I’ve been approached by a friend who wants to partner with me and invest in opening a franchise business. I know the business is likely to be successful as it has a proven model working everywhere…but don’t know anything about franchise economics. Every business I’ve started and sold has been an individual effort. I’ve been told to stay away from franchises as you are beholden to franchisor and, if they aren’t of any value, then you are basically fucked. Anyone have any successful franchise businesses and stories to tell?
From what I've heard about being a franchisee, you may end up working long hours for minimal reward... like $50K/yr net. Not worth it, IMV, unless you can hire a manager to run the thing and you make enough as owner to make it worthwhile in spite of "ownership risk". Maybe better if a McD's franchisee..... but wouldn't you need like $500k initial capital investment??
Care to share what it is? Food? Service? Some are better than others obviously. They can be a LOT of work. Silent partners rarely make much. I've never done it but I know a couple folks who have. Both silent and active. Way back in the day, when CMG had less than 75 stores and I ate at one and saw how busy it was, I went in the next week and asked if they were franchisable. Obviously the answer was no. Did they have stock? No. Then MCD went on a buying spree and they bought a big portion of CMG along with Boston Market and a pizza chain in the Midwest. They spun off everything later, but the ceo at the time was smart, he kept a big portion of the private ownership in CMG. It was right before the ipo.
I had a successful adventure as franchise. Put my wife in the shop and she made 5 times more money than me. I don't know how protected franchisees are in the US, but I negociated a minimum contract of 9 years, whereas normal contracts are only for 3 years. They first refused but finally agreed. I needed 9 years to pay of the building that I bought on a top location. After the first year my shop turn over was in the top 10 of all shops (over 100 shops) from that company. They wanted to get me out fast and take the money themselves. I knew this could happen, that's why I wanted a 9 year firm contract. Mc Donalds seems to be good too as I know 2 people who have each 3 restaurants.
IMO........If it's the food industry then a franchise would be better than going alone. And a fast food franchise in a food court at a shopping mall would probably be the most lucrative of any franchise.
I have SERIOUSLY investigated 2 food franchises. Each in different geo areas. Jersey Mikes subs in Las Vegas, and Little Caesers Pizza in (rural) Idaho. What I can say to you is this... In a large(r) market, to make money you need rights for additional locations. Consistent high volume locations do not come cheap, think millions for the buy-in (not including ongoing fees), assuming you have prior experience. So expansion is necessary... A la-dee-da mompop operation is not going to turn 100K in monthly sales! In small markets, you want to stick to well-known brands. Otherwise you start as a novelty requiring customer education which has high cost in money and time. Couple with minimal to none expansion opportunity, very difficult to be first, with no flexibility if local market is not receptive. Nowadays, I'm not interested in franchise. A string of local donut shops, with product made in in my donut distribution kitchen which also serves as a cloud kitchen for delivery apps will suit me just fine. If you are doing things the right way, franchising should give new meaning to your definition of Due Diligence.
Franchise City on youtube has good info and I would recommend going through him for franchise help. you Sign up and he helps you for free - has a pretty qualified team too. Need a minimum 30k though. Dude knows the industry better than anyone out there.
It’s baby / child related… Big market. Would be looking at being a silent partner in this but possible can put the wife to work.
I think you should consult with an experienced lawyer before you do anything else. imo, sounds like a recipe for trouble. Partnerships are difficult: you have to continually compromise with another person. Franchises are equally so... you're going to have to deal with the franchise, which will also have an agenda. Taken together, a franchised partnership, is asking for double-trouble. - The classic partner move is to get some sucker to take on the financial risk. If it succeeds, they share in the profits; if it fails, they jump ship. - The classic franchise move is to let some sucker open a new store, sign off on all the risk, and find out if the boat will float in some area. If bankruptcy, the franchisee takes it up the on the chin; if profitable, they push the franchisee out, and bring their own people in (at a much higher profit margin, of course). If this goes south, who's on the hook, for what percentage? What's the financial and legal responsibility of you, your partner, and the franchise? There's a lot of ways for this to go wrong. I'd call this a high risk endeavor. Like trading leveraged gold futures.
Just playing devils advocate here knowing no specifics at all... Longevity of business...Birth rates are declining. The baby/child space may have political over/under tones. May also provide opportunities. Spouse working. Silent partner. Really? With spouse working day to day? hmmm