Investing in a franchise

[Hornbeliever 712]

Anyone ever considered investing in a franchise?  Considering contributing equity into a small franchise and was wondering if there are horror (or feel-good) stories from your vast, sordid experiences. 

Wont be a ton of money....south of actually messing with retirement but north of "fuck it, doesn't matter if it gets pissed away and all I got was a few Hawaiian bbq meals."

[TwiceHorn 31463]

Man.  It's dependent on the franchise, some are better than others, but the fees are usually a lot, and all you are really getting is the brand.

The brand had better be worth it.

Also a "young" or small franchise may be better than a big one.  First, consider that the business assistance they provide you/yours will be hugely overrated, so having a "better system" is probably bullshit.  If you are a numbnut that would have trouble securing a lease and other fundamental stuff, a franchise can be helpful there, but not worth the fees over time.  The "checkups" on your business, that are ostensibly to help you, can become inquisitorial inspections designed to place you in breach of the franchise agreement, and terminate you.

But a young or small franchise will have an interest in your success, probably moreso than a larger one, who just wants your fees and is going through the motions, otherwise (and also selling you a shit ton of napkins, cups, containers and other branded shit at high markups).

Edited September 23, 2020 by TwiceHorn

[StruggleBus 3922]

Could be a great idea or the worst idea ever. What kind of franchise?

[Hornbeliever 712]

It's a Hawaiian bbq restaurant and consideration is for north burbs in Houston.  I'm in beginning research now so still toss up if I throw in some equity....hell, who knows if it even goes through.

[Hornbeliever 712]

35 minutes ago, TwiceHorn said:

Man.  It's dependent on the franchise, some are better than others, but the fees are usually a lot, and all you are really getting is the brand.

The brand had better be worth it.

Also a "young" or small franchise may be better than a big one.  First, consider that the business assistance they provide you/yours will be hugely overrated, so having a "better system" is probably bullshit.  If you are a numbnut that would have trouble securing a lease and other fundamental stuff, a franchise can be helpful there, but not worth the fees over time.  The "checkups" on your business, that are ostensibly to help you, can become inquisitorial inspections designed to place you in breach of the franchise agreement, and terminate you.

But a young or small franchise will have an interest in your success, probably moreso than a larger one, who just wants your fees and is going through the motions, otherwise (and also selling you a shit ton of napkins, cups, containers and other branded shit at high markups).

Yeah, it's a young ish franchise. Solid enough for a footprint, not solid enough to be super well known.  So value is to be seen (and researched)

[Updawg 2266]

I assume chik fil a wont accept surlys

[T’Boo Ted Marshall 2732]

Talk to other franchisees and see what their support level has been.

[CooterBrown 18010]

Every Hawaiian BBQ place has virtually the same menu and few in Texas have heard of any of them so you don’t gain anything with brand recognition. Why not just open an indie version of what you want?

[TwiceHorn 31463]

7 minutes ago, CooterBrown said:

Every Hawaiian BBQ place has virtually the same menu and few in Texas have heard of any of them so you don’t gain anything with brand recognition. Why not just open an indie version of what you want?

Yeah, this is  what I mean about the brand.

Chik FIl A, and most of the fast food franchises, are no brainers because the brand (and associated food, even if shitty), are what it's all about.  You don't want to be a chicken sandwich joint, you want to be CFA.  You don't want to be a mex joint, you want to be Taco Bell.  You don't want to be a burger joint, you want to be _________.

If you think you can reasonably compete with the franchise in their segment without their branding, you are better off without the franchise.

In your case, since there's not a "sell itself" brand of Hawaiian BBQ, you're probably better off without the franchise.  And if you or your investment "partners" think you really need the franchisor's help beyond menu/recipes to make a go of it, stop right now.

*Not a franchise lawyer, or in the franchise business, on either end.  But as a trademark lawyer, I have represented both ends and had some exposure to the whole biz.

Edited September 23, 2020 by TwiceHorn

[Homercles 10205]

Damnit was hoping it was Fleet-A-Pita

 

Edited September 23, 2020 by Homercles

[horn4life 3760]

I became friendly with some nice people who put everything they had into a Quizno's.  They got fucked in the end.  Corporate decided to add a limited menu of much cheaper csandwich special to compete with Subway's $5 foot long deal.  But they had a SUPERIOR sandwich!  So the revenues went down, as did profit margins.  Then the geniuses at corporate decided interior makeovers were what was really needed to compete... the poor folks lost everything.

The bottom line is, does the Franchise brand provide enough built in profit to deal with the other BS related to losing some degree of total control of your operations.  You might kill with a franchise.  Usually buyers see a certain safety in relying on the experience of the franchiser to make the reach to profitability less daunting.  It's a cost analysis deal only you can do for yourself.

I personally think the best current restaurant business model is the non-traditional delivery and pickup only model.  Your kitchen space is much cheaper, so you pour money into advertising to create "traffic."  In fact I have a friend who has owned several deli's and if not for delivery and catering would have not survived the gradual rent increases here in Austin over the years.  The delivery only model allows for much more affordable storefront space, because you "visability" is via advertising rather than prime real estate location.  The no tipping delivery model of TSO Delivery in Austin is the model I am thinking of.  The pandemic launched them into hyperdrive, but the model was solid and steady prior to that from a growth perspective. 

Roughly 80% of restaurants result in failure.  Franchisers are selling a much lesser chance of total failure and complete investment loss, via their systems and branding.  But the cost is only as good as the systems and branding, so do a LOT of research!!!!

[Dbeasy 15049]

Great topic. I’d be interested to hear more about successes. I’ve found plenty of failures.

[CooterBrown 18010]

I personally think the best current restaurant business model is the non-traditional delivery and pickup only model.  Your kitchen space is much cheaper, so you pour money into advertising to create "traffic."  In fact I have a friend who has owned several deli's and if not for delivery and catering would have not survived the gradual rent increases here in Austin over the years.  The delivery only model allows for much more affordable storefront space, because you "visability" is via advertising rather than prime real estate location.  The no tipping delivery model of TSO Delivery in Austin is the model I am thinking of.  The pandemic launched them into hyperdrive, but the model was solid and steady prior to that from a growth perspective. 

Kitchen Mix United on Burnet is fucking killing it with that model. It is jam packed all day long for order pick up.

[MonkeyDoughnut 10234]

7 minutes ago, CooterBrown said:

 

Kitchen Mix United on Burnet is fucking killing it with that model. It is jam packed all day long for order pick up.

 

Not in Austin, hadn't seen that Kitchen Mix United setup. That's pretty damn sweet. Great idea

[kmac30 416]

I have another story like the Quiznos above. Friend had a smoothie place (Smoothie King I think). They made them remodel the store. Then, after the remodel was finished, corporate came in and said “wait, the line is supposed to start on the right, not the left”. They had to redo half of it to comply. Cost them a pretty penny. I believe they still have it, but they’re not happy owners.

[Errestaurants 2570]

Chick Fil A doesnt franchise. You own nothing just an invited operator with great pay with an opportunity to run a couple if you show to be a great operator.  They pick the location and build it, you run it. 

The traditional restaurant business was already changing to delivery and Covid sped it up. If you didn't already have a digital and delivery model in the works its been painful. 

[TwiceHorn 31463]

1 minute ago, Errestaurants said:

Chick Fil A doesnt franchise. You own nothing just an invited operator with great pay with an opportunity to run a couple if you show to be a great operator.  They pick the location and build it, you run it. 

The traditional restaurant business was already changing to delivery and Covid sped it up. If you didn't already have a digital and delivery model in the works its been painful. 

I don't pretend to know the ins-outs-whathaveyous of the various operations.  Was just using them as an example of a hot brand.

[CooterBrown 18010]

1 hour ago, MonkeyDoughnut said:

Not in Austin, hadn't seen that Kitchen Mix United setup. That's pretty damn sweet. Great idea

Whenever we can't agree on dinner, then it's an automatic default to KMU. It's so easy. A dozen restaurants and one single online order/payment and one single pickup. No tipping.  You don't even ever have to interact with anyone. When your order is ready, you get a text and it is placed on the pickup table outside.

It's one of the best COVID business models out there.

[Nueces River Rat 5538]

Do your due diligence like your life depends on it.    I have a franchise, but it's in the service industry which is a different animal than food.  They do have some similarities in the sense  you will either succeed or sink based on how much the mothership values it's brand and franchisees.   If they are rapidly expanding just to promote the brand, that should be a warning sign because you will become a small fish in a big pond.   But if they are strategically looking to place a store here and store there on a longer term timeline  (see Chic Fil A), that would tell me they at least have some of their stuff together.   A red flag and should be a giant one is if they promote themselves as a get rich quick thing.    Ignore the propaganda (regardless If they promote the get rich thing or not)  they send you with projections based on X and sit with a good Accountant and come up with your own.  If I had to reinvent the wheel with my current venture, that is exactly what I would have done instead of now having to look back and make those projections with my CPA.  

Make sure they are ahead of the curve instead of playing catch up right now.  Best examples noted above by @Errestaurants is the digital delivery methods and less dining room space .  If they don't have any of those implemented right now or in the pipe line, walk away.

 

 

Edited September 23, 2020 by Nueces River Rat

[bernorange 8361]

Excuse me good sirs and ladies, but might I interest you with an exciting opportunity for franchising a drive through daiquiri and margarita store?  Well, more of a hut than a store.

[KYHorn 17047]

31 minutes ago, bernorange said:

Excuse me good sirs and ladies, but might I interest you with an exciting opportunity for franchising a drive through daiquiri and margarita store?  Well, more of a hut than a store.

I bet I can guess the franchise fee, and even that is too much.

[Gil Bang 25954]

4 hours ago, horn4life said:

I became friendly with some nice people who put everything they had into a Quizno's.  They got fucked in the end.  Corporate decided to add a limited menu of much cheaper csandwich special to compete with Subway's $5 foot long deal.  But they had a SUPERIOR sandwich!  So the revenues went down, as did profit margins.  Then the geniuses at corporate decided interior makeovers were what was really needed to compete... the poor folks lost everything.

The bottom line is, does the Franchise brand provide enough built in profit to deal with the other BS related to losing some degree of total control of your operations.  You might kill with a franchise.  Usually buyers see a certain safety in relying on the experience of the franchiser to make the reach to profitability less daunting.  It's a cost analysis deal only you can do for yourself.

I personally think the best current restaurant business model is the non-traditional delivery and pickup only model.  Your kitchen space is much cheaper, so you pour money into advertising to create "traffic."  In fact I have a friend who has owned several deli's and if not for delivery and catering would have not survived the gradual rent increases here in Austin over the years.  The delivery only model allows for much more affordable storefront space, because you "visability" is via advertising rather than prime real estate location.  The no tipping delivery model of TSO Delivery in Austin is the model I am thinking of.  The pandemic launched them into hyperdrive, but the model was solid and steady prior to that from a growth perspective. 

Roughly 80% of restaurants result in failure.  Franchisers are selling a much lesser chance of total failure and complete investment loss, via their systems and branding.  But the cost is only as good as the systems and branding, so do a LOT of research!!!!

I've read that Subway stores lose money on $5 footlongs, but corporate forces them to do the promo. 

[Sbbruin 21851]

 

[Sbbruin 21851]

4 hours ago, horn4life said:

I became friendly with some nice people who put everything they had into a Quizno's.  They got fucked in the end.  Corporate decided to add a limited menu of much cheaper csandwich special to compete with Subway's $5 foot long deal.  But they had a SUPERIOR sandwich!  So the revenues went down, as did profit margins.  Then the geniuses at corporate decided interior makeovers were what was really needed to compete... the poor folks lost everything.

Quizno's is the poster child of how to completely fuck up a great idea that had been proven to be successful.  I think once @CHAD BRISCOE infiltrated the organization, the whole thing went to shit.

Edited September 23, 2020 by Sbbruin

[StruggleBus 3922]

11 minutes ago, Sbbruin said:

Quizno's is the poster child of how to completely fuck up a great idea that had been proven to be successful.  I think once @CHAD BRISCOE infiltrated the organization, the whole thing went to shit.

Yeah but now you can get candles with your sandwich

[tokamak 6428]

I guess I'm in the minority, but I can't wait for COVID to be over so we can stop ordering out from restaurants. The list of foods that can survive a 35 minute car ride without being negatively affected is really short, IMO.

[Nice Guy Eddie 13512]

I can understand joining a well known brand. But joining a no-name or unrecognized brand would be a huge risk, imo. I would be flipping the question in terms of what is the corp office doing to bring customers to your restaurant. Not what am I doing to uphold you unknown brand name.

If I'm opening up a restaurant, there is value in someone providing the plan on how to build it out, start up operations, etc. That's worth paying someone to get you up and running. But after that, the corp office needs to proactively bring in new customers for me, and I don't mean by offering 4-for-1 meals coupons that I would have to accept at a loss. 

 

[BearSchlong 8091]

My in-law's are franchisees of a household name automotive repair brand and have been for 30 years.  Regularly a top performing franchisee so corporate tries to keep them happy, I've been to some training classes and seminars when my wife used to work there and was pretty impressed with the content.  They are pretty well established throughout the US and once a year they all the owners get together at a nice resort for seminars and presentations.

I know a guy who owns 12 Little Ceasars restaurants, and he just prints money.

Drive by any strip center and you'll see restaurants come and go.  Good franchises are expensive for a reason.  I'd never go eat at a Hawaiian BBQ place in a strip center, but I'm probably not the target demographic.

Maybe not a franchise, but my next door neighbor in Leon Springs was Rudy Aue, whose dad used to own the original Rudy's filling station and barbecue place across the highway. IIRC it was just a hole in the wall single location and then someone bought it and expanded.  Probably tied to Macaroni Grill somehow too.

Edited September 23, 2020 by BearSchlong

[Hornbeliever 712]

8 hours ago, BearSchlong said:

My in-law's are franchisees of a household name automotive repair brand and have been for 30 years.  Regularly a top performing franchisee so corporate tries to keep them happy, I've been to some training classes and seminars when my wife used to work there and was pretty impressed with the content.  They are pretty well established throughout the US and once a year they all the owners get together at a nice resort for seminars and presentations.

I know a guy who owns 12 Little Ceasars restaurants, and he just prints money.

 

 

All of these posts are helpful.  I've known guys who went broke and two different dudes who print money with numerous franchises each (one also Little Ceasars and another Taco Bell).  I also know someone who sold their couple of Patron pizza franchises and it was average.  

Had never thought of fact that the guys I know who print $ both have "weak" brands, not premium brands.  Hmmmm

 

[Brew 3049]

22 hours ago, Errestaurants said:

Chick Fil A doesnt franchise. You own nothing just an invited operator with great pay with an opportunity to run a couple if you show to be a great operator.  They pick the location and build it, you run it. 

The traditional restaurant business was already changing to delivery and Covid sped it up. If you didn't already have a digital and delivery model in the works its been painful. 

It’s more of a quasi ownership model. You “own” the operations of the store, they own the hard assets. You pick up and report the income and expenses, so all the benefits of operating profitably go to the “owner”. You pay a hefty royalty back to CFA, but all the operators I know and do work for do extremely well.

[TwiceHorn 31463]

10 hours ago, Hornbeliever said:

 

All of these posts are helpful.  I've known guys who went broke and two different dudes who print money with numerous franchises each (one also Little Ceasars and another Taco Bell).  I also know someone who sold their couple of Patron pizza franchises and it was average.  

Had never thought of fact that the guys I know who print $ both have "weak" brands, not premium brands.  Hmmmm

 

If you are calling Little Caesar's and Taco Bell "weak" brands, you are mistaken.  I get your point that they are not "premium," and are among the worst food in their respective segments.  

But, the brands are not "weak."  Everyone knows who Taco Bell and Little Caeasars are and are familiar with their food.  They generally know what they're getting whether they're in New York City or New Braunfels.  They also have devoted fans.  Not premium, no, but stroooong brands.  Strong enough that as long as your location doesn't suck, you're probably going to print money.

Also understand that a lot of franchisors make money both off the franchise fees and off selling you required branded things like cups, napkins, etc., as well as food ingredients.  I think some of the bigger franchises, like Taco Bell, have large initial fees (barriers to entry), but the ongoing fee is relatively small and their ongoing profit results from selling you things.

When you buy your stuff from a huge-volume seller like Taco Bell, it isn't any worse than buying from Sysco or whomever and is obviously needed for uniformity in experience.  But a smaller franchisor takes their own stuff and marks it up, and it can get very tiresome and expensive.

Edited September 24, 2020 by TwiceHorn

[Brew 3049]

Name recognition, advertising, and product consistency are the main things you are paying the franchisor for which is why the big ones work so well. Start up ones should have a low point of entry as they are building name recognition but they also have a much higher failure rate. Most legitimate ones have also performed market studies and know where the entry points are to make it work. There is no way I would franchise a new restaurant concept and I am not risk averse in any way. You’re just spending money to help the guy a few tries down the road. A new restaurant concept has to blow people away from the outset and is Hawaiian BBQ the model that does that?

The exceptions may be if it had a low entry point and they were committed to putting significant resources in the market or if you had a great location available that would give you a leg up on being successful. Past that, if it was a concept you really believed in that shows success elsewhere and you were going to blanket the area with locations it gives you a shot.

[Nice Guy Eddie 13512]

I would agree that Taco Bell is a strong brand. No one confuses it with high quality food but its instantly recognizable. And nothing wrong with owning stores or restaurants with a target audience of people that need affordable food or products.  If someone on the next yacht over is laughing because you bought your 100-ft boat with Taco Bell profits as opposed to Wall St. profits, screw him. money is money.

I would think that going with an unknown brand franchise for your first experience has a high risk. You may need to work there full-time (every open hour?) as the mgr/cook/cashier every day for free.

 

[TwiceHorn 31463]

Listen to Brew for the business/financial perspective.  He knows what's up.

My perspective comes from unhappy franchisees trying to escape some of the burdens that franchisors place on them and from franchisors trying to keep renegade franchisees in line.  In other words, disputes.  The disputes are the symptoms of the problems franchise organizations have, but the core problem is that the franchisee isn't making enough money. Those franchisees making enough money don't complain about the various things franchisors make them do.

[BearSchlong 8091]

Truth.  Plus the franchisees that make enough money get some negotiables with the franchisor, such as opening/closing locations.

A single location franchise would have to generate some serious $$ to be worthwhile.  If I was thinking about a franchise, I'd be considering the financials on a few locations minimum.

[Nice Guy Eddie 13512]

A friend of a friend was involved in a small franchise group in Austin, Mama Fus. I don't know know the details but they had 15 (20?) stores for a while, claimed 50+ in some level of opening but now I can see they have 5 stores. I don't live near one so I can't speak to to their food or location quality but they have a nice website that would make think I want to try them out. I need to ask my friend more about that when I see him next.

What makes a small franchise group seemingly stagnate? In most ways, I would want to succeed or fail quickly. If the concept isn't catching on, wouldn't you want to get away?

[TwiceHorn 31463]

6 minutes ago, BearSchlong said:

Truth.  Plus the franchisees that make enough money get some negotiables with the franchisor, such as opening/closing locations.

A single location franchise would have to generate some serious $$ to be worthwhile.  If I was thinking about a franchise, I'd be considering the financials on a few locations minimum.

You mentioned your involvement with an auto repair franchise.

Some years ago, I got involved in a dispute between a transmission repair franchisor and a local window-tinting franchise they had purchased.  It was a shitshow.  The trans repair place seemed to be the worst kind of franchisor with all-illusory benefits and the local place that they acquired had violated every provision of the Business Opportunity Act possible, but its franchisees were mostly doing pretty well by some happy accident.  But when they had to start operating as actual franchisees under the new owner, it was an open revolt.

It was a real eye-opener.  I view most auto-repair franchises askance as a result.

I have had some similar, smaller scale things arise since, but every time, it's some species of the same problems and issues that were at play in the first one.

[BearSchlong 8091]

Obviously.  If you're not growing, you're dying.

saw a developer building a new small strip center in a shitty part of town - laughed at him - until I saw the 3 tenants - Little Caesars, Donut shop, Liquor store.

It's all about synergy.

[Brew 3049]

1 hour ago, Nice Guy Eddie said:

A friend of a friend was involved in a small franchise group in Austin, Mama Fus. I don't know know the details but they had 15 (20?) stores for a while, claimed 50+ in some level of opening but now I can see they have 5 stores. I don't live near one so I can't speak to to their food or location quality but they have a nice website that would make think I want to try them out. I need to ask my friend more about that when I see him next.

What makes a small franchise group seemingly stagnate? In most ways, I would want to succeed or fail quickly. If the concept isn't catching on, wouldn't you want to get away?

A lot of things kill growth. Lack of capital to keep expanding, lack of higher level workforce to run multiple locations, lack of interest from the group in the constant grind of expansion and labor issues, financial fundamentals that just don’t support the risk/reward of further expansion, etc. Multiple locations requires a corporate environment which a lot of people have a problem with if they have been involved in building it.

I have a buddy that’s mid 30’s and owns 10-12 McDonalds. He walked way further out on the financial ledge to get there than any normal (hell even any abnormal) person would be comfortable with. He started with a leg up because his dad owned 1 and helped him get into his first 2, but there is no way 99% of people would have rolled the dice like he did. He made great money at 2, but he wants to own a proverbial empire. We all think he’s f-ing nuts, but he runs with the big dog franchisees that have their own jets and he wants the same thing.

Labor is the biggest ass whip in the whole deal. I took my firm over at about 7 offices and have more than doubled it with a plan in place to double again in 18 months. It’s a constant beating that I spend 70+ hours a week dealing with and I have good labor and partners/managers in most of the locations. Do that with crap labor and there would be nothing fun about and it’s not much fun most days now.

[Sbbruin 21851]

3 hours ago, TwiceHorn said:

If you are calling Little Caesar's and Taco Bell "weak" brands, you are mistaken.  I get your point that they are not "premium," and are among the worst food in their respective segments.  

 

First, Taco Bell slams.  Fuck anyone who says otherwise.  Second, Little Caesars used to be the absolute worst pizza you could buy anywhere. But recently at work we were going to order some pizzas for a lunch and I just threw in some money without asking where he was getting it from.  He comes back with Little Caesars, and I'm like "aw fuck."  He says "no, try it, they completely redid there formula and it's really good."  And I have to say I was really surprised.  It was pretty damn good for chain pizza.  Used to be you were better off throwing a Totino's in the oven.

Hawaiian BBQ has the advantage of being one of the more reasonably healthy options in fast food, but I'm not sure what kind of traction it could get.  There's a chain out here called "Ono's Hawaiian BBQ" that is decent, but you rarely if ever see lines in the drive thru that match any of the standard fatty brands.

[Walte464 450]

I’ve had several customers that franchised into small restaurants that didn’t have a large following nationwide and it was a disaster. The experiences on the operator and the sales side were a nightmare. They all folded within several years as the franchise owner wouldn’t allow any sort of subs due to the demographic being different from where the original location was at. With the way the times are going, i would definitely recommend a ghost kitchen and building your following through advertisement. Here’s some info about ghost kitchens below.

 

https://www.usfoods.com/our-services/ghost-kitchens.html

[T’Boo Ted Marshall 2732]

Have you thought about visiting with a franchise broker? Have a buddy in Dallas that seems to do well at it.

[Errestaurants 2570]

5 hours ago, Brew said:

It’s more of a quasi ownership model. You “own” the operations of the store, they own the hard assets. You pick up and report the income and expenses, so all the benefits of operating profitably go to the “owner”. You pay a hefty royalty back to CFA, but all the operators I know and do work for do extremely well.

Yea I get what your saying but you really "own" nothing if you can't sell it nor choose to pass it on to your heirs. If you want out of "owning" the operation you're basically quitting a high paying restaurant job.

 

[TwiceHorn 31463]

2 hours ago, Sbbruin said:

First, Taco Bell slams.  Fuck anyone who says otherwise.  Second, Little Caesars used to be the absolute worst pizza you could buy anywhere. But recently at work we were going to order some pizzas for a lunch and I just threw in some money without asking where he was getting it from.  He comes back with Little Caesars, and I'm like "aw fuck."  He says "no, try it, they completely redid there formula and it's really good."  And I have to say I was really surprised.  It was pretty damn good for chain pizza.  Used to be you were better off throwing a Totino's in the oven.

Hawaiian BBQ has the advantage of being one of the more reasonably healthy options in fast food, but I'm not sure what kind of traction it could get.  There's a chain out here called "Ono's Hawaiian BBQ" that is decent, but you rarely if ever see lines in the drive thru that match any of the standard fatty brands.

I am a Taco Bell fan.  I am also a lowbrow mofo from time to time.  I submit that a lot of texmex places would be pleased to serve their tacos.

I had never had Little Caesars until recently and that it was pretty damn good for the cost of a frozen pizza.

I was speaking in broad generalities.

[Chewbacca 7777]

On 9/22/2020 at 9:10 PM, T’Boo Ted Marshall said:

Talk to other franchisees and see what their support level has been.

This is hugely important.  I was part of an investor group in Krispy Kreme franchises about 10-15 years ago.  Corporate required them to purchase all food and supplies from them and massively jacked up the prices a few years into the agreement, which resulted in the franchisees not being able to make any money.  Turned into a huge lawsuit and the investment was written off.  Corporate support (and how they are to deal with) is critical.

[troph 24791]

Absolutely not a fan of franchise investments. Nope.

[Gil Bang 25954]

here's a cool story about a guy that bought a franchise

 

https://www.sportscasting.com/junior-bridgeman-used-fast-food-to-become-one-of-the-5-richest-former-athletes-in-the-world/

[Hornbeliever 712]

Even these posts are success/failure.

And sorry to mislead with the weak comment.  They are not weak, they are very strong brands.  I meant on premium scale and nothing else.  

And my mom owned a restaurant (not a franchise) for a couple of decades before selling and retiring.  I am so sure how hard of work it is that I would never be an active owner in a restaurant.  This is why my plan is to either be a passive investor to a passionate group that lacks a bit of capital or nothing.  My childhood was spent at a restaurant table, playing Gameboy*, my adult life aint going to be.

* I will whoop the shit out of anyone here on most Gameboy games.

[Sbbruin 21851]

22 minutes ago, Gil Bang said:

here's a cool story about a guy that bought a franchise

 

https://www.sportscasting.com/junior-bridgeman-used-fast-food-to-become-one-of-the-5-richest-former-athletes-in-the-world/

That's awesome.  Good for him.

[Dbeasy 15049]

A lot of things kill growth. Lack of capital to keep expanding, lack of higher level workforce to run multiple locations, lack of interest from the group in the constant grind of expansion and labor issues, financial fundamentals that just don’t support the risk/reward of further expansion, etc. Multiple locations requires a corporate environment which a lot of people have a problem with if they have been involved in building it.
I have a buddy that’s mid 30’s and owns 10-12 McDonalds. He walked way further out on the financial ledge to get there than any normal (hell even any abnormal) person would be comfortable with. He started with a leg up because his dad owned 1 and helped him get into his first 2, but there is no way 99% of people would have rolled the dice like he did. He made great money at 2, but he wants to own a proverbial empire. We all think he’s f-ing nuts, but he runs with the big dog franchisees that have their own jets and he wants the same thing.
Labor is the biggest ass whip in the whole deal. I took my firm over at about 7 offices and have more than doubled it with a plan in place to double again in 18 months. It’s a constant beating that I spend 70+ hours a week dealing with and I have good labor and partners/managers in most of the locations. Do that with crap labor and there would be nothing fun about and it’s not much fun most days now.

You said something here that stirs up an emotion for me. You mentioned that this friend went way out on a financial ledge.

That may be, but you also said he had family financial help early in his journey. I just want to point out that there are a lot of people out there that seemingly risk it all to be a successful entrepreneur, but when you realize they have a family financial backstop to ensure they don’t end up sleeping in the gutter, it’s really not that impressive.

What’s impressive is the person who doesn’t have that backstop. Don’t know which category describes your friend, but this has always been a pet peeve issue for me.