It seems so easy, right? You invest some sum of money, depending on the size of the franchise, open up shop and the customers just start flowing in. If life were that easy everyone would do it, right? I think a franchise can be a decent opportunity for the right person, in the right situation. Franchises appear to offer a sense of stability and this can be reassuring, especially if you are considering leaving a comfy corporate job, but buyer beware!
Out of pure interest and curiosity, I called on a few franchises recently to get a feel for their requirements and what I could expect. I won't mention any names, other than that I called a sub shop and an ice cream shop. I know they are both in the food industry, but I was looking for start-ups that didn't require an exorbitant amount of start-up capital and were relatively new entrants to the market I stayed away from the popular names such as Dunkin Donuts, Tropical Smoothie, Einstein Bagels, etc... because they were quite expensive to get in to and didn't seem practical for the purposes of my query.
What I came to find out is that even the newest franchises require a lot of fees and money up front with not that great ROI. The sub shop I called on informed me that I was lucky because they had a corporate franchise for sale in my area. The shop had been open for a few years now and they would be able to send me a P&L statement through 2011 YE. The asking price was $175,000 and the EBITA was only $20,000. With limited growth potential, didn't seem like the best opportunity.
As entrepreneurs it is worth the risk and the time to create your own venture. If you are choosing to go out on your own then it is because you want to work for yourself. Embrace this and pursue your passion. Don't forget about the WHY!
Good post and thanks for sharing. Is there any venture out there that has an exceptionally attractive franchise model?
ReplyDeleteI guess my question is that despite ROI, many franchise places do seem to be profiting quite well, right?! But I completely agree, for an entrepreneur, and if one is committed to taking the risk, pursuing an own venture is preferred.
You are absolutely correct. Obviously people are making money, but my interest was more for someone that didn't have much startup. Don't get me wrong, you put up a McDonald's or subway, you are going to make money but you need $$ to start.
ReplyDeleteYes its very interesting.... I had actually looked at a few franchise opportunities a couple of years ago myself, but was running into the same thing.... The fees and rules that you must follow and abide by are killer. Most want you to have a sizeable amount down and then a certain level of assets to even be considered for a franchise. Then when you look at the earnings potential for some of the smaller franchises, didnt seem like it was quite worth taking the jump for me at that point anyways. I would definately like to branch out and do my own thing, but when the time and opportunity is right.
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