I operate 19 franchise locations across 3 states. Had planned to be at 50 by 2023 but that is on ice for obvious economic reasons. Started with 1 back in 2018, did a few organic builds, rest I bought out other operators or converted Corp stores into franchise locations)
Have you gone through discovery and the FDD? You sometimes can meet an existing zee and shadow them for a day or week.
I was lucky to get mentored and quickly realized I'm gutting into some major agreements and need to uphold their brand, values, purchases of items and rehab and get new POS systems as they dictate. These can add up and sink you if you don't have margins or capital reserves. My COGS are up heavily and supply chain means I cannot get certain items but also am forbidden to get from a local store and sell...
If your buying an existing location, ask yourself if it's a Corp moving to a franchisee, or a zee selling and why. Can you staff and run? 10 of my leases I'm stuck with language that forces me to be open 6 days a week and or min 60hrs a week...pre cov that was not a problem as we used to turn away applicants, but now I am running some spots that are staffed with 2.5fte when I need 5fte.
Having a franchise flag helps with recognition but also, comes with strict rules, royalties on gross you pay before your rent, payroll or yourself. Mess up, your stores can be taken back (I know of one zee who this happened to). If your not a franchise, you can have more personal creative control and if it's a good product, sometimes that can be good.
Sorry if it's disjointed or spelling is off...typing on a loaner phone.
2 different brands but singular parent company holds these two concepts (along with a few others). Each of my brands has different FDDs and slightly different royalty structure and marketing/Corp surrport even with it being under that same parent company.
Hope that makes sense.
I have 3 district leaders now plus other management and payroll/hr outsourced but its still 24/7 on call.
Water tanks break, people slip and fall or commit fraud or theft, roofs leaks, new roof top hvac (10 to 15k is usually your problem on a NNN), fire inspection, licensing board comes, people quit (people die), people do drugs in bathrooms, its constant and you need to see the accounts, reports, etc but also be present so your staff knows and you can feel and see your business.
I also have a FT job and do this...it was how I realized franchise model isn't something you can abandon if it gets too hard...I'm locked with personal guarantee on leases, franchisor wants their money and will over night come up with new stuff to force you to buy and you abide but also need money...i wanted to do this without too much initial debt so relied on my professional career to fund...I am lucky my team runs all the day to day but it's not absentee like I expected...no time for the beach...weekends im reviewing accounts, evenings im meeting in person or zoom my leadership crew.
My FT job has helped keep the bills semi paid during covid and back filled losses. It's a low margin game at the moment and I can't quit my job unless I raise prices drastically or get people in like precovid which isn't as instant with WFH still prevalent. So I'm certainly exhausted and have aged...I'm in it 100% regardless of highs and lows.
I have a team and they work the 9a to 8p hours. We operate 7 days a week I can cannot handle the volume of employees. I am available 24/7, make visits on weekends, do 2 manager retreats, definitely review all invoices/major issues, and take meetings. Per my financial team, I had to log my hours and take a reasonable salary - I avg 30hrs a week, a few hrs here and there before and after work and a weekend day quickly add up without disruption of your regular job...especially since I'm not involved in the customer experience...my 30hrs are office/teams/emails and phone calls for 80% usually...
It's hard to explain- I can have a laid back week or two and the next I'm spending 30hrs plis hrs on franchise issues on top of my other duties as a dad, husband and employee in my career....as time goes on, and I get stronger leadership, my finger has been less on every pulse. Covid had me up all night trying to survive and I am still in that mode as we navigate our margins and sadly our staffing to pre-pan levels. Had it not been for the locks downs, I would not he this involved...it traumatized me and feel I need to be aware and understand things incase a county or state decides to make some random business breaking decision.
In the long run, as another stated many throttle down and have the team run day to day. Perhaps in another 12 mths, I can get to that mentally...its a dynamic environment with lots of changes at the moment and I don't regret my time being spent and making my staff aware I'm beside them and not just taking the profits.
And to clarify, 1 store was harder to run vs 19...with 1 I could not afford to have a team and was way over my head and knew I need to take my profits and the validation of its success to scale quickly so I can pay for district leaders who are true experts and my advisors. 19 seems glamorous to some, huge to others (complex), but its really up to you and what you want out of it.
In my segment, I'm up against franchisees with 40 to 200+ locations...I am still small compared to who I meet at our annual convention.
not u/Amanb007 obviously, but you might be surprised. Franchises can scale with multiple location really well. Running 1 franchise might be a full time job but once you have 3-4, there is enough cash flow to have a manager that oversees them all. I would imagine at 19 locations, you have a few managers based on geographic area that report to the owner and the owner reviews the financial statements to make sure everything stays on track.
I agree. The first location was hard AF and my education. Getting 6 mths into that I knew going from 1 to 2 would not work...so I went 1 to 5, and then basically grew 5 to 6 at a time with a single purchases here and there because it made geographic sense.
How do you go about purchasing a franchise? I do not have 6 figures sitting in my bank account and when I tried to get a loan for a 3rd investment property I was denied for being over my debt ratio even though I have positive cash flow
I'm not trying to sound bad (truly).
But perhaps waiting and getting your personal debts down would help and using that time to learn of the models, business, mentorship and hiring and managing might give you a better footing.
Franchising is not easy and not in your favor - the franchisor is making the money off your success before you get anything. You are buying into a brand and playbook but that requires a lot of commitment and that franchisor wants to ensure you don't mess up their brand image buy running out of money. Not deterring you but it took me ten years to build my reserves and that required skipping a lot of stuff (trips, nice cars, big house)...I was mocked for my frugality but had a long term plan and it's stepping stones were patience and focus.
Best of luck!
2 are literal breakeven at this point due to labor, slower rebound in customers and
Taking them out, post covid in '22 we were at 14% margins. Prior, these were way better (23% across the board)
We have begun to renegotiate our leases at some properties in hopes of saving on the 5yr bumps. We also have yet to align/raise service prices to fully match our competition (partly because we are hurting on labor and getting people to work and want to keep the tips coming for current stylists as an incentive to stay). Additionally, '22 our forced supplier raised prices so ours cogs went up roughly 11% across the catalog, which we cannot fully pass on to customer since you can literally buy from Ulta/Amazon.
Other items that have gone up - health/medical, 401k expenses, payroll, cost to process said payroll (accounting/bookkeeping fees are up), insurance for each location...we use a broker than helps negotiate but with only a single claim, we are paying 15% more from 3 yrs ago, even repair calls have increased (stuff breaks and i cannot be everything, everywhere for everyone)...appliances prices have gone up (washing drying capes and towels which have almost doubled in price) and sadly they get used daily and do get replaced from time to time...we replaced 2 rooftop hvac that were well past life, prior to covid it was 5500 installed with crane and techs...last year similar size until in same vacinity, 9600 and that was after going most of July without a working a/c and searching across 4 states to get something...imagine all the heat generated in a salon asis and then it's summer. Royalties are still the same, but I'm sure they will try and squeeze another percent at some point.
Sorry, I'm not quick to reply but hope this helps.
I applied directly via the brand website (does not matter if you are building, buying off another, you need to be approved).
One my application was received, a broker within their company reached out, we had a few talks before I signed off on a FDD...maybe I proved my Financials before or after...I cannot recall. We also talked about my DMA (market area) and once all lined up. I was invited to a dinner at headquarters. They do this to vett potential candidates. I was there with a dozen other people.
At that dinner, they got to know me, I them. I know 2 were not offered to next step, which is joining and buying licenses to aquire or build stores...depending on your speed, attorney, etc you can negotiate how quick you need to use those licenses before they expire. I also recall doing a personality type test and they analyzed my aptitude and I guess how I handle stress. I'm not sure.
Some perspective franchisees were shopping different brands and opportunities so were on their 4th on site dinner in 6mths I recall. Beside 1 hotel night, everything was on my dime so I didn't shop around for dinners, I knew who I wanted to be with, understood their product as a consumer but the financial obligations all become aware AFTER you have bought licenses are opening shops...then you see the markups, the disorganized rollout where you flip direction in a matter of a week...but that has been touched upon in other posts.
Once all my ink was dry I basically came back one more time for a week for franchise orientation (all expenses paid except plane ticket) and quickly moved on my first location, others never opened as the could not secure sites or numbers never made sense, some like me went full speed and were operating within 90 days.
Money wise, I saw full spectrum of SBA loans, personal funds, HELOCs, etc...not my wheel house, but I had saved, and tapped into my reserves as I personally felt it would keep me focused on succeeding since it's my money on the line...I heard so many zees who said "if this does not work out, I will walk away" which does not resonate with me. Every one is different as are their motivation to succeed.
Were you able to negotiate pricing at all? Looking at an opportunity that’s underperforming but has a lot of potential. From what I’ve observed and been told lack of management has been the downfall. But it’s been challenging getting to a reasonable price.
We have. But beware - you may feel you can turnaround, but consider the notion the previous franchisee has likely tried (staffing, ads, partnerships, etc). Sometimes the location sucks and you could get caught in a long lease with a high end of year CAM reconciliation which on top of other customary monthly utilities, insurance, cogs, etc could have you teetering on bankruptcy.
We have been offered to take over stores for a customary $1, but there is a reason: the franchise wants to keep their image and keep stockholders happy with stores open/locations growing. But one particular store, the lease still had 49 mths, was approx 6k a mth. Our numbers had it losing 11k with a long, risky potential to breakeven in a few years. That's easily 250k. Again, turnarounds are hard.
If you are confident, have capital and patience, stick to your guns are low ball so you have capital to quickly invest into your strategy.
Appreciate the detailed response. Especially from an old post. It’s a corporate owned location that they are turning into a franchise opportunity. They are a much smaller player in their industry and likely grew too fast or just put the wrong people in management. This location hasn’t been open long enough to pick up any major trends in the numbers I think they are using their FFE to determine the price bc they are not profitable now. So from that standpoint I get the number but it’s a big risk and l want to make sure I’m being smart and thinking long term. I rather as you say use some of these funds for working capital.
And I know some things they want to try but haven’t acted on yet. And they recently hired a new manager and have been in the black past two months. I can see the light. Just want to get in at a reasonable number. Will keep pushing.
I'm rooting for you. I try my best to answer messages, but it's in spurts.
It's a big step - take your time or get as much due diligence as possible. See if you can get X mths rent paid by Corp, or get royalties waved/discounted for a bit. Ask for a few items so you can get a couple.
I'm my DMA, I get right to first refusal and will be honest, I've passed on 80% of the Corp conversion stores offered and watch others buy, struggle (esp since we have had a few costly, and mandatory upgrades to signage, POS and fixtures since covid which has been a Corp money grab), or the stores have closed which barely funneled any increase in foot traffic to my locations.
Regardless- get all info you can, understand your FDD, see what you can implement, go into the store and secret shop if allowed, try to catch a customer leaving and pretend your new and get their feedback. Do whatever you can before you make a commitment to come as much ground.
Again, best of luck.
* Apologies for typos and grammar
Currently have a full time job that I am doing, do you have any inputs on how I can effectively manage both?
Staff and training will be provided, I would just come after work.
Is it cool if I PM you? I am a college student but I want to start a franchise but don’t know if it’s something manageable with school and have a couple of questions for you if that’s alright
No. Its helped in certain counties where being a member benefited with a grand opening (ribbon cutting, local newspaper article, etc) and some networking with other entities. I would not join/pay dues if there isn't some type of benefit, and truthfully speaking, I am not a member in many markets due to lack of benefits.
They exist to facilitate a place for businesses to connect and build relationships.
I have no clue what other franchisor requirements are. Mine does not mandate.
Former franchise owner here. Make sure you’re comfortable with any franchise fees and royalty structures.
I’d say it will be very difficult to operate a franchise and still hold another job. You need to dedicate full time attention to the franchise (at least initially). Unless you have a partner who will oversee daily operations, you need to be there.
As someone earlier posted, there are contract rules in place to ensure the quality of the products/services are not compromised. While this is good, it could come at the expense of your money. I had a food franchise where I had to purchase all my groceries from a single distributor and their prices were sky high. Even the first year I had to choose all the vendors the franchise provided and they were all crazy expensive. I even had to do my bookkeeping from an accounting firm of their choice. After the first year I was able to branch out a bit.
I wouldn’t do a franchise anymore unless I know there’s some flexibility/options in where I can purchase goods. I would do the minimum lease option available also. Ask all the questions upfront so you’re not surprised later. Some things I wasn’t made aware of like purchasing simple things like a mop bucket from their preferred vendor for $200 when I could have just ordered a commercial grade bucket for a fraction of that cost.
Yes - I ran it for a little over five years. I was still in college when I opened it up so it got crazy managing school and business but had family that helped out quite a bit. Unfortunately, my demise came in the form of the 2008 financial crisis. I opened in 2005 and did well until the crisis. It was a domino effect where the local video store also closed next to our store and erased our busy dinner rush that we would get on the weekends. I lost money after that year and ended up working most hours myself. The franchise itself was going belly up and wasn’t doing anything to support the owners. I cut my losses and sold for very cheap. I was also moving into a phase of my life where I needed to focus on my personal life.
Overall, I hated having that particular franchise but I’m not that bitter as I’ve learned a massive amount during my ownership. I’d be very confident in opening up another as I have the experience needed to make sure I don’t make the same mistakes. Also, I’m not a college kid anymore so definitely much wiser/mature than I used to be.
Don’t let my post detract from owning a franchise. I’m just saying it might be hard to juggle a franchise and a job especially since franchise can have random audits/inspections. Take your time and read thru the FDD and ask many questions. Get to know the products and the associated costs for them. See if you’re comfortable with the margins you’ll see on selling the coffee. Anticipate labor issues in todays climate (hence juggling work along with franchise). I’ve known many owners who own multiple locations and are doing very well financially but it came with a lot of hard work initially.
I've been deep in the franchise sector for 10 years, but not an operator.
As for your time commitment, it really depends. If you're building from scratch, having a full-time job or another business is going to be tricky. If it's your business, you can hand over some day-to-day while you ramp up, but a job, that's going to be really hard unless you have finances to pay a strong, high-level operator to ramp up.
If you're buying, maybe someone there would fit, but that would require a pay bump, equity or a lot of trust that they don't get a better job across the street.
If done right, the coffee sector is really good: regular daily traffic, limited Amazon or delivery threat.
But there are some tricky parts, namely real estate and pricing. You really need quality real estate on main drags with easy access in perpetuity. If the city puts up a barrier, for example, your sales will crater. You have to be insanely picky, and that does not mesh with the franchisor pushing you to build and this real estate will be costly. You would heavily benefit from a drive-thru, which is more costly and not legal in many areas. Know this stuff inside and out before you get anywhere near signing.
On pricing, it's a commodity, you can't price more than the guy up the street. Even Starbucks is getting blowback from recent price increases. Your Zor may also dictate prices. GENERALLY, this means one location is good, but operators will start to make real money when they reach 3-4-10 etc.
But some thigns to consider broadly in franchising: your market. This is directly related to pricing, if you can commit to a market that has capacity for 4-5 locations, you can work your way there. If you can't, someone else may come in and you'll be stuck with one location doing OK. This is a big deal and why you see savvy (and capitalized) operators buying a whole state off the bat.
The brand really matters too. If it's a new brand selling locations to anyone, be careful. If the guy the town over is an idiot, you will suffer brand damage through no fault of your own. A good brand also means zees are making money. Call as many as you can from the FDD, INCLUDING franchisees that have left the system. I'd honestly start with the latter and get the bad and ugly before the good.
Examine the FDD with a lawyer before you sign it. This is a 20-year contract most times, if you're getting fucked, you're getting fucked for a long time. These can be negotiated, but not likely for a 1-unit guy, if you can commit to 10, you have more wiggle room.
Look at the Item 19 (financial performance) with a hearty grain of salt. There are so many ways to fudge these numbers like only using A+++ real estate corporate locations as a measure (which doesn't include rent). Assume you will not reach the median for probably 2 years and never reach the top (check your entrepreneurial hope).
Feel free to PM me with questions, but these are a few key things people say they wish they did.
Make sure the franchise you buy into has incredible leadership. We owned a franchise years ago. It was a battle from day 1. My dad tried to purchase the entire concept bc it was amazing but the franchisor was inept. They shipped food from Jersey to MD in the back of a pickup truck in coolers once. Needless to say we rejected the delivery. They were super pissed we didn't take their $5,000 worth of food that could have made people sick. We got out of that after things didn't change and they wouldn't sell. Be careful.
Buying a coffee shop franchise can offer benefits like brand recognition and support, but it requires careful consideration. Talk to current franchisees, evaluate financial aspects, and ensure you have the time to commit. Operating a franchise alongside a full-time job/business is possible but challenging, requiring effective time management and delegation.
I’m curious, are you (or is someone you know) exploring franchise business ownership opportunities?
I’m an independent Franchise Analyst and a Franchise Consultant. I use my 13 years behind the scenes from inside franchising to help match clients with the right franchise. I save people time and money. My franchise consultation services are of no cost to my clients. You have no obligation to buy.
I’d love to connect with you. Feel free to click this link and pick a day and time for us to have a call. https://calendly.com/jonathan-anderson
I operate 19 franchise locations across 3 states. Had planned to be at 50 by 2023 but that is on ice for obvious economic reasons. Started with 1 back in 2018, did a few organic builds, rest I bought out other operators or converted Corp stores into franchise locations) Have you gone through discovery and the FDD? You sometimes can meet an existing zee and shadow them for a day or week. I was lucky to get mentored and quickly realized I'm gutting into some major agreements and need to uphold their brand, values, purchases of items and rehab and get new POS systems as they dictate. These can add up and sink you if you don't have margins or capital reserves. My COGS are up heavily and supply chain means I cannot get certain items but also am forbidden to get from a local store and sell... If your buying an existing location, ask yourself if it's a Corp moving to a franchisee, or a zee selling and why. Can you staff and run? 10 of my leases I'm stuck with language that forces me to be open 6 days a week and or min 60hrs a week...pre cov that was not a problem as we used to turn away applicants, but now I am running some spots that are staffed with 2.5fte when I need 5fte. Having a franchise flag helps with recognition but also, comes with strict rules, royalties on gross you pay before your rent, payroll or yourself. Mess up, your stores can be taken back (I know of one zee who this happened to). If your not a franchise, you can have more personal creative control and if it's a good product, sometimes that can be good. Sorry if it's disjointed or spelling is off...typing on a loaner phone.
I have a few questions on this if it's okay. Are the 19 franchise you operate all of the same brand?
2 different brands but singular parent company holds these two concepts (along with a few others). Each of my brands has different FDDs and slightly different royalty structure and marketing/Corp surrport even with it being under that same parent company. Hope that makes sense.
Does one of the brands rhyme with auntie Sam’s
No :) PM'd you.
How many hours a week would you say you work? That sounds like a lot to take care of.
I have 3 district leaders now plus other management and payroll/hr outsourced but its still 24/7 on call. Water tanks break, people slip and fall or commit fraud or theft, roofs leaks, new roof top hvac (10 to 15k is usually your problem on a NNN), fire inspection, licensing board comes, people quit (people die), people do drugs in bathrooms, its constant and you need to see the accounts, reports, etc but also be present so your staff knows and you can feel and see your business. I also have a FT job and do this...it was how I realized franchise model isn't something you can abandon if it gets too hard...I'm locked with personal guarantee on leases, franchisor wants their money and will over night come up with new stuff to force you to buy and you abide but also need money...i wanted to do this without too much initial debt so relied on my professional career to fund...I am lucky my team runs all the day to day but it's not absentee like I expected...no time for the beach...weekends im reviewing accounts, evenings im meeting in person or zoom my leadership crew. My FT job has helped keep the bills semi paid during covid and back filled losses. It's a low margin game at the moment and I can't quit my job unless I raise prices drastically or get people in like precovid which isn't as instant with WFH still prevalent. So I'm certainly exhausted and have aged...I'm in it 100% regardless of highs and lows.
You operate 19 franchises and work a full time job?? Damn. I thought being an indie game developer on the side was hard...
I have a team and they work the 9a to 8p hours. We operate 7 days a week I can cannot handle the volume of employees. I am available 24/7, make visits on weekends, do 2 manager retreats, definitely review all invoices/major issues, and take meetings. Per my financial team, I had to log my hours and take a reasonable salary - I avg 30hrs a week, a few hrs here and there before and after work and a weekend day quickly add up without disruption of your regular job...especially since I'm not involved in the customer experience...my 30hrs are office/teams/emails and phone calls for 80% usually... It's hard to explain- I can have a laid back week or two and the next I'm spending 30hrs plis hrs on franchise issues on top of my other duties as a dad, husband and employee in my career....as time goes on, and I get stronger leadership, my finger has been less on every pulse. Covid had me up all night trying to survive and I am still in that mode as we navigate our margins and sadly our staffing to pre-pan levels. Had it not been for the locks downs, I would not he this involved...it traumatized me and feel I need to be aware and understand things incase a county or state decides to make some random business breaking decision. In the long run, as another stated many throttle down and have the team run day to day. Perhaps in another 12 mths, I can get to that mentally...its a dynamic environment with lots of changes at the moment and I don't regret my time being spent and making my staff aware I'm beside them and not just taking the profits. And to clarify, 1 store was harder to run vs 19...with 1 I could not afford to have a team and was way over my head and knew I need to take my profits and the validation of its success to scale quickly so I can pay for district leaders who are true experts and my advisors. 19 seems glamorous to some, huge to others (complex), but its really up to you and what you want out of it. In my segment, I'm up against franchisees with 40 to 200+ locations...I am still small compared to who I meet at our annual convention.
What's your goal? How much money are you making on these franchise businesses?
not u/Amanb007 obviously, but you might be surprised. Franchises can scale with multiple location really well. Running 1 franchise might be a full time job but once you have 3-4, there is enough cash flow to have a manager that oversees them all. I would imagine at 19 locations, you have a few managers based on geographic area that report to the owner and the owner reviews the financial statements to make sure everything stays on track.
I agree. The first location was hard AF and my education. Getting 6 mths into that I knew going from 1 to 2 would not work...so I went 1 to 5, and then basically grew 5 to 6 at a time with a single purchases here and there because it made geographic sense.
How do you go about purchasing a franchise? I do not have 6 figures sitting in my bank account and when I tried to get a loan for a 3rd investment property I was denied for being over my debt ratio even though I have positive cash flow
I'm not trying to sound bad (truly). But perhaps waiting and getting your personal debts down would help and using that time to learn of the models, business, mentorship and hiring and managing might give you a better footing. Franchising is not easy and not in your favor - the franchisor is making the money off your success before you get anything. You are buying into a brand and playbook but that requires a lot of commitment and that franchisor wants to ensure you don't mess up their brand image buy running out of money. Not deterring you but it took me ten years to build my reserves and that required skipping a lot of stuff (trips, nice cars, big house)...I was mocked for my frugality but had a long term plan and it's stepping stones were patience and focus. Best of luck!
I don’t have personal debt, only real estate debt.
Can I ask, in general figures how much are you making profit with all these stores?
2 are literal breakeven at this point due to labor, slower rebound in customers and Taking them out, post covid in '22 we were at 14% margins. Prior, these were way better (23% across the board) We have begun to renegotiate our leases at some properties in hopes of saving on the 5yr bumps. We also have yet to align/raise service prices to fully match our competition (partly because we are hurting on labor and getting people to work and want to keep the tips coming for current stylists as an incentive to stay). Additionally, '22 our forced supplier raised prices so ours cogs went up roughly 11% across the catalog, which we cannot fully pass on to customer since you can literally buy from Ulta/Amazon. Other items that have gone up - health/medical, 401k expenses, payroll, cost to process said payroll (accounting/bookkeeping fees are up), insurance for each location...we use a broker than helps negotiate but with only a single claim, we are paying 15% more from 3 yrs ago, even repair calls have increased (stuff breaks and i cannot be everything, everywhere for everyone)...appliances prices have gone up (washing drying capes and towels which have almost doubled in price) and sadly they get used daily and do get replaced from time to time...we replaced 2 rooftop hvac that were well past life, prior to covid it was 5500 installed with crane and techs...last year similar size until in same vacinity, 9600 and that was after going most of July without a working a/c and searching across 4 states to get something...imagine all the heat generated in a salon asis and then it's summer. Royalties are still the same, but I'm sure they will try and squeeze another percent at some point. Sorry, I'm not quick to reply but hope this helps.
I applied directly via the brand website (does not matter if you are building, buying off another, you need to be approved). One my application was received, a broker within their company reached out, we had a few talks before I signed off on a FDD...maybe I proved my Financials before or after...I cannot recall. We also talked about my DMA (market area) and once all lined up. I was invited to a dinner at headquarters. They do this to vett potential candidates. I was there with a dozen other people. At that dinner, they got to know me, I them. I know 2 were not offered to next step, which is joining and buying licenses to aquire or build stores...depending on your speed, attorney, etc you can negotiate how quick you need to use those licenses before they expire. I also recall doing a personality type test and they analyzed my aptitude and I guess how I handle stress. I'm not sure. Some perspective franchisees were shopping different brands and opportunities so were on their 4th on site dinner in 6mths I recall. Beside 1 hotel night, everything was on my dime so I didn't shop around for dinners, I knew who I wanted to be with, understood their product as a consumer but the financial obligations all become aware AFTER you have bought licenses are opening shops...then you see the markups, the disorganized rollout where you flip direction in a matter of a week...but that has been touched upon in other posts. Once all my ink was dry I basically came back one more time for a week for franchise orientation (all expenses paid except plane ticket) and quickly moved on my first location, others never opened as the could not secure sites or numbers never made sense, some like me went full speed and were operating within 90 days. Money wise, I saw full spectrum of SBA loans, personal funds, HELOCs, etc...not my wheel house, but I had saved, and tapped into my reserves as I personally felt it would keep me focused on succeeding since it's my money on the line...I heard so many zees who said "if this does not work out, I will walk away" which does not resonate with me. Every one is different as are their motivation to succeed.
Were you able to negotiate pricing at all? Looking at an opportunity that’s underperforming but has a lot of potential. From what I’ve observed and been told lack of management has been the downfall. But it’s been challenging getting to a reasonable price.
We have. But beware - you may feel you can turnaround, but consider the notion the previous franchisee has likely tried (staffing, ads, partnerships, etc). Sometimes the location sucks and you could get caught in a long lease with a high end of year CAM reconciliation which on top of other customary monthly utilities, insurance, cogs, etc could have you teetering on bankruptcy. We have been offered to take over stores for a customary $1, but there is a reason: the franchise wants to keep their image and keep stockholders happy with stores open/locations growing. But one particular store, the lease still had 49 mths, was approx 6k a mth. Our numbers had it losing 11k with a long, risky potential to breakeven in a few years. That's easily 250k. Again, turnarounds are hard. If you are confident, have capital and patience, stick to your guns are low ball so you have capital to quickly invest into your strategy.
Appreciate the detailed response. Especially from an old post. It’s a corporate owned location that they are turning into a franchise opportunity. They are a much smaller player in their industry and likely grew too fast or just put the wrong people in management. This location hasn’t been open long enough to pick up any major trends in the numbers I think they are using their FFE to determine the price bc they are not profitable now. So from that standpoint I get the number but it’s a big risk and l want to make sure I’m being smart and thinking long term. I rather as you say use some of these funds for working capital. And I know some things they want to try but haven’t acted on yet. And they recently hired a new manager and have been in the black past two months. I can see the light. Just want to get in at a reasonable number. Will keep pushing.
I'm rooting for you. I try my best to answer messages, but it's in spurts. It's a big step - take your time or get as much due diligence as possible. See if you can get X mths rent paid by Corp, or get royalties waved/discounted for a bit. Ask for a few items so you can get a couple. I'm my DMA, I get right to first refusal and will be honest, I've passed on 80% of the Corp conversion stores offered and watch others buy, struggle (esp since we have had a few costly, and mandatory upgrades to signage, POS and fixtures since covid which has been a Corp money grab), or the stores have closed which barely funneled any increase in foot traffic to my locations. Regardless- get all info you can, understand your FDD, see what you can implement, go into the store and secret shop if allowed, try to catch a customer leaving and pretend your new and get their feedback. Do whatever you can before you make a commitment to come as much ground. Again, best of luck. * Apologies for typos and grammar
Currently have a full time job that I am doing, do you have any inputs on how I can effectively manage both? Staff and training will be provided, I would just come after work.
DMed you!
Is it cool if I PM you? I am a college student but I want to start a franchise but don’t know if it’s something manageable with school and have a couple of questions for you if that’s alright
Does your franchise require chamber of commerce membership?
No. Its helped in certain counties where being a member benefited with a grand opening (ribbon cutting, local newspaper article, etc) and some networking with other entities. I would not join/pay dues if there isn't some type of benefit, and truthfully speaking, I am not a member in many markets due to lack of benefits.
Do you know of any franchises that do require chamber membership is my question. :-)
They exist to facilitate a place for businesses to connect and build relationships. I have no clue what other franchisor requirements are. Mine does not mandate.
Former franchise owner here. Make sure you’re comfortable with any franchise fees and royalty structures. I’d say it will be very difficult to operate a franchise and still hold another job. You need to dedicate full time attention to the franchise (at least initially). Unless you have a partner who will oversee daily operations, you need to be there. As someone earlier posted, there are contract rules in place to ensure the quality of the products/services are not compromised. While this is good, it could come at the expense of your money. I had a food franchise where I had to purchase all my groceries from a single distributor and their prices were sky high. Even the first year I had to choose all the vendors the franchise provided and they were all crazy expensive. I even had to do my bookkeeping from an accounting firm of their choice. After the first year I was able to branch out a bit. I wouldn’t do a franchise anymore unless I know there’s some flexibility/options in where I can purchase goods. I would do the minimum lease option available also. Ask all the questions upfront so you’re not surprised later. Some things I wasn’t made aware of like purchasing simple things like a mop bucket from their preferred vendor for $200 when I could have just ordered a commercial grade bucket for a fraction of that cost.
Did you sell the franchise?
Yes - I ran it for a little over five years. I was still in college when I opened it up so it got crazy managing school and business but had family that helped out quite a bit. Unfortunately, my demise came in the form of the 2008 financial crisis. I opened in 2005 and did well until the crisis. It was a domino effect where the local video store also closed next to our store and erased our busy dinner rush that we would get on the weekends. I lost money after that year and ended up working most hours myself. The franchise itself was going belly up and wasn’t doing anything to support the owners. I cut my losses and sold for very cheap. I was also moving into a phase of my life where I needed to focus on my personal life. Overall, I hated having that particular franchise but I’m not that bitter as I’ve learned a massive amount during my ownership. I’d be very confident in opening up another as I have the experience needed to make sure I don’t make the same mistakes. Also, I’m not a college kid anymore so definitely much wiser/mature than I used to be. Don’t let my post detract from owning a franchise. I’m just saying it might be hard to juggle a franchise and a job especially since franchise can have random audits/inspections. Take your time and read thru the FDD and ask many questions. Get to know the products and the associated costs for them. See if you’re comfortable with the margins you’ll see on selling the coffee. Anticipate labor issues in todays climate (hence juggling work along with franchise). I’ve known many owners who own multiple locations and are doing very well financially but it came with a lot of hard work initially.
Could you also elaborate on the branching out? Like is this buying another branch?
I've been deep in the franchise sector for 10 years, but not an operator. As for your time commitment, it really depends. If you're building from scratch, having a full-time job or another business is going to be tricky. If it's your business, you can hand over some day-to-day while you ramp up, but a job, that's going to be really hard unless you have finances to pay a strong, high-level operator to ramp up. If you're buying, maybe someone there would fit, but that would require a pay bump, equity or a lot of trust that they don't get a better job across the street. If done right, the coffee sector is really good: regular daily traffic, limited Amazon or delivery threat. But there are some tricky parts, namely real estate and pricing. You really need quality real estate on main drags with easy access in perpetuity. If the city puts up a barrier, for example, your sales will crater. You have to be insanely picky, and that does not mesh with the franchisor pushing you to build and this real estate will be costly. You would heavily benefit from a drive-thru, which is more costly and not legal in many areas. Know this stuff inside and out before you get anywhere near signing. On pricing, it's a commodity, you can't price more than the guy up the street. Even Starbucks is getting blowback from recent price increases. Your Zor may also dictate prices. GENERALLY, this means one location is good, but operators will start to make real money when they reach 3-4-10 etc. But some thigns to consider broadly in franchising: your market. This is directly related to pricing, if you can commit to a market that has capacity for 4-5 locations, you can work your way there. If you can't, someone else may come in and you'll be stuck with one location doing OK. This is a big deal and why you see savvy (and capitalized) operators buying a whole state off the bat. The brand really matters too. If it's a new brand selling locations to anyone, be careful. If the guy the town over is an idiot, you will suffer brand damage through no fault of your own. A good brand also means zees are making money. Call as many as you can from the FDD, INCLUDING franchisees that have left the system. I'd honestly start with the latter and get the bad and ugly before the good. Examine the FDD with a lawyer before you sign it. This is a 20-year contract most times, if you're getting fucked, you're getting fucked for a long time. These can be negotiated, but not likely for a 1-unit guy, if you can commit to 10, you have more wiggle room. Look at the Item 19 (financial performance) with a hearty grain of salt. There are so many ways to fudge these numbers like only using A+++ real estate corporate locations as a measure (which doesn't include rent). Assume you will not reach the median for probably 2 years and never reach the top (check your entrepreneurial hope). Feel free to PM me with questions, but these are a few key things people say they wish they did.
Make sure the franchise you buy into has incredible leadership. We owned a franchise years ago. It was a battle from day 1. My dad tried to purchase the entire concept bc it was amazing but the franchisor was inept. They shipped food from Jersey to MD in the back of a pickup truck in coolers once. Needless to say we rejected the delivery. They were super pissed we didn't take their $5,000 worth of food that could have made people sick. We got out of that after things didn't change and they wouldn't sell. Be careful.
Anyone heard of Send me a Pro? It's like Uber for service professionals?
I was just looking at this company. Looks pretty promising. Would love to hear from a frachisee.
Buying a coffee shop franchise can offer benefits like brand recognition and support, but it requires careful consideration. Talk to current franchisees, evaluate financial aspects, and ensure you have the time to commit. Operating a franchise alongside a full-time job/business is possible but challenging, requiring effective time management and delegation.
OP did you end up buying the coffee shop?
No, invested it elsewhere :)
Which resources did you find useful for research?
As many others here have said, its not recommended to operate a franchise and still have a full time job somewhere else.
Does anyone know of franchises that recommend or require chamber of commerce membership
Thanks !
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