Investing in a franchise

[NotActuallyALonghorn 4975]

13 hours ago, BearSchlong said:

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.

One of my FIL's good friends owned a donut shop in a small town outside of Tyler. He said that place printed money, but the hours were pretty terrible and he didn't trust paying someone else to manage it enough to give him reasonable hours. He ended up selling it and moving out of state.

[Brew 3049]

4 hours ago, Dbeasy said:

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.

His dad owns 1 and used that as collateral to help him get the first 2. Everything since then has been on the son. Walking out on the ledge was putting everything he built on the line to buy a package of 7 at one time right after having a kid. If it all went under he could have gone back to work for Dad or some other operator, but everything he had was put up to buy the group with him having no experience with that large an operation. They were under performing stores that the numbers didn’t make sense on, but he’s made it work.

I get your point and don’t disagree, but even with a limited backstop you’re still risking what you have and what you have built. I’ve made several gambles over the years that would have cost me most everything, but I was never going to the streets. Even on the jobs front, I would have walked into something else instantly I always believed.

[CooterBrown 18003]

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.

Yep. It’s easy to walk through the door when it’s been opened for you.

[Archer 474]

What’s the opinion of franchising into fast food with no food service experience?

 

I’ve always considered it to be a bad idea to buy into a CFA or something similar if you had never worked in the industry. I could see opening fast food in a underserved town but have never worked in the food industry. 

[Errestaurants 2570]

13 hours ago, Archer said:

What’s the opinion of franchising into fast food with no food service experience?

 

I’ve always considered it to be a bad idea to buy into a CFA or something similar if you had never worked in the industry. I could see opening fast food in a underserved town but have never worked in the food industry. 

Chick fil A is not your typical franchise. You're not buying into anything. You'll put up a very small fee and if selected ( remember the religion aspect) you will have a very good restaurant job but you'll have to operate the restaurant. Its not passive but very hands on. Its not like you're buying into a Subway, Jimmy Johns, Wendy's, Papa John's. Etc. If you're wanting in that game look into WingStop. You want a VERY strong digital, Takeout and delivery system. 

Also you're not going to be able to just buy a successful franchise unit like a WingStop or McDonald's unless you can open a new market so forget any of the large brands. Now can you buy a couple Subways off someone sure but have fun. Most of the large successful franchise brands are operated by large companies/PE with big money. Groups that operate 50 WingStops or 100 Wendys all in established markets like a D/FW or Houston. 

Edited September 27, 2020 by Errestaurants

[ShaggyBevo RIP 3868]

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.

The latter half of this post is what you need to pay attention to. Many present day start up franchises are borderline disguised MLM schemes. They require purchasing from their vendors but don’t have the volume to deliver discounts to their franchisees and in fact commonly cost more than what you could buy it for yourself outside of their ecosystem. Meaning the supplies are as big a profit center for corporate as the fees. There are some great new concepts out there but when you get down in the details you’re sending ~50% to corporate.

[TwiceHorn 31438]

20 minutes ago, ShaggyBevo RIP said:

The latter half of this post is what you need to pay attention to. Many present day start up franchises are borderline disguised MLM schemes. They require purchasing from their vendors but don’t have the volume to deliver discounts to their franchisees and in fact commonly cost more than what you could buy it for yourself outside of their ecosystem. Meaning the supplies are as big a profit center for corporate as the fees. There are some great new concepts out there but when you get down in the details you’re sending ~50% to corporate.

Yep.  Very common area for dispute.  Something dumb like napkins with logo are really expensive.  Franchisee gets tired of paying for them, gets their own made, gets busted.  Franchise terminated, sued for breach and for trademark infringement.  It's a fuck.

[Tylerocks 2553]

You know who prints money (or at least I assume they do)...the owner/operator of the Chick Fil A in the park shops downtown.

11-2(or 3) that line is 20 deep for 4-5 hours.  It's a machine.

 

Also, a friend from middle and high school owns and operates the Chick Fil A on Buffalo Speedway/Holcombe. 

I imagine that's a cash cow

[troph 24781]

Not interested in working 70 hours a week schleping chicken sandwiches for a living. If you could own 15 as an owner that would be something.

[Nice Guy Eddie 13508]

While it creates great customer service, I bet the staffing levels at CFAs are too high for max profits. I assume the Corp office dictates the staffing levels. 

[KYHorn 17014]

The workers also get paid quite well and (in my area at least) college students receive scholarships. A family we know owns a couple in our city and they do quite well with just those 2. My father in law recently waited over an hour in line to get CFA for lunch on a weekday. Between customers willing to do that every single day and the fairly high prices they charge for food that is likely very cheap, I think they turn a pretty good profit. 

[Pescado_Rojo 19413]

On 9/23/2020 at 6:14 AM, 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 heard several horror stories about Quizno's. I read an article a few years ago about a guy that sunk his life savings into one and ended up committing suicide. The article said the micro-managed every aspect of his store, and then started shrinking each store's territory to the point he had something like 3 competing stores within 1-2 miles of his. 

[Chewbacca 7767]

2 hours ago, KYHorn said:

The workers also get paid quite well and (in my area at least) college students receive scholarships. A family we know owns a couple in our city and they do quite well with just those 2. My father in law recently waited over an hour in line to get CFA for lunch on a weekday. Between customers willing to do that every single day and the fairly high prices they charge for food that is likely very cheap, I think they turn a pretty good profit. 

The best part of CFA is how efficient their drive ins are.  The one by me has 3 lines (that merge into one) and I can still get out of there in 10 minutes even if all 3 are wrapped around the building at lunchtime.

[NeverMarryAStripper 21874]

If CFA ran the government COVID-19 would have been eliminated by now

[Nice Guy Eddie 13508]

51 minutes ago, NeverMarryAStripper said:

If CFA ran the government COVID-19 would have been eliminated by now

Except if you catch covid on a Sunday, you’d be screwed. 

[KYHorn 17014]

3 hours ago, Chewbacca said:

The best part of CFA is how efficient their drive ins are.  The one by me has 3 lines (that merge into one) and I can still get out of there in 10 minutes even if all 3 are wrapped around the building at lunchtime.

Actually just ran into the operators of the CFAs. They said the average time someone waits during peak hours (lunchtime) is 7 mins. The most they've ever made per hour was Saturday lunch- $4500 in an hour. Most cars they've ever served was 252 in an hour.

Edited October 1, 2020 by KYHorn

[Chewbacca 7767]

Actually just ran into the operators of the CFAs. They said the average time someone waits during peak hours (lunchtime) is 7 mins. The most they've ever made per hour was Saturday lunch- $4500 in an hour. Most cars they've ever served was 252 in an hour.

Holy shit. 252 cars per hour is cranking. That's just over 4 per minute, or just under 15 seconds per car at the window.

[C-Man 27187]

One of my colleagues in our El Paso office is working on the insurance for a current client who is upgrading from a $300K-$400K home to one that will be insured for more than $3M. I believe it’s a 12,000 SF home. They own one CFA. One.

[C-Man 27187]

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. 

After reading this, maybe our client is also slingin’

[DallasHorn26 586]

I had a classmate in my MBA program that started with CFA when he was in high school. Became an operator of a mall location after getting his undergrad. He said it only cost him 5k initially. Since then, he's added a second location, seems to be doing quite well.

[Nice Guy Eddie 13508]

I've heard that CFA only costs $5-10K to get started but that would seem to create a 100K waiting list. I realize that you're not going to be a passive owner but what's the catch? Or is the $5-10K more of a cost of the application that eventually requires you to take out a large loan to buy into running the operations?

[BearSchlong 8083]

On 9/28/2020 at 1:56 PM, TwiceHorn said:

Yep.  Very common area for dispute.  Something dumb like napkins with logo are really expensive.  Franchisee gets tired of paying for them, gets their own made, gets busted.  Franchise terminated, sued for breach and for trademark infringement.  It's a fuck.

[KYHorn 17014]

2 hours ago, Nice Guy Eddie said:

I've heard that CFA only costs $5-10K to get started but that would seem to create a 100K waiting list. I realize that you're not going to be a passive owner but what's the catch? Or is the $5-10K more of a cost of the application that eventually requires you to take out a large loan to buy into running the operations?

One big catch seems to be that they have to select you. There aren't all that many locations in any given city, compared to most fast-food chains, and so my understanding is that they're really selective in who they choose as "operators".

[DallasHorn26 586]

1 hour ago, KYHorn said:

One big catch seems to be that they have to select you. There aren't all that many locations in any given city, compared to most fast-food chains, and so my understanding is that they're really selective in who they choose as "operators".

That's my understanding as well. I think the guy I knew got in because he had worked in various stores for 10 or so years before applying to be an operator. 

[conVINCEd 21469]

17 hours ago, C-Man said:

One of my colleagues in our El Paso office is working on the insurance for a current client who is upgrading from a $300K-$400K home to one that will be insured for more than $3M. I believe it’s a 12,000 SF home. They own one CFA. One.

I know a guy who has one of the biggest DFW locations and he thinks that guy is merely upper middle class.

[HRSchenker 2268]

Chick Fil A operators don't get any equity. You could work there for 30 years and when you hang it up, that's it. Doesn't matter how many sandwiches you're slinging at noon. Once it's over, it's over. 

[Nice Guy Eddie 13508]

So CFA operators are employees with presumably good compensation and large bonus potential? And nothing wrong with that.

[1978horn 892]

14 hours ago, Nice Guy Eddie said:

So CFA operators are employees with presumably good compensation and large bonus potential? And nothing wrong with that.

Yeah, I know an operator.  Also, if you are selected for a 2nd store it has to be within a certain mileage of your first store.  

This is not from the operator that I know, but I heard years ago that they can also remove you as operator whenever they want if you feel you are not up to the standards, both as an operator or morally. 

[tokamak 6391]

35 minutes ago, 1978horn said:

This is not from the operator that I know, but I heard years ago that they can also remove you as operator whenever they want if you feel you are not up to the standards, both as an operator or morally. 

So that disqualifies everyone posting on Surly.

[Nice Guy Eddie 13508]

4 minutes ago, tokamak said:

So that disqualifies everyone posting on Surly.

 

40 minutes ago, 1978horn said:

Yeah, I know an operator.  Also, if you are selected for a 2nd store it has to be within a certain mileage of your first store.  

This is not from the operator that I know, but I heard years ago that they can also remove you as operator whenever they want if you feel you are not up to the standards, both as an operator or morally. 

all of that money and you're contractually obligated to be moral? wtf. 

[closetohumping 17435]

TTT.  Thoughts on a Mac and cheese franchise?

 

*low barrier of entry

*lower operating costs (easy to make, no overhead hoods)

*scarcity, I just don't see a lot of these places

*Familiarity, and generally everyone loves Mac and Cheese

 

[royiv 9253]

Low barrier to entry and scarcity? I think you answered your own question. If slinging mac & cheese was a goldmine, you'd see a purveyor on every corner. 

[closetohumping 17435]

On 9/24/2020 at 2:21 PM, Chewbacca said:

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.

I've seen a lot of Krispy Kreme's closed.

[Updawg 2266]

Reminds me of the grilled cheese franchises

[closetohumping 17435]

On 9/24/2020 at 12:01 PM, TwiceHorn said:

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.

 

On 9/24/2020 at 3:02 PM, Hornbeliever said:

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.

 

On 9/26/2020 at 7:35 PM, Archer said:

What’s the opinion of franchising into fast food with no food service experience?

 

I’ve always considered it to be a bad idea to buy into a CFA or something similar if you had never worked in the industry. I could see opening fast food in a underserved town but have never worked in the food industry. 

It's not rocket surgery.  

On 9/30/2020 at 11:34 AM, KYHorn said:

The workers also get paid quite well and (in my area at least) college students receive scholarships. A family we know owns a couple in our city and they do quite well with just those 2. My father in law recently waited over an hour in line to get CFA for lunch on a weekday. Between customers willing to do that every single day and the fairly high prices they charge for food that is likely very cheap, I think they turn a pretty good profit. 

I have never seen a Chic Fil A that wasn't crazy busy, quite remarkable.  Also, great customer service

On 9/30/2020 at 9:45 PM, C-Man said:

One of my colleagues in our El Paso office is working on the insurance for a current client who is upgrading from a $300K-$400K home to one that will be insured for more than $3M. I believe it’s a 12,000 SF home. They own one CFA. One.

Holy schnikes

8 minutes ago, Updawg said:

Reminds me of the grilled cheese franchises

Since I don't know of any grilled cheese franchises, maybe that's not a great sign. 

 

 

 

I'm just researching different options.  Another one was Teriyaki Madness.  I don't see many around my neighborhood.  Pretty simple Asian food.  

[closetohumping 17435]

On 9/25/2020 at 2:08 PM, CooterBrown said:

Yep. It’s easy to walk through the door when it’s been opened for you.

Most millionaires are self made, but it don't hurt to be born on second base.

[troph 24781]

3 minutes ago, closetohumping said:

Most millionaires are self made, but it don't hurt to be born on second base.

Born in the hole baby.  My kids are on second base and I worry for them a bit. 

[Sandman 3403]

6 hours ago, closetohumping said:

TTT.  Thoughts on a Mac and cheese franchise?

 

*low barrier of entry

*lower operating costs (easy to make, no overhead hoods)

*scarcity, I just don't see a lot of these places

*Familiarity, and generally everyone loves Mac and Cheese

 

Would this happen to be "I Heart Mac & Cheese"? My daughter worked there a couple of years ago when they opened up in our town. It didn't last, prices were high and the parent company was always messing with things. Good food but my kid said most customers balked at the prices.

[closetohumping 17435]

On 10/2/2020 at 10:40 AM, 1978horn said:

Yeah, I know an operator.  Also, if you are selected for a 2nd store it has to be within a certain mileage of your first store.  

This is not from the operator that I know, but I heard years ago that they can also remove you as operator whenever they want if you feel you are not up to the standards, both as an operator or morally. 

What do they mean morally

[closetohumping 17435]

On 10/2/2020 at 10:40 AM, 1978horn said:

Yeah, I know an operator.  Also, if you are selected for a 2nd store it has to be within a certain mileage of your first store.  

This is not from the operator that I know, but I heard years ago that they can also remove you as operator whenever they want if you feel you are not up to the standards, both as an operator or morally. 

What do they mean morally

[conVINCEd 21469]

2 hours ago, closetohumping said:

What do they mean morally

You can’t like or support the gays.

[CooterBrown 18003]

Since I don't know of any grilled cheese franchises, maybe that's not a great sign. 
 
 
 
I'm just researching different options.  Another one was Teriyaki Madness.  I don't see many around my neighborhood.  Pretty simple Asian food.  

There was a Teriyaki Madness on Burnet for a couple of years. I liked it quite a bit but I think the very limited menu kept customers from being frequent repeat customers. It also did give me salmonella poisoning. On the bright side, I did lose 11 pounds in one week.

[1978horn 892]

12 hours ago, closetohumping said:

What do they mean morally

My understanding from 15 yrs ago was that if they deemed you were sinful and unremorseful. Based on their beliefs.

[closetohumping 17435]

3 minutes ago, 1978horn said:

My understanding from 15 yrs ago was that if they deemed you were sinful and unremorseful. Based on their beliefs.

FML.  Did you go through the process with them?

[NeverMarryAStripper 21874]

4 minutes ago, 1978horn said:

My understanding from 15 yrs ago was that if they deemed you were sinful and unremorseful. Based on their beliefs.

So I'm guessing the a CFA franchise won't be in my future

[1978horn 892]

7 minutes ago, closetohumping said:

FML.  Did you go through the process with them?

No, never even thought about it, but I have eaten a shit ton of Chick-fil-a.  

It is also not just "apply here" for a store.  You have to work your ass up through things.  Start by working at one and work with the manager about a path or go into a store and ask if there is a path, but it is highly competitive.  They want you committed as possible and know how they operate things.

My understanding is that corporate decides where to open stores and then lets the managers and potential operators know about a potential store location.  then people interested apply for it.  You don't get to chose where a store could be. 

 

I do know that they rent out multiple cruise ships for the operators yearly meeting.  They take all the alcohol off the ships before launch.

Edited February 5, 2021 by 1978horn

[Hook1997 5351]

On 2/4/2021 at 9:51 AM, closetohumping said:

TTT.  Thoughts on a Mac and cheese franchise?

 

*low barrier of entry

*lower operating costs (easy to make, no overhead hoods)

*scarcity, I just don't see a lot of these places

*Familiarity, and generally everyone loves Mac and Cheese

 

I’ve seen one of these open up close to me, I think it lasted 6-9 months....   There’s only so much you can do with Mac and Cheese and not many people are eating just that and a protein thrown in as a meal every week.  It’s a terrible idea.

[closetohumping 17435]

1 hour ago, 1978horn said:

No, never even thought about it, but I have eaten a shit ton of Chick-fil-a.  

It is also not just "apply here" for a store.  You have to work your ass up through things.  Start by working at one and work with the manager about a path or go into a store and ask if there is a path, but it is highly competitive.  They want you committed as possible and know how they operate things.

My understanding is that corporate decides where to open stores and then lets the managers and potential operators know about a potential store location.  then people interested apply for it.  You don't get to chose where a store could be. 

 

I do know that they rent out multiple cruise ships for the operators yearly meeting.  They take all the alcohol off the ships before launch.

How the hell can you be on a cruise without alcohol?   Do they check your bags for alcohol?

[1978horn 892]

2 hours ago, closetohumping said:

How the hell can you be on a cruise without alcohol?   Do they check your bags for alcohol?

Yeah, a cruise with no alcohol is terrifying.  No idea how hard they check, but I have tried to sneak stuff on carnival cruises before, both successfully and unsuccessfully.  I would imagine they let the cruise line run a normal operation in checking luggage.

Another part about that...It is my understanding that they pay the cruise line what they would have made in alcohol sales anyway.  It is just not available.

Edited February 5, 2021 by 1978horn

[Homercles 10205]

So you just spend your time getting super wasted on life?