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Becoming a franchisee...

Old 10-13-2017, 10:18 AM
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Default Becoming a franchisee...

As the title says, my wife and I are looking to become franchisee's of a certain franchise brand. The intent would be start one from the ground up, then acquire maybe one or two more as time allows...

In my initial estimates which I deem to be very conservative and accurate, the numbers look great. I had a phone call with said company yesterday and I still am quite confident that what I estimate is very attainable.

Anyone here with experience in this field or have advice as to what to look out for?
Old 10-13-2017, 10:49 AM
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What type of franchise?

Some general areas to look at

If it's food are you required to buy from deignsted suppliers (which are often the parent company itself)?

Protected territory?

Mandatory capital improvement spend?

Failure rate? What % corporate owned?

Do you have pricing flexibility? If not they control your margins.

Advertising spend?

Is your franchise % fixed or floating?

Generally speaking not a fan of franchises and definitely not a fan of just owning one. You need scale from the start otherwise it's a slow grind.
Old 10-13-2017, 10:52 AM
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I do...from the corporate side.
Get yourself an attorney who has alot of experience with this.

Due diligence ×10,000,000.

They are your partner and enemy in one.

Need advise 1-401-300-6548

Lance
Old 10-13-2017, 10:57 AM
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Tad bit confused.;?

You said Franchise, then you mention "from the ground up" ?

As I understand it, a franchise already has everything in place, all you do is build it and they will come. No building of anything from the ground up.
Old 10-13-2017, 10:59 AM
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Originally Posted by Lprizman View Post

They are your partner and enemy in one.
Couldn't not have said it better myself. If possible talk to other franchise owners - as many as you can. I guarantee there will be hidden costs and restrictions that are not immediately evident.
Old 10-13-2017, 11:02 AM
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Retail ? Business Services ?

Make sure they provide you with audited financials from other franchisees in similar markets
Old 10-13-2017, 11:17 AM
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Originally Posted by spraynet 1 View Post
Tad bit confused.;?

You said Franchise, then you mention "from the ground up" ?

As I understand it, a franchise already has everything in place, all you do is build it and they will come. No building of anything from the ground up.
Sorry, should have clarified. I will be starting a location, not buying an existing location from another franchisee.
Old 10-13-2017, 11:19 AM
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Originally Posted by triplenet View Post
Retail ? Business Services ?

Make sure they provide you with audited financials from other franchisees in similar markets
Lets call it health and fitness with a bit of retail sprinkled in. Already have documented audited financials from other locations similar to mine.
Old 10-13-2017, 11:32 AM
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I would want some guarantees about exclusive rights to a market area. Meaning it could be the best idea in the world, but if they start opening franchises on every block, the only one that would get rich is the person selling the franchises.

Depending on the idea, the exclusive market area you would need to protect your investment could vary quite a bit. If it's a fast food franchise, perhaps 5 may be sufficient. If it's something more unique that people would be willing to drive 50 miles for, than you need a bigger radius for exclusive market rights for X amount of years. Just my opinion.
Old 10-13-2017, 11:38 AM
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Originally Posted by goody12 View Post
As the title says, my wife and I are looking to become franchisee's of a certain franchise brand. The intent would be start one from the ground up, then acquire maybe one or two more as time allows...

In my initial estimates which I deem to be very conservative and accurate, the numbers look great. I had a phone call with said company yesterday and I still am quite confident that what I estimate is very attainable.

Anyone here with experience in this field or have advice as to what to look out for?
I have some experience. Basic question to ask yourself on things like this, if it is such a great opportunity, why are there not 100 other people in your area already doing it? Why doesn't the corporation just open and manage the location themselves?

Sometimes, there are legitimate good opportunities. Often, the reality turns out to be less ideal than you expected, not necessarily bad, but different. For example, I am familiar with a couple of franchisors that offer a decent legitimate opportunity, but you need have a certain skillset/background to get in on it, that naturally limits the talent pool in most markets to a handful of people. Many of those people are already running their own independent business, so there are legitimate openings for franchisees because it is not something just anyone with some cash can execute on.

Too good to be true often is.
Old 10-13-2017, 12:00 PM
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Originally Posted by dev View Post
I have some experience. Basic question to ask yourself on things like this, if it is such a great opportunity, why are there not 100 other people in your area already doing it? Why doesn't the corporation just open and manage the location themselves?

Sometimes, there are legitimate good opportunities. Often, the reality turns out to be less ideal than you expected, not necessarily bad, but different. For example, I am familiar with a couple of franchisors that offer a decent legitimate opportunity, but you need have a certain skillset/background to get in on it, that naturally limits the talent pool in most markets to a handful of people. Many of those people are already running their own independent business, so there are legitimate openings for franchisees because it is not something just anyone with some cash can execute on.

Too good to be true often is.
I would typically agree 100% with you. Neither of us are what you would call "risk takers". It is a niche market and the franchisor does look for very specific qualities and backgrounds, luckily they basically told us on the phone yesterday my wife and I are the perfect fit, which we kinda knew.

They make it to where not anyone can just open up a location, it is very targeted and wait for the right person(s) in a target location to contact them with interest.

You could not make a career out of it by only doing one, but doing 2, maybe 3.. one could make a darn decent living.

I personally know some owners of this franchise in other cities, all who do quite well both in their operations and financially. Not a single on of the regrets it and are by no means "business people" or your prototypical "entrepreneur".
Old 10-13-2017, 12:05 PM
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Originally Posted by goody12 View Post
Lets call it health and fitness with a bit of retail sprinkled in. Already have documented audited financials from other locations similar to mine.
Health and fitness... do you have to buy equipment and product from them? How often does equipment have to be replaced?
Old 10-13-2017, 12:20 PM
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Originally Posted by Jersus View Post
Health and fitness... do you have to buy equipment and product from them? How often does equipment have to be replaced?
Minor equipment, very small investment. Less than 2k worth. The equipment should last quite some time and never needs to be serviced.
Old 10-13-2017, 12:24 PM
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Originally Posted by goody12 View Post
Lets call it health and fitness with a bit of retail sprinkled in. Already have documented audited financials from other locations similar to mine.
Thats good... make sure you factor in the correct rents and find a good location..

BTW - I know a ton of retail franchise operators - most just earn a living ... The guys that open up multiple location do fairly well ...

Good luck
Old 10-13-2017, 12:24 PM
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Originally Posted by goody12 View Post
. It is a niche market and the franchisor does look for very specific qualities and backgrounds, luckily they basically told us on the phone yesterday my wife and I are the perfect fit, which we kinda knew.

They make it to where not anyone can just open up a location, it is very targeted and wait for the right person(s) in a target location to contact them with interest.
As a franchisee myself, please remember that the Franchisor is a salesperson who goal it is is to sell their franchises. As others have said, due your diligence.
Old 10-13-2017, 12:59 PM
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Originally Posted by Lprizman View Post
Get yourself an attorney who has alot of experience with this.
This^^^ Do not sign a franchise document without paying a franchise attorney to review it. I see the OP is in SFL... I have used Zarco Law in Miami. They are $$ but very good.

No, your cousin/friend/neighbor the personal injury/real estate/family lawyer can't read through it for you. The franchisor paid serious $$ to have a franchise expert law firm weight the documents in their favor. You do the same!
Old 10-13-2017, 01:15 PM
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Originally Posted by dev View Post
Basic question to ask yourself on things like this, if it is such a great opportunity, why are there not 100 other people in your area already doing it? Why doesn't the corporation just open and manage the location themselves?
I always thought the same thing....if opening more locations was so profitable, why doesn't the main company raise funds and open corporate owned locations?

I think the answer is usually pretty simple....they want some sucker to come up with the capital investment and provide sweat equity and then make nearly risk-free $$$$.
Old 10-13-2017, 01:16 PM
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Originally Posted by nicecast View Post
This^^^ Do not sign a franchise document without paying a franchise attorney to review it. I see the OP is in SFL... I have used Zarco Law in Miami. They are $$ but very good.

No, your cousin/friend/neighbor the personal injury/real estate/family lawyer can't read through it for you. The franchisor paid serious $$ to have a franchise expert law firm weight the documents in their favor. You do the same!
Funny you mention that, my bosses husband sold Zarco his 70' Azimut, I spent the weekend with him not too long ago. Sharp guy.

If it comes down to it, I will certainly pay the $$$ to have the agreement gone over thoroughly.
Old 10-13-2017, 01:17 PM
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Originally Posted by goody12 View Post

In my initial estimates which I deem to be very conservative and accurate, the numbers look great. I had a phone call with said company yesterday and I still am quite confident that what I estimate is very attainable.
If you are in fact quite confident, you shouldn't need any advice. Go for it and achieve your fame and fortune.
Old 10-13-2017, 01:19 PM
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Originally Posted by haccpguy View Post
As a franchisee myself, please remember that the Franchisor is a salesperson who goal it is is to sell their franchises. As others have said, due your diligence.
I totally get it, but it is a location/market they have been wanting to tap into, but they haven't found the right person to do it yet. As I mentioned, they are somewhat picky as to who they accept and every owner I know has the exact same backgrounds and "look" to them.

I pride myself on being able to get a feel for when someone is being too sales-ey and BS'ing me. I can assure you they were not. This will not be something I would rush into by any means.

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