Reply to: Buying a franchise

[SueEllen]

I know of a couple of people who each have several subway franchisees in London area. They seem to be doing well. Are the risks different for food outlets (McD, Pizza, subway) compared to others?

With all I've read up about franchises the risk with food outlets is that another franchisee will be allowed to set up a few streets away from you or even a few doors down if the street is long. Fine while your product is fashionable but not when it isn't.

BTW 2 McD franchises near where I live closed down in the same year. And it was quite easy to find out that they were franchises not owned by McDs.

[Green]

I know of a couple of people who each have several subway franchisees in London area. They seem to be doing well. Are the risks different for food outlets (McD, Pizza, subway) compared to others?

[Jet Setter]

I got to the final stage of buying a Subway franchise in Aussie and am well pleased that I didn't go through with it.

A couple of mates and I wanted to run it on the side of our other gigs as a way of generating extra income. We sources a couple of sites pitched for the franchise and the franchise managers (two of the dumbest blokes I've had the misfortune to meet) told us the sites would never work because of high rents; despite the fact our estimates and costings had them being covered due to the fact the store would be close to the MCG for football and cricket. They freely admitted that you couldn't really hope to make much cash out of one store and you needed several to be comfortable and that they gave preference to their established franchisees.

You can imagine my disgust when I went home for a holiday about 18 months ago and saw a brand new store just near where we'd proposed where it was supposedly too expensive. Doing a roaring trade too

[BolshieBastard]

They should have just stopped payments. Then it would have been up to the franchisor to take them to court, not the other way round.

They should have just said to the franchisor that they were about to go bankrupt and that would kick them out of the contract - wear some shabby clothes and generate some customer complaints consistent with some bad cashflow problems and that'll hopefully persuade the company to not bother suing them.

Weren't they running a Ltd company? If so then just pull all the assets out of the company and let it go bankrupt.

Hahahahaha! You're seriously deluded and dont know what you're talking about here. I know 3 people who were bankrupted by the franchisor in the same franchise. They didnt just become bankrupt, they lost their ******* homes, their well being and all their money.

Franchisors sell the dream. They'll tell you 'no experience necessary' blah, blah, blah. They'll even take you to the success story or tell you to contact anyone in the group. Only every one in the group wont tell the truth. They'll all say they are 'doing ok'!

[BolshieBastard]

Im thinking of setting up a web site 'Dont buy a franchise!'

Seriously. Far too many people dont realise what franchising it and what it entails. Under no circumstances would I recommend anyone to go into franchising unless it is as a franchisor, not the franchisee. Being the franchisor is the only way you'll make serious money.

Think as a franchisee you'll be your own boss, (often a big selling point by franchises) think again. You will just be like an employee. You'll be set targets, You'll have to complete performance reports. You'll have frequent visits to ensure your franchise is operating to the franchisor's 'model' etc, etc.

Think you can sell what you want? Think again. You'll only be able to sell what the franchisor allows you to sell. More importantly, you'll only be able to buy your stock from the franchisor's approved list of suppliers. And guess what, they are dearer than every other supplier you can find!

Want to sell you business, sorry franchise? You'll find your franchisor will want to vet the purchaser and, they'll want a nice cut of the sale price (at least 10%, for their paper work, dont you know!)

Have a dispute and think the franchise association will help? Think again. They'll side with the franchisor. Yeah there's an arbitration service but your franchisor will probably want you to pay his fees to use this service and it aint cheap.

I could go on and on and that doesnt include 3 people I know personally who've been bankrupted by the franchisor!

Dont buy a franchise! You have been warned.

[KentPhilip]

Be very, very, very careful what you sign.

My son is a solicitor and recently had a couple in tears in his office because they had signed up to something which committed them to make monthly payments regardless of what income the business generated.

They couldn't generate enough income to cover the payments, and there was no way out of the contract without challenging it in court, with the risk of losing.

It looks like they are going to lose everything because of this.

HTH
Dave

ps I'm a poster from many moons ago, under a different id. I signed up again just to warn you. So be warned!

They should have just stopped payments. Then it would have been up to the franchisor to take them to court, not the other way round.

They should have just said to the franchisor that they were about to go bankrupt and that would kick them out of the contract - wear some shabby clothes and generate some customer complaints consistent with some bad cashflow problems and that'll hopefully persuade the company to not bother suing them.

Weren't they running a Ltd company? If so then just pull all the assets out of the company and let it go bankrupt.

[Fat Dave]

No, but I'm starting the diet tomorrow, or maybe next week...

[thelace]

Be very, very, very careful what you sign.

My son is a solicitor and recently had a couple in tears in his office because they had signed up to something which committed them to make monthly payments regardless of what income the business generated.

They couldn't generate enough income to cover the payments, and there was no way out of the contract without challenging it in court, with the risk of losing.

It looks like they are going to lose everything because of this.

HTH
Dave

ps I'm a poster from many moons ago, under a different id. I signed up again just to warn you. So be warned!

Were you Thin Dave then?

[Fat Dave]

Be very, very, very careful what you sign.

My son is a solicitor and recently had a couple in tears in his office because they had signed up to something which committed them to make monthly payments regardless of what income the business generated.

They couldn't generate enough income to cover the payments, and there was no way out of the contract without challenging it in court, with the risk of losing.

It looks like they are going to lose everything because of this.

HTH
Dave

ps I'm a poster from many moons ago, under a different id. I signed up again just to warn you. So be warned!

[PhilAtBFCA]

Franchise

I think you will generally positive and negatives for that one, and alot depends on your skills and the actual franchise.

I had a negative experience with a franchise. A very good idea with a poor business system, died a death after 12 months.

I have had clients with positive experiences.

You may want to ask, do you want to buy a business, or a job, some franchises are just jobs in disguise.

If its a business you are after you may want to be sure that you need the franchise and that there are real advantages ( to you !) of being a franchisee.

Its a big step, and so easy to lose money. But thats the same with any business i guess !

Phil

[DimPrawn]

A franchise is a great business for the franchiser not the franchisee.

HTH

[Not So Wise]

Never had any personal experience of franchise's myself but know a few people who have and for majority the reports are pretty bad.

Basically conclusion I have drawn from those I have spoken to is, you are just buying a right to use a name/brand and the right for someone else to tell you how to run your business (and not necessarily to your business's benefit).

If that name/brand is not worth the cost/hassle in extra revenue it brings it is not recommended

[tino]

I heard recently that it costs £250k to setup a Dominos Pizza...

You'd make that back in a fortnight though with their prices

[chris79]

I heard recently that it costs £250k to setup a Dominos Pizza...

[RichardCranium]

And what happens to your investment when the parent company goes bust? Like Coffee Republic?