Anyone a Franchisee?

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AggieMike88

AggieMike88

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The original "I don't know it all" of aviation.
i know several regulars here, including myself, are independent business owners. But I'm curious I'd any are owners of a franchise operation. As I learn about how this sector of business is done, I want to hear from any others who Are franchisees and their experience.
 
I researched several a couple years ago. Had deposits on two different ones and then passed. Really disgusted with most brokers and franchisor attitude toward franchisees. Will be interested in others experience.
 
I am not but have had several friends/acquaintances over the years that have had everything from 7-11s, Taco Bells, and everything in between. Those that have one franchise always have themselves a job they own and barely make it and usually sell to some other poor sap.

On the other hand I have a few friend that have multiple locations and do great...like super nice houses and cars great.

Bottom line I have discovered from first hand accounts...unless you can get to 5-6 locations minimum rapidly you are just literately just buying yourself a job at best.

Now my opinion...most franchises are set up like a forced MLM...get "owners" to buy in and force them to buy your products and services. McDonalds corporate does not make their money from selling Big Macs...they make their money from leasing the real estate to the franchisees...but most I have known got out.

My friend's dad that was making a ton in Taco Bell nearly went bankrupt with several stores starting out...then it only started to turn when he was able get to the point where he could be a distributor service other locations as well as partner with the construction firm that built the locations for the new franchisees...that is where his fortune was made, not selling tacos to the stoners and duplicating that doomed strategy of taking on all the downside risk.

Unless you look at it as an investor as an addition to a portfolio and not your primary livelihood, the only successful franchisees owners I have ever met all climbed up the pyramid and were somehow making money off the "downline"...never just selling the end product/service to the consumer.
 
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AggieMike88 said:
i know several regulars here, including myself, are independent business owners. But I'm curious I'd any are owners of a franchise operation. As I learn about how this sector of business is done, I want to hear from any others who Are franchisees and their experience.
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My wife and I owned and operated two franchise territories for a national tax preparation company from 2000 through most of 2015, when we sold our territories to another person. At one time we operated eight or ten locations (I forget the exact number).

It was not a horrible experience, we made money each year, but I would not do it again and I don't encourage others to buy franchises.

One good thing about our franchise when compared to others is that we had fairly large geographic territories, with no intermediate 'master franchisee'. Most franchise outfits don't give you territories, so that the franchisor can sell another franchise right down the street.

We didn't go out of business, but had we done so we didn't have a penalty clause. Many franchise agreements require the franchisees to pay the franchisor the amount of profit the franchisor thinks they would have received had the business continued.

After we sold we just hung our own shingle. We had to move away from our old locations for two years due to non-compete clauses, which ran out last fall so now we get to keep all the money we make and can choose all our own vendors and technology. Yeah!

Most franchise agreements are very one sided in favor of the franchisor.

My advice to anyone contemplating purchasing a franchise is get hired to work in an existing franchise first. Learn as much as you can about this business. It is in the interest of franchisees to minimize the downside of their businesses because they don't want to hurt the sale value of their business. You need to have insight into the internal workings of the business.

If possible use the money you would have paid to buy your franchise to start a similar business of your own. If there is profit you get to keep it all, if the business isn't profitable you can walk away. Also if you are in a similar line of business there's a chance the franchisor will give you great terms to buy your business.
 
FYI, I am avoiding the food opportunities. Zero interest in that.
 
My first wife and I owned a Subway. She had worked at a couple and enjoyed it so she convinced me to buy one. She didn't really have much experience doing anything else and only had a high school education but she wanted to have her own business. I was working at the airline at the time but was assured that my main obligation would be to attend the franchise training in CT and then manage the books. She would then run the day to day operations herself as well as work the line. She was a hard worker. Well, she was a bit of a perfectionist not only in her own self but also with employees. She drove a few employees off but the biggest issue was that she could not find anyone that she trusted to run the place for a day or two in our absence so one of us always had to be there. This meant for the year and a half that we owned the joint that we had almost no time off together. It sucked. I finally put my foot down and told her that she either needed to find someone to trust or we needed to sell the place. About a week later she agreed to sell.

During the time we owned the place, we made a fairly decent profit and we sold it for more than we paid. However the cost in personal life was more than I wanted to spend. I do believe though that we could have ended up owning multiple stores if she would have been able to be more trusting of employees. There were a couple that I believed would have done a good job for us and who I thought were trustworthy enough. Unfortunately she didn't see what I saw.

Bottom line is that as with any business you just have to work at it.
 
There is a whole cottage industry of buying franchises from folks who are in over their heads, get them under control and re-sell them to a multi-unit franchisee or the next sucker.

I had a neighbor who blew a good part of his retirement on a franchise coffee shop. All the GIS and marketing data said the location was perfect. Unfortunately he was a grouch and couldn't be bothered to be in the store. I bet all the college kids he hired to run it made good money on the side. He went broke. Another independent coffee shop took over the location and went broke with it too. Starbucks then built a store around the corner and has been printing money ever since.
 
AggieMike88 said:
FYI, I am avoiding the food opportunities. Zero interest in that.
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AggieMike88 said:
i know several regulars here, including myself, are independent business owners. But I'm curious I'd any are owners of a franchise operation. As I learn about how this sector of business is done, I want to hear from any others who Are franchisees and their experience.
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Car dealerships seem to do very well.
 
I was a business owner, and I considered creating franchises, but my business was too vested in high quality and high ethics in a professional relationship with clients. I couldn't imaging selling a franchise based on my business model and expecting franchise holders to be able to maintain that same level of quality. My business model was based on the fact that we were better than everyone else and we charged accordingly.

But I sort of think that your business is based on processes and procedures. I think you could easily package that and sell franchise options in your business.

Have you considered that?
 
When I researched franchises, I came to the conclusion the only reason for a franchise was to have a recognizable name that brought customers through the door, i.e. Dunkin Donuts, Panera, etc. Otherwise, you can learn everything else on your own. For instance, why buy a HVAC franchise when you can go to work for an HVAC company for two years, move to a new market, and then open up your own. Then you don't have to pay franchise fees. In addition, franchises frequently have zip code restrictions. I refused to own a company that restricted where I could go to sell my product, especially when the economy sours. I bought an existing business, and then made changes to make it my own. So far, so good.
 
I saw the other side of it.. my client was the franchiser so I was working on the business systems that collected franchisee monies to spend on the costs of supporting the brand and the franchisee (in that order it seemed).

Back in college one of my Econ professors asked, "What does the McDonald's corporation sell?" Some clown said, "Hamburgers." Prof says "Wrong. They sell franchises."
 
AggieMike88 said:
FYI, I am avoiding the food opportunities. Zero interest in that.
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I looked into several restaurant franchises and the main thing I learned is owning a franchise is just buying a mandatory over time job, then give the money away to the franchisee.

I also looked into one of the house cleaning franchises. I learned there to not buy a franchise, instead just start cleaning houses. This was for my wife, not me. I don't fit in a French maid outfit very well....
 
"he was a grouch and couldn't be bothered to be in the store"

A lot of franchisors will claim that their business will run on autopilot so the owner can just sit on the beach all year.

This is rarely true, especically if the business employes low wage workers. At least not until you have many locations.
 
JimNtexas said:
"he was a grouch and couldn't be bothered to be in the store"

A lot of franchisors will claim that their business will run on autopilot so the owner can just sit on the beach all year.

This is rarely true, especically if the business employes low wage workers. At least not until you have many locations.
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A former neighbor has a number of standalone 7-11s and at this point they are on autopilot. You need to find folks capable of managing the individual units, in his case the managers are family members from India.
The thing with c-stores is that the ones in the borderline neighborhoods are the ones with the best margins. With that of course comes occupational risk.
 
Zeldman said:
I also looked into one of the house cleaning franchises. I learned there to not buy a franchise, instead just start cleaning houses. This was for my wife, not me. I don't fit in a French maid outfit very well....
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I don't see what the franchise model adds to that line of business. What you need is Access to reliable labor, plenty enough work to go around. Same with office cleaning. A relative of my wife's does that, hasn't picked up a broom in 30 years. His job these days is mostly QA and recruiting.
 
weilke said:
I don't see what the franchise model adds to that line of business. What you need is Access to reliable labor, plenty enough work to go around. Same with office cleaning. A relative of my wife's does that, hasn't picked up a broom in 30 years. His job these days is mostly QA and recruiting.
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You are right. The franchisees wanted something along the lines of 40,000 to 75,000 up front. They would supply initial training and T-shirts with the company name. I could do a whole lot more with that money in my pocket and hiring people that want to make 10 bucks an hour for part time work.
 
JOhnH said:
But I sort of think that your business is based on processes and procedures. I think you could easily package that and sell franchise options in your business
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I think you're thinking I am considering becoming a "sor" with the salvage yard. That's not the case.

I am exploring an exit strategy from the yard and want to shift to something else. Especially something that already fits skills and knowledge of both myself and my current team.
 
Ravioli said:
I saw the other side of it.. my client was the franchiser so I was working on the business systems that collected franchisee monies to spend on the costs of supporting the brand and the franchisee (in that order it seemed).

Back in college one of my Econ professors asked, "What does the McDonald's corporation sell?" Some clown said, "Hamburgers." Prof says "Wrong. They sell franchises."
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A twist on this in this mornings seminar was "how do they make money?" Also not hamburgers, but in the successful acquisition of customers and then converting them into frequent repeat customers.

Presenter was Dr. John Hayes if anyone has heard of him.
 
AggieMike88 said:
I think you're thinking I am considering becoming a "sor" with the salvage yard. That's not the case.

I am exploring an exit strategy from the yard and want to shift to something else. Especially something that already fits skills and knowledge of both myself and my current team.
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Are any of the auto part stores franchised?
 
Mary and I looked closely at becoming a franchise hotel when we opened in Iowa, and then 8 years later when we opened in Texas. The restrictions that franchises put on our operations, the profit loss, the overall inferior (to what we were offering) service standards, and the basic inability to manage our own business as we saw fit caused us to reject the idea both times.

There are times I wish we had a chain's marketing muscle, though. It's hard to beat brand awareness.
 
AggieMike88 said:
NAPA stores are. Not sure of the other big brands. But it wouldn't surprise me if they were.
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Most of them are - if not directly franchised like NAPA are, but most use same distributors and are "slaved" to them.

One of my clients is the guy who started and then sold Worldpac, he's doing OK...
 
AggieMike88 said:
I think you're thinking I am considering becoming a "sor" with the salvage yard. That's not the case.

I am exploring an exit strategy from the yard and want to shift to something else. Especially something that already fits skills and knowledge of both myself and my current team.
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A lot of people who get into franchising are getting their first taste at running a business. I suspect they seek out franchises in part so that they have some sort of instruction set to running their own business. As a business owner, you already have the knowledge, team, etc. Accordingly, I suspect you'd be paying for a service you don't need.
 
Jay Honeck said:
Mary and I looked closely at becoming a franchise hotel when we opened in Iowa, and then 8 years later when we opened in Texas. The restrictions that franchises put on our operations, the profit loss, the overall inferior (to what we were offering) service standards, and the basic inability to manage our own business as we saw fit caused us to reject the idea both times.

There are times I wish we had a chain's marketing muscle, though. It's hard to beat brand awareness.
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I figured it would be the required name change to "Patel" that would put you off.
 
Zeldman said:
Ok.... pictures coming soon....!!!
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acaa5c87414bfbc264a17fb8ebef3a03.jpg
 
AggieMike88 said:
I think you're thinking I am considering becoming a "sor" with the salvage yard. That's not the case.

I am exploring an exit strategy from the yard and want to shift to something else. Especially something that already fits skills and knowledge of both myself and my current team.
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Looking to open a Pick'n'Pull yard?

[ducks]
 
MAKG1 said:
Looking to open a Pick'n'Pull yard?

[ducks]
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No ducking needed. Considered converting, but the variables that govern a successful self service yard are not in our favor.
 
Most has been already mentioned. All those I met that had done more than bought a job with long hours and lame returns had several operations. Brokers won't tell you the straight story. Franchisors would put one on every corner and across the street from you if they can.
Big income gas station turns out the couple that owned it worked ALL hours themselves! When I figured in employees so I only have ad about 40 hours the gross went from $250,000 to $40,000...
The garage door company with $180,000 gross turns out its split between partners, one of which I'd have to replace as a senior employee AND his wife that did the books.
Fryer cleaning business with special equipment sounded like a green business that would flourish. Finally found two franchisees that had been seriously screwed over and lost their retirement savings.
Etc. Etc......
 
Mike,

Way back when, in the seventies, my wife and I took care of a doctor and friend their kids when they went on vacation. We were offered money to set us up in a franchise business.
We declined then and would still do so today.

As @nauga would posit,

Not waiting for the spring to trap us. Mice are gullible. Cheese is cheap. You have a profitable business. Reap the rewards of that. Growth and expansion are not always the best answers.
 
Goofy said:
Most has been already mentioned. All those I met that had done more than bought a job with long hours and lame returns had several operations. Brokers won't tell you the straight story. Franchisors would put one on every corner and across the street from you if they can.
Big income gas station turns out the couple that owned it worked ALL hours themselves! When I figured in employees so I only have ad about 40 hours the gross went from $250,000 to $40,000...
The garage door company with $180,000 gross turns out its split between partners, one of which I'd have to replace as a senior employee AND his wife that did the books.
Fryer cleaning business with special equipment sounded like a green business that would flourish. Finally found two franchisees that had been seriously screwed over and lost their retirement savings.
Etc. Etc......
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What you're describing is not just limited to franchises. Most small businesses are marginally profitable, at best, if you try to structure them so that you are working a mere 40 hour week.

In our case, we do well because my wife and I work a bajillion hours, and I am physically able to perform all the trades. If we hired everything out so that we were working 40 hour weeks, the hotel would be (at best) a break even proposition.

As it is, the #1 beneficiary of our business, for the 15th consecutive year, has been the government. They skim more profit than me, Mary, and all of our employees COMBINED.
 
Jay, wasn't planning on that, just used it to see what payroll would run. Figured on being there a lot more than that. But 80 hours a week would not have doubled that 40K. Would have been the 40 plus the savings of one employee wages and burden. Still, with CA taxes, not remotely worth it.
When I was building custom homes I worked 7 days a week for years...
 
I took a look at a number of them. In the end I decided they were too much money and too restrictive to be worth it. If a franchise has any value, it's that there's a tried and true system already in place, and if you follow the recipe, then you can have some success. But really, most every industry has some kind of trade group of independent owners that can provide 90% of the value of a franchise for a fraction of the cost.
 
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