
 
You obviously stay in nicer hotels than I do :)

No but - I often adjust the lenght of my stay, every time you do that, they need to recode the keys. And You are really lucky if you've never had a door lock with dead batteries..
+1

Mary and I have traveled a lot. Not so much on business, mostly for fun. We have experienced card failure often enough to make us never, ever want to inflict those infernal things on our guests, no matter how much easier they are.

There is simply no worse way to start a vacation then to have key failure at the end of a long travel day. Inevitably, one of us (okay, me!) has to trudge back down to the lobby, stand in line, and have them make a new key -- all the while hoping that it was a key (not a lock) problem. Meanwhile, Mary is standing outside the room, with all of our luggage piled around her, waiting...

Case in point: Today we had guests lose keys to the Stearman and Charles Lindbergh rooms. They got drunk, lost them on the beach, or in the car, yada yada yada. (These were NOT pilots. I don't think we have ever had a pilot lose a key, in 13 years.)

Guess who was out re-keying those locks? ;)

I don't minds doing the locks -- that's the easy part. However, I get REALLY torqued when they lose our awesome pewter airplane keychains.
 
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