have you ever owned any kind of franchise?

[16k_zx81]

We are looking at buying into one and wanted to check in with you guys to see if anyone has any experience owning/operating a franchised business.

Would be interested to hear what it was like, if anyone would care to share their experience....?

 

[lsi]

I have not although the idea fascinates me and I work with several different franchise owners (customers). An associate of mine owns a territory of an IT franchise in my area and here are the impressions I get while speaking to him:
-he already has several resources at his fingertips including marketing materials, pricing plans, helpdesk services, distributor account, logowork, etc.
-he paid way too much for those things
-in many cases he is required to do things by franchise rules and has struggled with things I find trivial like customizing my pricing, changing my website, etc.
-he doesn't feel like there is much value in the franchise's brand recognition or advertising efforts

My takeaway was that there were definitely advantages if I had the investment money and was short on patience but so far I'm still glad I took the long route and avoided the debt.

 

[katz]

I've not, but two friends of mine have - One owned a doughnut franchise, the other a subway type store...Both were a nightmare; they worked all sorts of hours, the profit margins were thin because they were required to purchase all the products from the franchise instead of shopping independently.

Both gave it up after a few years of working like 15-20 hrs./day, 7 days/week. Maye this is how the food industry experience goes, another type of franchise may be completely different. The idea is intriguing to me though. I would consider it if the right opportunity presented itself.

 

[nlinecomputers]

I can't see a computer related franchise offering any advantage. As lsi points out you are usually locked into certain advertising venues that you are required to purchase. Advertising that is of questionable effectiveness because I doubt any of your clients can name a computer store franchise.

You have to hand over large chunks of cash to your franchiser in an industry who's profit margins are on the decline.

You may be forced to use certain suppliers who may or may not have good quality.

I really can't see the benefit of one in this industry.

 

[Kaizen]

In general franchises are statistically more successful than independent businesses. Every franchise deal is unique.

 

[Martyn]

In general franchises are statistically more successful than independent businesses. Every franchise deal is unique.

Yes because generally a franchise is based on a successful model. If you buy a McDonalds franchise then you know what you are getting and you have ready made customers who know what they are getting. They do all the training so you can be a novice and become a franchisee with all the support and marketing to go with it.

 

[nlinecomputers]

In general franchises are statistically more successful than independent businesses. Every franchise deal is unique.

I disagree with that. Most franchises fail. http://www.businessweek.com/smallbi...es_among_top_seven_overrated_investments.html

 

[mr m]

I've looked at lots of franchises...Snap-on Tools, Subway, Carvel, Coast to Coast Hardware, TCBY etc.

Swim Eddie, swim.

Franchisors like to sell you on the fact you are buying a proven, turn-key business. Maybe so but the risks are all on the franchisee.

All franchisors must provide a prospectus by law. Read it. Read it again or pay a lawyer to interpret it for you.

For example Subway did not offer an exclusive territory. That's right, you could open one on the corner and across the street they could sell another unit to another franchisee. The interests rates were a rip off...24% if I remember from years back. That rate doesn't equate to a franchisor looking out for the franchisee.

Subway's prospectus also claimed 98% of the stores were still in business. Sounds great, right? After reading between the lines I realized that there were numerous owners per store. What they don't tell you is you go into debt for a quarter million opening a new store. You can't afford the note so you sell it for $150,000 and eat the loss albeit on oven-hot, fresh-baked bread. Then that dude can't make it either so he sells the store for $60,000. Finally the last guy can survive on 30K a year because he has a small note. Sure, 98% of the stores make it but the vast majority of franchisees lose their shirts.

 

[coffee]

We are looking at buying into one and wanted to check in with you guys to see if anyone has any experience owning/operating a franchised business.

Would be interested to hear what it was like, if anyone would care to share their experience....?

Hello,

Before I struck out on my own I worked for a very small business that bought into a francise to start. Ill let you know that the francise absolutely sunk them. You see, You have to pay attention to where you buy your parts, Supplies, ect... Some will make you buy from them at inflated prices. Also, They had a rule that you had to spend X amount of dollars a month on advertising too.

Basically, Alot of what the francise offered never came thru. They got minimal help and the bills started stacking up. They finally went under according to their contract they had to find a buyer before they could get out and there was some fee for doing it that you had to pay them. They fought it in court and closed the business.

I dont care for francises because of this. You have to buy into them and then they milk you dry. But that is just my personal opinion and it could be a different manner in your case.

Just be careful,

coffee

 

[carrcomp]

Agreed, although Franchising CAN be successful, it's been my experience that it is not.

When I was first starting out, Nerds on Site approached me and offered me a Franchise (there was none in the Barrie Area at the time)

I did my due diligence, and turned them down. Seemed to be they were taking too much off the top, and the requirements were too strict.

Zoom ahead a few years ... someone else bought the franchise. After speaking with him about his experiences, it seems that I was right.

 

[altrenda]

I know several franchisees. The successful ones own several locations so they can split the costs among them.
For businesses like ours, I don't think they bring enough benefit to make it worth the expense.
Also, name a service franchise that has enough name recognition that would bring in customers by the name alone?

 

[Markverhyden]

Just like any other business it depends. Personally I never had looked at a franchise as that model does not fit into my MO.

There is a younger couple that my Dad knows who have several Subway franchises. They put in a lot of hours but are doing well. One of my former customers were McDonald's franchisees. Again, lost of hours but they did well.

There are advantages to the advertising and marketing aspects. But being locked in to suppliers can be difficult. As was mentioned if you have several then you can benefit from volume purchases.

They fail just like any other business for many of the same reasons. I'm a huge fan of Popeye's Fried Chicken. They made a stab at opening up in the New England area. Ended up closing after a few years as no one like spicy food. But 5 Guys Burgers is just booming.

Other types of franchises are having problems though. Mainly those that sell non-consumables. Due to this whole Internet thing more and more people just looking at things locally, if at all, and then buying online.

 

[tom11011]

We are looking at buying into one and wanted to check in with you guys to see if anyone has any experience owning/operating a franchised business.

Would be interested to hear what it was like, if anyone would care to share their experience....?

I could put you in contact with someone I know who owns a CMIT franchise.

 

[Kaizen]

I disagree with that. Most franchises fail. http://www.businessweek.com/smallbi...es_among_top_seven_overrated_investments.html

I wonder what the open independent businesses are for comparison. Are they just small in homes businesses with out much sales or profit?

 

[SprinterTech-WI]

I would NEVER buy an IT franchise, I am however looking at the coffee/cafe realm such as Tim Hortons etc.... as with any franchise though, you don't make money on 1 store get to 5 and you'll start making money. When I last checked Caribou Coffee would only franchise to companies opening 10 locations within 3 yrs.... probably a very good move on their part.

 

[SprinterTech-WI]

I wonder what the open independent businesses are for comparison. Are they just small in homes businesses with out much sales or profit?

that data is almost 20 yrs old....

 

[ohio_grad_06]

Would not want to do an IT franchise. I like having control, if you want to do something differently, you can do it, you have more freedom I think and not giving up profits to someone else.

 

[codegreen]

Agreed, although Franchising CAN be successful, it's been my experience that it is not.

When I was first starting out, Nerds on Site approached me and offered me a Franchise (there was none in the Barrie Area at the time)

I did my due diligence, and turned them down. Seemed to be they were taking too much off the top, and the requirements were too strict.

Zoom ahead a few years ... someone else bought the franchise. After speaking with him about his experiences, it seems that I was right.

Nerds On Site had a franchisee in my area a few years ago. They've since closed up shop, but there are still some outdated ads around. One of my clients told me that, before they called me, they called the NoS 800 number. Apparently, the dispatcher was rude and disinterested.

I'm sure buying a franchise works in certain other fields, but I have zero interest in an IT franchise. To me, it is all the work and responsibility of your own business combined with the lack of control of working for someone else. I'll pass.

 

[Kaizen]

I happen to be in the middle of the Ray Kroc autobiography. For you who do not know his business, it was hamburgers(McDonalds). When he started his franchise model, he decided early on not to sell products directly to the franchisees, instead he looked for ways to help his franchisees leverage their business to get the best prices from local vendors. His business success was built on supporting franchisees, not selling to them. I have no idea if McDonalds still uses this philosophy, but I suspect they still do. I take from this some franchisors have a different philosophy than others. Some bad ones out there and some great ones also.

 

[lsi]

I know several franchisees. The successful ones own several locations so they can split the costs among them.
For businesses like ours, I don't think they bring enough benefit to make it worth the expense.
Also, name a service franchise that has enough name recognition that would bring in customers by the name alone?

I'll take you up on that challenge: ServPro. One of my most successful customers is a ServPro franchise. Another one is ValPak. They have taken a hit but are still doing well. But to refine your point, name a "computer" service franchise with enough name recognition... and I see your point.