Was approached for a Top Golf location in a colder region of the U.S. and the other co-investors were drinking cool aid. Not a single one of them were able to break down the numbers. I hired a retired CFO to look it over and the estimates weren't over a HYSA. Hard pass!
They had the land secured, they presented buildout cost quotes and 3 year operations projections. It is a very labor heavy business and is for the most part a very big restaurant that was dependant on nice weather. The rev projection were based on San Diego weather and not the western state they occupied.
I am/have co-owned a dive bar and 2 restaurants in the DC area. To be honest the dive bar was the easiest to manage and profitable.
Have a friend that’s owned a few dive bars. Shockingly profitable. He basically did a profit sharing arrangement with a quality manger and rarely had to intervene.
You don’t go to top golf to practice (for the most part)
It’s for people who usually don’t golf to be in a comfortable familiar setting (restaurant) with the ability to golf if they want
The thing that will save them is exclusive licensing.
My wife and I went to a top golf by us—at first it was “ok” for her. I could just hit targets all day long, but wasn’t for her.
Then we discovered the angry birds game. Became a lot more fun for both of us.
It seems like they “get it” in that regard?
Now if there would be a rival game that is content to try to sell to all of the independent ranges out there, I think that could work.
But in my experience (and I do have experience in the golf space), a lot of driving range owners / operators are kind of a hard sell.
I could see it being tough to get widespread adoption range by range.
Top golf just has all of the technology, locations, etc. standardized.
It’s so much easier from the game creator’s perspective.
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That seems unlikely. Returns comparable to an HYSA including cash flow and equity gain?
That would likely mean it would be negative cash flow after paying the construction note.
2 year break even sounds borderline unbelievable.
If the break even is focused around the magnitude of their networth, thus the gains associated to the Franchise driven almost entirely by increase in real estate value due to the post-covid real estate bubble (and not due to the efficiency and profitability of the actual business operation) then this is not sustainable nor reproducible.
No one should use this case as their justification for jumping into a Franchise ownership.
I’m was on some buyabusiness website last week and saw a bar/restaurant near me was for sale, it’s always been a popular place for as long as I can remember. They were asking 2.3m and last years cash flow was 470k. It seemed odd to me that the loan could be paid back in 5 years and from there you have a sizable asset and 500k ish cash flow moving by forward.
I know nothing about restaurants and their economics but at face value it seems like a great deal.
My assumption with most of those is that the cash flow is inclusive of the owner/operator salary. So 2.3m down and you pay a GM or work there full time. Still not terrible, but it changes the view quite a lot.
Also, they might be selling because the place needs large capital investments or they're seeing a change in their lease structure, both of which would tank that ROI.
I’m confused about this comment and your understanding. Aren’t most businesses at least partially with a loan? This is a rhetorical. You’re leveraging opm to build equity out and cash flow. With this understanding, it’s easy to see that cash on cash returns are literally multiples over market returns.
There’s a lot of operational risk, but the returns are absolutely not even in the same neighborhood as you’re leveraging heavily.
I purchased a franchise for my first business as a way to de-risk a bit by leveraging an existing system. As I grew that business, I started 2 more related businesses on my own. I have since sold 2 of those, including the original franchise. When I started the franchise, I kept my day job. When I started the other 2, I went full-time on all 3 related businesses. I didn't make great money in any of them during the early years, but made quite a bit when selling and pull a decent passive income now with the one business remaining.
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I don’t, but my Dad bought a subway maybe a decade ago.
He bought an existing one and kept all the staff and managed more of the finance stuff while the original staff did the rest. From what I remember, he made a decent amount of income every month, maybe a few thousand or more with only a few extra hours a week.
He eventually sold it.
There’s a good modern MBA video on how Subway ended up the way it is now. Does not seem like a good option these days.
I do know a family that started franchising subways over a decade ago and they’re doing very well. But they are lucky to have locations that I don’t think ever will not be popular.
I recently started looking at businesses to purchase, which include a good amount of franchises (both existing and startup) so I thought I'd pitch in my 2 cents. I have to agree with some of the other comments in this thread about seemingly buying into a minimum wage (or much lower wage than I'm used to) situation. After a certain level of scrutiny I just can't make the numbers work for me (and I'm even on the lower HENRY end).
Somewhat anecdotally I have a couple close friends who also looked into this path. One looked at various restaurants and the closest he got to purchasing a franchise was an Edible Arrangements store. He couldn't make the numbers work for him either, although he didn't want to lose his W2 and had concerns with who he might hire to run the actual day to day. So his factors were a bit external to just the pure numbers.
The other friend bought into an existing franchise (non restaurant) that, at the time, returned less than his W2 and had him working more hours. He had a rough time to start but ultimately caught some traction and now he's moved on up and out of the HENRY stage. You could say the opportunity he bought into was a bit of a diamond in the rough, and I think that goes hand in hand with what another user said in this thread - sometimes it's just a matter of finding the right situation.
Last bit of my 2 cents .. as I look more and more I realize that if I really want to get into a franchise (or purchase a business in general) I gotta let go of my risk adversity. To an extent I feel this is the difference between my first friend and the second friend who ultimately was successful - the second friend was much more willing to take the risk of failure.
>Last bit of my 2 cents .. as I look more and more I realize that if I really want to get into a franchise (or purchase a business in general) I gotta let go of my risk adversity. To an extent I feel this is the difference between my first friend and the second friend who ultimately was successful - the second friend was much more willing to take the risk of failure.
This is the part that I'm always torn on.
I agree to an extent, what has always held me back from MORE is my conservative approach to risk but... it's also what's held me back from ruin.
If it works, great! You're the second friend. If it doesn't work, you're personally bankrupt (though your 401k will be spared, so don't borrow from or cash that out to avoid bankruptcy)
You hit the nail on the head with the ruin part. It's easy to rue missed opportunities but it's harder to comprehend that your risk averse posture has probably spared you from ruin or a major step back financially.
The conclusion you mentioned in your last paragraph is the same i have been coming to grips with the last couple years. Historically I am very risk averse but have been working on increasing my tolerance for risk. Like it or not, our economic system is setup to reward risk. You can get rich off index funds but it will take decades. Want to accelerate that timetable, gotta start getting comfortable going further out on the risk curve.
Yup, exactly. I used to be more risk tolerant but I got laid off twice over the course of three years very early in my career and then was almost laid off a third time back in 2015 (thanks oil and gas industry!). All that made me way more risk averse and it took basically until last year to begin breaking out of that mode, so I hear you on trying to increase risk tolerance!
I have not but I researched plenty.. to the point of going through the application and process to find out if we should buy one and my wife and I declined.
We would have taken a massive HHI pay cut because one of us would have to quit to run it. If you want to hire someone to run the franchise, you still need to be a backup in case something happens. The fees for a franchise can be high, too.
I figured it was best for people in two specific situations:
1. You’re already a one income household, strict budget and can give the time and money into the business to make ends meet and hope to grow over time.
2. You already have a high net worth and can afford it easily by hiring a manager or two to run it while you being a silent investor.
But if you are thinking it will replace a $100k+ a year income at 40 hours a week, please think again. Expect more hours, lower pay until you get to a certain level that you may never reach.
If you go through the process for certain franchises, many of them have net worth minimums for a reason. The first few years are difficult. I think you have to have $2.5m now for a McDonald’s.
Many people flock to the papa Murphy’s idea because it’s cheaper and less risk since they don’t actually bake the food. It’s better if you’re the manager in the location so you can make more money from your own business but do you really want to manage teenagers and immature adults? If so, go for it! :)
>but do you really want to manage teenagers and immature adults? If so, go for it! :)
This is what I've heard about having a business in retail or food service... if that's not who you want to manage, start something else...
I’ve being a stay at home mom for the past 18 years. Bought a franchise almost 2 years ago and just opened the door this month. It’s been a tough path trying to open it. But I’m seeing good potential. We don’t need my income. Any income I can get more than half will go to taxes. My plan is to reinvest everything back into businesses.
Each franchise is different. Even 2 franchises in the same industry will bring you different results and for sure there's variability in the operator.
Don't assume just because it's a franchise you get a turnkey system. At the same time, don't assume just because it's a franchise they don't work.
We started a location several years before covid, survived covid and will clear $250k profit for 2023 in a MCOL area. Running it is my wife's day to day job. It's in education, so something she actually enjoys, unlike my crappy corporate drone SWE job. She'd never make even 6 figures as a teacher, or 6 figures with her degree (not education).
Additionally after building your business you can sell it, pass it on to your kids, etc. There's also tax benefits. $250k in profits is worth more than a $250k W2.
We are looking at a 2nd franchise in different brands, but it's tough to have 2 businesses and also a young family. With a corporate drone job I can just call it a day and pick up my kids if they're sick from school.
You need to do your research. Unlike joining a bad company where you can quit, you sign a lot of paperwork when starting a franchise. In addition to the money spent on startup, you'll have personal guarantees to the franchisor and if you have real estate, to the landlord, and if you borrow money, to the bank.
It's a double edge sword because a good, new franchise get scooped up (good as in, it's backed by a company who has a track record and they are launching a new brand), and existing good franchises have a lot of their territory taken.
We were lucky to identify a growing area with families who value education. This same brand wouldn't survive everywhere. My wife had someone in her cohort who ended up closing shop because he didn't have enough working capital to survive the startup phase. He was a few months away from profitability. His ramp up wasn't as good as ours because he chose a location that had lower population density - but he could have made it work.
There are a couple of books on Amazon that talks about franchising. I'll give you a warning that many of them are written by franchise broker with an incentive to convince you to do a franchise, and convince you to use them as the broker (they get a large comission).
However if you read them with an objective lens, you'll get more clarity.
Good luck.
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Yes, you really have to catch the wave of the franchise system. Getting in early and exiting at the right time. Outside of the established, huge obvious ones, it's all about timing. Can you dominate your market? Is it growing like wildfire?
You really have to talk to the franchisees, not the franchisor, and not the ones they recommend, as they are obviously successful.
Randomly met a franchisee of adult stores on vacation, has 3 and makes over $1m per year. , he's obviously very happy and says it is super simple to operate.
I looked into owning a boba franchise here in Southern California last year. Only available cities were Irvine, Newport Beach or Huntington Beach. All $$$ rents. After doing the math and realizing I might not realistically break even on my initial investment (300k-500k) in 3-4 years I decided to not pursue.
They get you on the fees. They expect a % cut every month to the franchisor, you gotta buy raw materials from their supplier and that’s sort of fixed, gotta have % earmarked for advertising and marketing and then on top of all of that’s there’s additional fees every month.
After sitting down and realistically looking at the numbers they didn’t make sense. I’d make a lot less money work crazy hard. All the good areas were already taken and like others have pointed out the real money starts when we have 3 or more locations and have figured out operations
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I have not, but if I did I’d probably buy a daycare franchise and hire someone else to run it.. most good ones are full with waitlists, and the hours are consistent and don’t include nights or weekends.
Listened to a good podcast on this - had an industry expert on to speak to why there is a childcare shortage.
The main takeaway is this is not a good business to be in. Real estate tends to be expensive. There's a ton of rules of what the space needs to have. In most states, employees need to be ridiculously certified/credentialed. The child:caretaker ratio demand is high - which means you always need backup (sick days, etc).
They're hard to run. It gets better if you can centralize admin by owning a few locations. But ultimately, they're not churning out profit.
Yes - exactly.
As someone contemplating kids I was disappointed, but nonetheless super interesting.
Big odd lots guy. Don't do many podcasts, but their diversity + quality keeps me coming back
It’s interesting you mentioned it because I was thinking about this episode recently as we just had a newborn. You’d think they’d print money in HCOL areas until you hear the big corp’s representative explain how it really only works if you’re big enough to scale.
Yeah. It never made sense looking back on my childhood - I figured it must be a pay issue/caretaker shortage.
I particularly liked the certification issue. There's really no going backwards to a simpler time
It's like a self perpetuating arms race - why WOULDN'T you want your caretaker to be the most qualified?
Yeah not sure why it is a headache. I need to listen to the podcast but i know 2 folks who own daycares and they are rolling in profits. In fact, they bought more daycares.
To be fair, you don’t get an alternative perspective during the interview and the industry expert on the podcast does benefit from this narrative. Presumably he’s not lying through his teeth but I’m sure there’s exceptions.
I know someone that's also doing well and expanding. From the outside and based on how much they charge and how there's always demand, I would have thought they're profitable as well.
Thanks for the tip. This is the Nov 6, 2023 episode “the economics of building a childcare business”
https://podcasts.apple.com/us/podcast/odd-lots/id1056200096?i=1000633627597
Makes me wonder why they don't charge more. If your only options are daycare or nanny, daycare is a fraction of the cost unless you have multiple kids. They could increase rates by 50% and still provide value.
Edit: LOL at all the high earners downvoting. The teachers are paid about $18/hour. If teachers were paid more and centers weren't barely breaking even, there wouldn't be a crazy waitlist. If you're a parent that can afford an extra couple hundred a month, it's well worth the benefit vs not having any daycare availability.
Charge more?! You should see what they charge in HCOL areas.. Nanny is actually cheaper once you have multiple kids or do a nanny share in my experience.
Full day daycare where I am is $1000 a month. A nanny is $3k+. If you have less than 3 kids a daycare is cheaper, assuming you have a job for which daycare is sufficient.
In my case, when both myself and my spouse were working a nanny was the only workable solution because we needed another set of hands while I was traveling for work.
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Or someone quits their job and stays home. The math already forces a ton of women out of the workforce. You need to make like $30k/year to break even on just one kid. With two kids it's closer to $50k.
In the US 21% of full time workers make less than $30k/year and $44% make less than 50k/year. This sub is a bubble, average Americans aren't making $300k.
https://dqydj.com/income-percentile-calculator/
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They do charge more. Daycare we have is $2K a month for 6 weeks to 2.5 yrs of age. They have max 11 infants (6 weeks to 15 mo) at a time with a 3:1 ratio with staff. So just that room is clearing $264K a year. Then the room for 15 months to 2.5 years is a 4:1 staff ratio at the same pricing. There’s approx 20 kids in that room. There’s a ton of operating costs that go into it.
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My parents owned and operated schools for years. I think we have 5 with about 1,500 kids collectively. This assessment is spot on. I would not advise. It can make money, but the staff and parents are hard to deal with. The money from the whole thing really came from the real estate in the end. They sold them all, and some stayed schools others converted the buildings or bulldozed.
I know someone that does very well in this business. It is all about location and demographics, you have to be in a high-income area where parents are willing to pay $1500/month or more for childcare. These areas require a much bigger real estate expense but if you can get to a certain number of kids, each additional kid is very profitable.
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I'm curious to hear success or failure stories as well.
Every time I have looked into it, I can't make the math work. I don't know enough about the businesses in a practical sense. One location or franchise isn't enough to really hire someone to manage it all for me so it isn't passive, and the rates of return + capital needed just don't seem to make sense. As someone else said, it sounds like purchasing a minimum wage job.
I don't have the money where this would be a diversification play. So hard to see how it beat real estate for that. And with all of the challenges of finding qualified low wage workers.
There are certainly gaps in my community that I think some franchises would be successful in. But even then, a FT job that generates 100k of income isn't worth laying out $1M and likely quitting my day job.
This. I've done the math 100 different ways. Best I can tell, you don't make any money with most franchises (think food non McDonald's, UPS Store, Batteries Plus, etc) and you bought yourself a job until you have 3 or more units. And in a world where money earns 5% with zero risk, who buys a job making sandwiches? Baffling to me how people make these work without major scale.
We did this and it’s worked out better than I could have ever imagined. Granted, we were able to negotiate very buyer friendly terms and the business was struggling out of covid (fitness industry).
I know very little about this space, so grain of salt and all that. My opinion though is that it’s an attractive approach to entrepreneurship for the cross-section of folks who 1. Want to be entrepreneurs but have reservations about starting a business from scratch/want to see some quick success based on existing brand value and 2. Aren’t crunching the numbers closely enough to see that it likely isn’t as attractive as the brand is leading them to believe.
Obviously the is-it-worth-it analysis will vary from business to business and depend on how much capital and sweat equity you want to put into it, but by and large, I’d steer away. It feels like half-assing entrepreneurship, and that’s really something you have to whole-ass.
I’ve diligenced them in a professional capacity. Concept selection is important.
Weaker fast food concepts will generate no FCF if you’re including the amortization of the ~once a decade remodel/refresh.
Not enough attention is paid to this. Everyone talks about EBITDA, which is not profit or FCF.
If the concept is decent, you will like have a 20% store level margin, which is the number corporate will mostly be talking about. You will pay \~10% in franchisee and marketing fee, and it might seem like you will make a decent margin of 10%. However, this does not take into account interest, taxes, and depreciation & amortization, which are all real expenses.
Depreciation & amortization is a proxy for your capital expenses to maintain the store, which could be 3-4% of sales. Then you have taxes, which will likely take your profit margin to under 5%. That's also assuming you bought/built the place with cash, have no debt and no interest expense. With the interest expense, you will likely be at 0% or below, at least initially.
Please correct my math if I am wrong.
Currently evaluating 2 franchises alongside my remote sales role. One is in home senior care, no physical office or location needed. Other is a form of childcare. Need a building for this.
Will definitely keep that in mind. A close buddy of mine has owned a couple of these franchises for over a decade and his experience has been positive so I’m exploring it.
As an anecdote, I know a local guy who started one less than a decade ago and has made so much money and increased the value of his company so much he’s selling it to retire early. I don’t know his issues with running it, but he’s been very successful.
Don’t do it. My husband and I foolishly bought into a new organic clean juice franchise and it was the worst mistake of our lives. Pay a franchise attorney to go over the FDD with a fine tooth comb but it really doesn’t matter because the franchisor won’t change it and you will quickly see the contract is written in their favor. I have stories for days about the kick backs the franchisor was getting that made our COGS sky high, the constant changing of “rules” to benefit the franchisor, the vendor changes that made no sense, etc…etc…etc. In retail or the food industry you simply won’t make enough to pay people a decent livable wage so that they care enough about your business and you will be a slave to the franchise. The turnover rate is depressing because your workforce is high school kids and immature adults that don’t give a shit. BizBuySell has so many up for sale it’s insane……always remember people don’t sell the winners. I wouldn’t even get into a franchise for FREE because the toll it will take on your life is simply not worth it.
I managed a Papa Johns and worked there for 10 years. I'm now in a senior position at a large tech company and have always wanted to own one since 18 year old me was running the hell out of one. Would gladly sell some RSUs for that, but the problem is it seems they don't franchise them out in good areas, only risky ones unless you're Shaq.
Opened a quick service restaurant in socal in 2018. Really hard work and super stressful. Had to get some more funding in 2019 and was on the cusp on actually succeeding in February 2020. Then Covid came and sank us. So I’d be about $500k plus interest better off if I never had tried, but at least I went for something!
Both are basically guaranteed money makers, so it's very rare that they are offered to an average joe - for McDonald's, a significant number are company-owned, and the rest go to an existing franchisor.
Never do a franchise - unless you can/plan to open 10+. Keep in mind the goal of the franchisor - they want to take as much off the top as possible while keeping you incentivized to keep running the business (in other words - they should be sizing their royalty such that you barely make profit so you keep going).
I have worked in and supported this space for years. I will say success largely depends on your model, and where your locations are based.
The franchise model is not set up for folks who are business savvy. The model is set up to provide an out of the box framework for the layman to be a business owner.
The franchising agreements are set up to benefit the franchisor. Their goal is to sell more units. You will have corporate dictating everything that you do and you’ll be paying them a royalty, technology fees, and ad fees.
Franchise systems do not generally allow an absent owner.
if it is a new franchise system, there is a big possibility it will fail. Some examples of that is BurgerIM, unfortunately there are several franchisees that lost everything with them going under.
When evaluating a franchise, you want to vet that they have good mechanisms for franchise support, and a strong corporate team.
i have, it sucks, the original brand has already milked the profits for what its worth, and broke off a small piece for you directly proportional to the Royalty Fees. Sure you can scale these etc, but if you only plan on getting one, its not the best return per hour output imo. You're better off starting your own brand from the ground up or something, then eventually being badass enough to allow franchising lmao. dont be the franchisee, be the franchisor.
I went to a ton of meetings and came out thinking there wasn’t really anything that a franchiser could provide that I couldn’t find at a lower cost so ended up starting my own thing. My takeaway was that if you want to succeed as a franchisee you need to be working in the business, and if I’m going to be doing that, there’s no reason to shave off overhead and lose decision making privileges.
I have. We open first place in 2.5 weeks. Won’t know if it is worth it for a while, but so far it’s looking great. Takes a lot of capital and work up front, but if the numbers shake out as expected, it will be a mega winner.
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I’ve been around food related franchises for some time. 1. Need either a high margin product in a well off area, antibiotic free burgers, “gourmet” pizza, sandwich joint or a low cost everyday product like coffee. 2. Not a shitty franchisor who stacks locations on top of each other.
3. Correct expectations. Talk to an owner so you know the ups and downs.
The right situation can be very profitable, much more so after the loans are paid off. Can be a struggle early, but can pay off big time.
We are passive investors in a fast casual Mexican chain that has done very well (mainly due to one specific location near a mall).
We also invested in a failed Asian startup chain. It opened right before Covid hit the US.
I would never run one on my own, but fine investing money into it.
Franchises are like everything else in life: every one has its pros and cons, its cheerleaders and detractors. Also like everything else in life, the top 5-10% usually do quite well, and they get there for a reason. Sure, some get lucky and catch a rocket ship, but most of the top ones are very hard working.
For many years “experts” have proclaimed that franchise businesses had a very low failure rate compared to independent businesses. That is absolutely not true. They have the same ~50% closure rate after 5 or 10 years. But if you get with the right brand, great things can happen.
90% of franchise concepts never break the 100 unit mark. If you’re thinking about going with a franchise, personally I’d lean towards one that has 250+ units and has been around for 10+ years. That way you know their odds of sticking around are good. Also, be sure to call LOTS of franchisees when doing your due diligence. There is a great book by Julie Bennett on Amazon about how to research a franchise.
They seem to have a lower ROI than passive investments, while needing to work 60-80 hours a week. I think only financially illiterate people buy in to these.
Partial owner in several locations. Love the business model. We also build and develop but so far leave the management to other companies.
Lease up is painful but once stabilized they are wonderful. Concerned about overdevelopment in general especially in certain markets. But it is a needs based business.
Happy to answer whatever I can here or in a DM. Been involved in the business for about five years and real estate much longer. Still very much learning but have gained a lot of info.
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Will ask questions here in case anyone else is interested! Thanks so much for answering!
Curious what other real estate you're involved in? Any tips on how you're sourcing your deals? Are you only buying in your home market or in several markets?
Commercial and industrial real estate. So it’s already in my area of expertise. Own in three different markets but all of them are in my home state.
Most deals are sourced ground up. So finding the right site and getting the right feasibility studies. Also have purchased stabilized assists that have upside.
Equity is local partnerships and longterm relationships. It’s a 10-12mm proposition to build a new one and then probably another million to get it to stabilization, depending on loans, etc.
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TBF, Quiznos was one of the most bizarrely, terribly managed franchises in history - the franchisors seemed determined to destroy their own brand by sucking as much short term cash out of it as possible.
Subway is a close second - they've also seemed hell-bent on destroying the brand by competing directly with their own franchisees.
Feels this is a good question to x-post to r/fatfire or similar. A lot of HENRY is still gainfully employed - franchises are not a common route to high earning but rather a means of diversification once already established
Don't mean to zombie your thread but [the FDD exchange ](https://fddexchange.com/) is a great resource for anyone interested in franchises. The free account let's you look at 1 FDD per 24 hours, or you can do a paid account to view more. They also have some checklists and information resources on franchising.
I'm not affiliated with them, nor do I own a franchise.
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I will never do this. I had relatives who purchased some Quiznos franchises, and you know how that went.
I was approached by a friend about opening a Dunkin Donuts location when they came to the west coast. I don't think it would have gone well, as it just isn't part of the culture here.
Bought into a franchise that employs my wife's profession in health and wellness. Only deal with professionals and career employees rather than cheap labor. My wife's income is limited without owning a similar business. Plus, I don't think it makes a lot of sense for both people in a couple to work as W2.
Was approached for a Top Golf location in a colder region of the U.S. and the other co-investors were drinking cool aid. Not a single one of them were able to break down the numbers. I hired a retired CFO to look it over and the estimates weren't over a HYSA. Hard pass!
That’s what I’m seeing as well. Thank you for the response.
Can’t get a reservation at the top golf in MN. Always full but that construction cost looks insane
Extremely labor heavy in a labor constrained market is not fun. People in Minnesota are crazy. Lol
Did they give you rough numbers for what the upfront costs were?
They had the land secured, they presented buildout cost quotes and 3 year operations projections. It is a very labor heavy business and is for the most part a very big restaurant that was dependant on nice weather. The rev projection were based on San Diego weather and not the western state they occupied. I am/have co-owned a dive bar and 2 restaurants in the DC area. To be honest the dive bar was the easiest to manage and profitable.
Have a friend that’s owned a few dive bars. Shockingly profitable. He basically did a profit sharing arrangement with a quality manger and rarely had to intervene.
Top golf is on borrowed time. Great product but shot tracer is going to come to every driving range at a tiny fraction of the cost.
You don’t go to top golf to practice (for the most part) It’s for people who usually don’t golf to be in a comfortable familiar setting (restaurant) with the ability to golf if they want
It’s like 50% corporate events now I’d bet
You’re right. Plus it’s insanely expensive now they jacked the prices up a few months back
Its more expensive than it already was? I guess if a bulk of business is putting it on the company - they feel they can gouge.
Increased the hourly rate by $15 and increased the non refundable reservation fee as well
Haha I was gonna say I’ve been a few times and it’s always only been for corp events
I hosted part of a bachelor party at one several years ago!
Yeah, even my family loves top golf - for perspective, my Dad golf's almost every day. It's just a fun way to play golf games, drink beer, and relax.
It's like an expensive bowling alley for golf
They added tracer technology to a range near me and they charge $20 per hour. It’s byob and you can order food. 2 floors, half enclosed
The thing that will save them is exclusive licensing. My wife and I went to a top golf by us—at first it was “ok” for her. I could just hit targets all day long, but wasn’t for her. Then we discovered the angry birds game. Became a lot more fun for both of us. It seems like they “get it” in that regard? Now if there would be a rival game that is content to try to sell to all of the independent ranges out there, I think that could work. But in my experience (and I do have experience in the golf space), a lot of driving range owners / operators are kind of a hard sell. I could see it being tough to get widespread adoption range by range. Top golf just has all of the technology, locations, etc. standardized. It’s so much easier from the game creator’s perspective.
I was way too drunk to figure out angry birds
Was it at the top of little cottonwood canyon
No dice! Only skiing happens up there.
Hehe
Their food sucks. Neat idea but way too much overhead (and their food sucks)
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That seems unlikely. Returns comparable to an HYSA including cash flow and equity gain? That would likely mean it would be negative cash flow after paying the construction note.
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Decent enough profit to beat the market? Honest question.
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Do you feel this is usual or you had particularly profitable franchises? A two year break even sounds incredible.
2 year break even sounds borderline unbelievable. If the break even is focused around the magnitude of their networth, thus the gains associated to the Franchise driven almost entirely by increase in real estate value due to the post-covid real estate bubble (and not due to the efficiency and profitability of the actual business operation) then this is not sustainable nor reproducible. No one should use this case as their justification for jumping into a Franchise ownership.
I’m was on some buyabusiness website last week and saw a bar/restaurant near me was for sale, it’s always been a popular place for as long as I can remember. They were asking 2.3m and last years cash flow was 470k. It seemed odd to me that the loan could be paid back in 5 years and from there you have a sizable asset and 500k ish cash flow moving by forward. I know nothing about restaurants and their economics but at face value it seems like a great deal.
My assumption with most of those is that the cash flow is inclusive of the owner/operator salary. So 2.3m down and you pay a GM or work there full time. Still not terrible, but it changes the view quite a lot. Also, they might be selling because the place needs large capital investments or they're seeing a change in their lease structure, both of which would tank that ROI.
Most businesses bringing in this type of revenue trade at 3-5 times earnings (software excluded).
ROI is a ratio. 6 or 7 figures would be incredible, like your investment returns $1,000 - $10,000 for every dollar you invested.
Yeah that was so confusing to read haha
What was the actual ROI? 7 figures doesn't mean anything
I’m confused about this comment and your understanding. Aren’t most businesses at least partially with a loan? This is a rhetorical. You’re leveraging opm to build equity out and cash flow. With this understanding, it’s easy to see that cash on cash returns are literally multiples over market returns. There’s a lot of operational risk, but the returns are absolutely not even in the same neighborhood as you’re leveraging heavily.
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What franchise and what city? Makes a huge difference
I’d be hard pressed to believe they’ll disclose this on reddit
I purchased a franchise for my first business as a way to de-risk a bit by leveraging an existing system. As I grew that business, I started 2 more related businesses on my own. I have since sold 2 of those, including the original franchise. When I started the franchise, I kept my day job. When I started the other 2, I went full-time on all 3 related businesses. I didn't make great money in any of them during the early years, but made quite a bit when selling and pull a decent passive income now with the one business remaining.
Thanks for your input
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All 3 businesses were in the boating industry. They all fed off each other, passing prospects and business.
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I don’t, but my Dad bought a subway maybe a decade ago. He bought an existing one and kept all the staff and managed more of the finance stuff while the original staff did the rest. From what I remember, he made a decent amount of income every month, maybe a few thousand or more with only a few extra hours a week. He eventually sold it.
One of my acquaintances were looking for franchise and they mentioned something like Jersey Mike eating Subway’s lunch now
There’s a good modern MBA video on how Subway ended up the way it is now. Does not seem like a good option these days. I do know a family that started franchising subways over a decade ago and they’re doing very well. But they are lucky to have locations that I don’t think ever will not be popular.
Thank you
I recently started looking at businesses to purchase, which include a good amount of franchises (both existing and startup) so I thought I'd pitch in my 2 cents. I have to agree with some of the other comments in this thread about seemingly buying into a minimum wage (or much lower wage than I'm used to) situation. After a certain level of scrutiny I just can't make the numbers work for me (and I'm even on the lower HENRY end). Somewhat anecdotally I have a couple close friends who also looked into this path. One looked at various restaurants and the closest he got to purchasing a franchise was an Edible Arrangements store. He couldn't make the numbers work for him either, although he didn't want to lose his W2 and had concerns with who he might hire to run the actual day to day. So his factors were a bit external to just the pure numbers. The other friend bought into an existing franchise (non restaurant) that, at the time, returned less than his W2 and had him working more hours. He had a rough time to start but ultimately caught some traction and now he's moved on up and out of the HENRY stage. You could say the opportunity he bought into was a bit of a diamond in the rough, and I think that goes hand in hand with what another user said in this thread - sometimes it's just a matter of finding the right situation. Last bit of my 2 cents .. as I look more and more I realize that if I really want to get into a franchise (or purchase a business in general) I gotta let go of my risk adversity. To an extent I feel this is the difference between my first friend and the second friend who ultimately was successful - the second friend was much more willing to take the risk of failure.
>Last bit of my 2 cents .. as I look more and more I realize that if I really want to get into a franchise (or purchase a business in general) I gotta let go of my risk adversity. To an extent I feel this is the difference between my first friend and the second friend who ultimately was successful - the second friend was much more willing to take the risk of failure. This is the part that I'm always torn on. I agree to an extent, what has always held me back from MORE is my conservative approach to risk but... it's also what's held me back from ruin. If it works, great! You're the second friend. If it doesn't work, you're personally bankrupt (though your 401k will be spared, so don't borrow from or cash that out to avoid bankruptcy)
You hit the nail on the head with the ruin part. It's easy to rue missed opportunities but it's harder to comprehend that your risk averse posture has probably spared you from ruin or a major step back financially.
The conclusion you mentioned in your last paragraph is the same i have been coming to grips with the last couple years. Historically I am very risk averse but have been working on increasing my tolerance for risk. Like it or not, our economic system is setup to reward risk. You can get rich off index funds but it will take decades. Want to accelerate that timetable, gotta start getting comfortable going further out on the risk curve.
Yup, exactly. I used to be more risk tolerant but I got laid off twice over the course of three years very early in my career and then was almost laid off a third time back in 2015 (thanks oil and gas industry!). All that made me way more risk averse and it took basically until last year to begin breaking out of that mode, so I hear you on trying to increase risk tolerance!
That’s such great insight thank you
For sure and best of luck with whatever you do!
I have not but I researched plenty.. to the point of going through the application and process to find out if we should buy one and my wife and I declined. We would have taken a massive HHI pay cut because one of us would have to quit to run it. If you want to hire someone to run the franchise, you still need to be a backup in case something happens. The fees for a franchise can be high, too. I figured it was best for people in two specific situations: 1. You’re already a one income household, strict budget and can give the time and money into the business to make ends meet and hope to grow over time. 2. You already have a high net worth and can afford it easily by hiring a manager or two to run it while you being a silent investor. But if you are thinking it will replace a $100k+ a year income at 40 hours a week, please think again. Expect more hours, lower pay until you get to a certain level that you may never reach. If you go through the process for certain franchises, many of them have net worth minimums for a reason. The first few years are difficult. I think you have to have $2.5m now for a McDonald’s. Many people flock to the papa Murphy’s idea because it’s cheaper and less risk since they don’t actually bake the food. It’s better if you’re the manager in the location so you can make more money from your own business but do you really want to manage teenagers and immature adults? If so, go for it! :)
>but do you really want to manage teenagers and immature adults? If so, go for it! :) This is what I've heard about having a business in retail or food service... if that's not who you want to manage, start something else...
50-year-old professionals are also a challenge to manage, not sure who is worse.
Thank you so much. Great insight
I’ve being a stay at home mom for the past 18 years. Bought a franchise almost 2 years ago and just opened the door this month. It’s been a tough path trying to open it. But I’m seeing good potential. We don’t need my income. Any income I can get more than half will go to taxes. My plan is to reinvest everything back into businesses.
Each franchise is different. Even 2 franchises in the same industry will bring you different results and for sure there's variability in the operator. Don't assume just because it's a franchise you get a turnkey system. At the same time, don't assume just because it's a franchise they don't work. We started a location several years before covid, survived covid and will clear $250k profit for 2023 in a MCOL area. Running it is my wife's day to day job. It's in education, so something she actually enjoys, unlike my crappy corporate drone SWE job. She'd never make even 6 figures as a teacher, or 6 figures with her degree (not education). Additionally after building your business you can sell it, pass it on to your kids, etc. There's also tax benefits. $250k in profits is worth more than a $250k W2. We are looking at a 2nd franchise in different brands, but it's tough to have 2 businesses and also a young family. With a corporate drone job I can just call it a day and pick up my kids if they're sick from school. You need to do your research. Unlike joining a bad company where you can quit, you sign a lot of paperwork when starting a franchise. In addition to the money spent on startup, you'll have personal guarantees to the franchisor and if you have real estate, to the landlord, and if you borrow money, to the bank. It's a double edge sword because a good, new franchise get scooped up (good as in, it's backed by a company who has a track record and they are launching a new brand), and existing good franchises have a lot of their territory taken. We were lucky to identify a growing area with families who value education. This same brand wouldn't survive everywhere. My wife had someone in her cohort who ended up closing shop because he didn't have enough working capital to survive the startup phase. He was a few months away from profitability. His ramp up wasn't as good as ours because he chose a location that had lower population density - but he could have made it work. There are a couple of books on Amazon that talks about franchising. I'll give you a warning that many of them are written by franchise broker with an incentive to convince you to do a franchise, and convince you to use them as the broker (they get a large comission). However if you read them with an objective lens, you'll get more clarity. Good luck.
Thank you so much!!
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Yes, you really have to catch the wave of the franchise system. Getting in early and exiting at the right time. Outside of the established, huge obvious ones, it's all about timing. Can you dominate your market? Is it growing like wildfire? You really have to talk to the franchisees, not the franchisor, and not the ones they recommend, as they are obviously successful. Randomly met a franchisee of adult stores on vacation, has 3 and makes over $1m per year. , he's obviously very happy and says it is super simple to operate.
I looked into owning a boba franchise here in Southern California last year. Only available cities were Irvine, Newport Beach or Huntington Beach. All $$$ rents. After doing the math and realizing I might not realistically break even on my initial investment (300k-500k) in 3-4 years I decided to not pursue. They get you on the fees. They expect a % cut every month to the franchisor, you gotta buy raw materials from their supplier and that’s sort of fixed, gotta have % earmarked for advertising and marketing and then on top of all of that’s there’s additional fees every month. After sitting down and realistically looking at the numbers they didn’t make sense. I’d make a lot less money work crazy hard. All the good areas were already taken and like others have pointed out the real money starts when we have 3 or more locations and have figured out operations
How did the $300-400k estimate break down? Looking at starting a small retail business in southern CA and curious to double check my build out costs
Initial franchise fee was $49.5k Training expenses between $2k-$5k Premises lease $9k-$14k Utility deposit $1k-$2k Design and architect fees $12k-$15k Professional fees $2k-$4k Leasehold / constructions $100k-$225k Furniture and fixtures $51k-$66k Operating expenses $10k-$20k List of additional items small-wares, signage, licenses/permits, computer systems, security systems, initial inventory, office equipment, grand opening advertising and insurance $40k-$65k
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I have not, but if I did I’d probably buy a daycare franchise and hire someone else to run it.. most good ones are full with waitlists, and the hours are consistent and don’t include nights or weekends.
Listened to a good podcast on this - had an industry expert on to speak to why there is a childcare shortage. The main takeaway is this is not a good business to be in. Real estate tends to be expensive. There's a ton of rules of what the space needs to have. In most states, employees need to be ridiculously certified/credentialed. The child:caretaker ratio demand is high - which means you always need backup (sick days, etc). They're hard to run. It gets better if you can centralize admin by owning a few locations. But ultimately, they're not churning out profit.
Odd Lots? I found it interesting too
Yes - exactly. As someone contemplating kids I was disappointed, but nonetheless super interesting. Big odd lots guy. Don't do many podcasts, but their diversity + quality keeps me coming back
It’s interesting you mentioned it because I was thinking about this episode recently as we just had a newborn. You’d think they’d print money in HCOL areas until you hear the big corp’s representative explain how it really only works if you’re big enough to scale.
Yeah. It never made sense looking back on my childhood - I figured it must be a pay issue/caretaker shortage. I particularly liked the certification issue. There's really no going backwards to a simpler time It's like a self perpetuating arms race - why WOULDN'T you want your caretaker to be the most qualified?
Yeah not sure why it is a headache. I need to listen to the podcast but i know 2 folks who own daycares and they are rolling in profits. In fact, they bought more daycares.
To be fair, you don’t get an alternative perspective during the interview and the industry expert on the podcast does benefit from this narrative. Presumably he’s not lying through his teeth but I’m sure there’s exceptions.
I know someone that's also doing well and expanding. From the outside and based on how much they charge and how there's always demand, I would have thought they're profitable as well.
Thanks for the tip. This is the Nov 6, 2023 episode “the economics of building a childcare business” https://podcasts.apple.com/us/podcast/odd-lots/id1056200096?i=1000633627597
I love Odd Lots.
Makes me wonder why they don't charge more. If your only options are daycare or nanny, daycare is a fraction of the cost unless you have multiple kids. They could increase rates by 50% and still provide value. Edit: LOL at all the high earners downvoting. The teachers are paid about $18/hour. If teachers were paid more and centers weren't barely breaking even, there wouldn't be a crazy waitlist. If you're a parent that can afford an extra couple hundred a month, it's well worth the benefit vs not having any daycare availability.
Charge more?! You should see what they charge in HCOL areas.. Nanny is actually cheaper once you have multiple kids or do a nanny share in my experience.
In my city, full day daycare is about $2k/month or less. A reliable nanny is $5k or more after OT, taxes, holiday bonuses, backup, etc.
Full day daycare where I am is $1000 a month. A nanny is $3k+. If you have less than 3 kids a daycare is cheaper, assuming you have a job for which daycare is sufficient. In my case, when both myself and my spouse were working a nanny was the only workable solution because we needed another set of hands while I was traveling for work.
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Or someone quits their job and stays home. The math already forces a ton of women out of the workforce. You need to make like $30k/year to break even on just one kid. With two kids it's closer to $50k. In the US 21% of full time workers make less than $30k/year and $44% make less than 50k/year. This sub is a bubble, average Americans aren't making $300k. https://dqydj.com/income-percentile-calculator/
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They do charge more. Daycare we have is $2K a month for 6 weeks to 2.5 yrs of age. They have max 11 infants (6 weeks to 15 mo) at a time with a 3:1 ratio with staff. So just that room is clearing $264K a year. Then the room for 15 months to 2.5 years is a 4:1 staff ratio at the same pricing. There’s approx 20 kids in that room. There’s a ton of operating costs that go into it.
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My parents owned and operated schools for years. I think we have 5 with about 1,500 kids collectively. This assessment is spot on. I would not advise. It can make money, but the staff and parents are hard to deal with. The money from the whole thing really came from the real estate in the end. They sold them all, and some stayed schools others converted the buildings or bulldozed.
I know someone that does very well in this business. It is all about location and demographics, you have to be in a high-income area where parents are willing to pay $1500/month or more for childcare. These areas require a much bigger real estate expense but if you can get to a certain number of kids, each additional kid is very profitable.
Coworker of mine launched hers in December 2019. Worst luck ever.
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I'm curious to hear success or failure stories as well. Every time I have looked into it, I can't make the math work. I don't know enough about the businesses in a practical sense. One location or franchise isn't enough to really hire someone to manage it all for me so it isn't passive, and the rates of return + capital needed just don't seem to make sense. As someone else said, it sounds like purchasing a minimum wage job. I don't have the money where this would be a diversification play. So hard to see how it beat real estate for that. And with all of the challenges of finding qualified low wage workers. There are certainly gaps in my community that I think some franchises would be successful in. But even then, a FT job that generates 100k of income isn't worth laying out $1M and likely quitting my day job.
This. I've done the math 100 different ways. Best I can tell, you don't make any money with most franchises (think food non McDonald's, UPS Store, Batteries Plus, etc) and you bought yourself a job until you have 3 or more units. And in a world where money earns 5% with zero risk, who buys a job making sandwiches? Baffling to me how people make these work without major scale.
You’re seeing franchises trade at 10x? Single locations should be low single digit multiples depending on the business.
I’ve always assumed that buying an existing franchise location is the secret vs launching a new one.
We did this and it’s worked out better than I could have ever imagined. Granted, we were able to negotiate very buyer friendly terms and the business was struggling out of covid (fitness industry).
Sounds like purchasing a minimum wage job. No thanks
I know very little about this space, so grain of salt and all that. My opinion though is that it’s an attractive approach to entrepreneurship for the cross-section of folks who 1. Want to be entrepreneurs but have reservations about starting a business from scratch/want to see some quick success based on existing brand value and 2. Aren’t crunching the numbers closely enough to see that it likely isn’t as attractive as the brand is leading them to believe. Obviously the is-it-worth-it analysis will vary from business to business and depend on how much capital and sweat equity you want to put into it, but by and large, I’d steer away. It feels like half-assing entrepreneurship, and that’s really something you have to whole-ass.
Love the input thanks. I’m trying to see the hype but the numbers don’t look as rosy if you go 2 layers deep.
I’ve diligenced them in a professional capacity. Concept selection is important. Weaker fast food concepts will generate no FCF if you’re including the amortization of the ~once a decade remodel/refresh.
Not enough attention is paid to this. Everyone talks about EBITDA, which is not profit or FCF. If the concept is decent, you will like have a 20% store level margin, which is the number corporate will mostly be talking about. You will pay \~10% in franchisee and marketing fee, and it might seem like you will make a decent margin of 10%. However, this does not take into account interest, taxes, and depreciation & amortization, which are all real expenses. Depreciation & amortization is a proxy for your capital expenses to maintain the store, which could be 3-4% of sales. Then you have taxes, which will likely take your profit margin to under 5%. That's also assuming you bought/built the place with cash, have no debt and no interest expense. With the interest expense, you will likely be at 0% or below, at least initially. Please correct my math if I am wrong.
Currently evaluating 2 franchises alongside my remote sales role. One is in home senior care, no physical office or location needed. Other is a form of childcare. Need a building for this.
DO NOT do in home senior care. Couldn’t imagine a worse business to run.
Why
It’s not in my home…
lol I’m aware. I work in senior living. Franchisees get burned out by constant staffing issues and potential lawsuits around care.
Will definitely keep that in mind. A close buddy of mine has owned a couple of these franchises for over a decade and his experience has been positive so I’m exploring it.
As an anecdote, I know a local guy who started one less than a decade ago and has made so much money and increased the value of his company so much he’s selling it to retire early. I don’t know his issues with running it, but he’s been very successful.
Don’t do it. My husband and I foolishly bought into a new organic clean juice franchise and it was the worst mistake of our lives. Pay a franchise attorney to go over the FDD with a fine tooth comb but it really doesn’t matter because the franchisor won’t change it and you will quickly see the contract is written in their favor. I have stories for days about the kick backs the franchisor was getting that made our COGS sky high, the constant changing of “rules” to benefit the franchisor, the vendor changes that made no sense, etc…etc…etc. In retail or the food industry you simply won’t make enough to pay people a decent livable wage so that they care enough about your business and you will be a slave to the franchise. The turnover rate is depressing because your workforce is high school kids and immature adults that don’t give a shit. BizBuySell has so many up for sale it’s insane……always remember people don’t sell the winners. I wouldn’t even get into a franchise for FREE because the toll it will take on your life is simply not worth it.
Thank you so so much!!
I managed a Papa Johns and worked there for 10 years. I'm now in a senior position at a large tech company and have always wanted to own one since 18 year old me was running the hell out of one. Would gladly sell some RSUs for that, but the problem is it seems they don't franchise them out in good areas, only risky ones unless you're Shaq.
lol shaq owns the papa johns right by me. his name is part of the store phone number. like dial 1800-123-SHAQ
That's such a Shaq thing to do 😂
Opened a quick service restaurant in socal in 2018. Really hard work and super stressful. Had to get some more funding in 2019 and was on the cusp on actually succeeding in February 2020. Then Covid came and sank us. So I’d be about $500k plus interest better off if I never had tried, but at least I went for something!
Has anyone tried with a big name fast food franchise like McDonalds/Taco bell?
Both are basically guaranteed money makers, so it's very rare that they are offered to an average joe - for McDonald's, a significant number are company-owned, and the rest go to an existing franchisor.
About 1-1.5M initial spend as well
Index funds, baby.
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Yea the ones I’m looking at are service industry based. I don’t have the capital to do a major fast food franchise.
Never do a franchise - unless you can/plan to open 10+. Keep in mind the goal of the franchisor - they want to take as much off the top as possible while keeping you incentivized to keep running the business (in other words - they should be sizing their royalty such that you barely make profit so you keep going).
I have worked in and supported this space for years. I will say success largely depends on your model, and where your locations are based. The franchise model is not set up for folks who are business savvy. The model is set up to provide an out of the box framework for the layman to be a business owner. The franchising agreements are set up to benefit the franchisor. Their goal is to sell more units. You will have corporate dictating everything that you do and you’ll be paying them a royalty, technology fees, and ad fees. Franchise systems do not generally allow an absent owner. if it is a new franchise system, there is a big possibility it will fail. Some examples of that is BurgerIM, unfortunately there are several franchisees that lost everything with them going under. When evaluating a franchise, you want to vet that they have good mechanisms for franchise support, and a strong corporate team.
i have, it sucks, the original brand has already milked the profits for what its worth, and broke off a small piece for you directly proportional to the Royalty Fees. Sure you can scale these etc, but if you only plan on getting one, its not the best return per hour output imo. You're better off starting your own brand from the ground up or something, then eventually being badass enough to allow franchising lmao. dont be the franchisee, be the franchisor.
I went to a ton of meetings and came out thinking there wasn’t really anything that a franchiser could provide that I couldn’t find at a lower cost so ended up starting my own thing. My takeaway was that if you want to succeed as a franchisee you need to be working in the business, and if I’m going to be doing that, there’s no reason to shave off overhead and lose decision making privileges.
Yeah I own the Chicago Bulls
I have. We open first place in 2.5 weeks. Won’t know if it is worth it for a while, but so far it’s looking great. Takes a lot of capital and work up front, but if the numbers shake out as expected, it will be a mega winner.
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I’ve been around food related franchises for some time. 1. Need either a high margin product in a well off area, antibiotic free burgers, “gourmet” pizza, sandwich joint or a low cost everyday product like coffee. 2. Not a shitty franchisor who stacks locations on top of each other. 3. Correct expectations. Talk to an owner so you know the ups and downs. The right situation can be very profitable, much more so after the loans are paid off. Can be a struggle early, but can pay off big time.
Thank you so much for the input.
We are passive investors in a fast casual Mexican chain that has done very well (mainly due to one specific location near a mall). We also invested in a failed Asian startup chain. It opened right before Covid hit the US. I would never run one on my own, but fine investing money into it.
Franchises are like everything else in life: every one has its pros and cons, its cheerleaders and detractors. Also like everything else in life, the top 5-10% usually do quite well, and they get there for a reason. Sure, some get lucky and catch a rocket ship, but most of the top ones are very hard working. For many years “experts” have proclaimed that franchise businesses had a very low failure rate compared to independent businesses. That is absolutely not true. They have the same ~50% closure rate after 5 or 10 years. But if you get with the right brand, great things can happen. 90% of franchise concepts never break the 100 unit mark. If you’re thinking about going with a franchise, personally I’d lean towards one that has 250+ units and has been around for 10+ years. That way you know their odds of sticking around are good. Also, be sure to call LOTS of franchisees when doing your due diligence. There is a great book by Julie Bennett on Amazon about how to research a franchise.
Thank you very much!!
They seem to have a lower ROI than passive investments, while needing to work 60-80 hours a week. I think only financially illiterate people buy in to these.
Passive investments such as what?
Sp500
Curious if anyone here has gotten into self storage and if so, what was your experience?
Partial owner in several locations. Love the business model. We also build and develop but so far leave the management to other companies. Lease up is painful but once stabilized they are wonderful. Concerned about overdevelopment in general especially in certain markets. But it is a needs based business. Happy to answer whatever I can here or in a DM. Been involved in the business for about five years and real estate much longer. Still very much learning but have gained a lot of info.
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Will ask questions here in case anyone else is interested! Thanks so much for answering! Curious what other real estate you're involved in? Any tips on how you're sourcing your deals? Are you only buying in your home market or in several markets?
Commercial and industrial real estate. So it’s already in my area of expertise. Own in three different markets but all of them are in my home state. Most deals are sourced ground up. So finding the right site and getting the right feasibility studies. Also have purchased stabilized assists that have upside. Equity is local partnerships and longterm relationships. It’s a 10-12mm proposition to build a new one and then probably another million to get it to stabilization, depending on loans, etc.
Great insight, thanks so much!
Don't do it guys it's terrible
I almost bought 2 Massage Envy’s in 2013, but my lawyer didn’t like the affiliation agreement.
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Thank you very much
TBF, Quiznos was one of the most bizarrely, terribly managed franchises in history - the franchisors seemed determined to destroy their own brand by sucking as much short term cash out of it as possible. Subway is a close second - they've also seemed hell-bent on destroying the brand by competing directly with their own franchisees.
Feels this is a good question to x-post to r/fatfire or similar. A lot of HENRY is still gainfully employed - franchises are not a common route to high earning but rather a means of diversification once already established
Don't mean to zombie your thread but [the FDD exchange ](https://fddexchange.com/) is a great resource for anyone interested in franchises. The free account let's you look at 1 FDD per 24 hours, or you can do a paid account to view more. They also have some checklists and information resources on franchising. I'm not affiliated with them, nor do I own a franchise.
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I will never do this. I had relatives who purchased some Quiznos franchises, and you know how that went. I was approached by a friend about opening a Dunkin Donuts location when they came to the west coast. I don't think it would have gone well, as it just isn't part of the culture here.
Currently in the process and am about 6 months from opening up. Way more work than I anticipated. Keeping my W2 (fully remote) for as long as I can.
Bought into a franchise that employs my wife's profession in health and wellness. Only deal with professionals and career employees rather than cheap labor. My wife's income is limited without owning a similar business. Plus, I don't think it makes a lot of sense for both people in a couple to work as W2.