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Forum nameFinancial Feast
Topic subjectRE: in debt up to my eye balls!
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321, RE: in debt up to my eye balls!
Posted by Phanntom, Wed Jul-11-07 07:20 PM
These are the type of messages I hate to see for a couple reasons. First it always bothers me to see these messages at the point the person is desparate because it's usually too late for us to be of much help. The second reason is that I hate to see people and their money sucked into franchises with higher than deserved expectations.

It doesn't surprise me to hear the franchisor isn't willing to help. I see a lot of people that struggle with franchises and when I get to talk with them the story is always similar. They thought that just because it is a franchise it's like a guarrantee of success.

I have a friend that was sold on the idea of opening a Quizno's by her son in law. While I tried to caution her about how one sided franchise agreements are she let it go in one ear and out the other.
The store itself became very successful but her son in law had tired of it when he finally figured out you were only going to make one descent living out of it and that it was more work than he wanted to be doing. She hadn't taken a check the entire 2 yrs they owned it and hated working in it so they decided they'd sell it. They notified Quizno's as any new owner had to be approved by them. Not a problem they figured. Every buyer they came up with, Quizno's nixed for really no good reason. Ironically, two of the buyers came back and told her that Quizno's had contacted them and told them they had a better location for them and would approve them. Now had that been me, I would have sued the hell out of them. Quizno's reasoning was that they wouldn't get that $44k franchise fee if she sold them hers. In the end she figured she was holding a pretty good hand. It was a store in a great location, doing more than the projected volumes. She had called them at the corporate offices for 2 weeks and couldn't even get a call back. Finally, she waited until thursday afternoon and called them and just left a message saying they didn't need to call her back, the sign company was coming friday to remove the signage and it wouldn't be opening after that.

Within, 15 minutes they had called her back and asked her to cancel the sign removal and that they would have a buyer there over the weekend or they would purchase it on Monday. The last thing a franchiser wants the public to see is a closed store. It used to be said that there had never been a McDonalds close. That was because if one wasn't making it, the corporation would step in and take it over.

It frost me because within my own industry I see several companies selling franchises and given how competitive and saturated my industry is I know that 9 out of 10 of these are going to fail. I've had people considering buying these franchises contact me for input. I've been in the business 19 yrs. and started the company with only several thousand dollars but I wouldn't try it today without one million. I've seen several companies startup with that much and experience in the industry and still fail.

People expect too much from franchises based on inexperience and franchisors oversell expectations and it becomes a plan for personal disaster. I do believe however there are some companies that are more realistic in their business models. I see various commercials on tv for many food places that we don't have here in California. It finally dawned on me one day that I suspect that they have decided that because of the excessive real estate prices coupled with the high cost of doing business here that their business model won't work here and offering franchises here would be too risky.

People looking at franchises should remember that the franchisor is making money even if the franchisee isn't. They get their cut from the gross receipts not the net profit.

Your story also illustrates why I discourage people from putting up their homes to fund a business venture. Most startups fail by overwhelming numbers. If you're reasonably good at playing blackjack and have the discipline to play by the book you'd actually be better off taking the money out of your house and sitting down at a blackjack table. Playing by the book the house only has about a two tenths of one percent advantage over you which is far better than doing a business startup.

For a short term bailout you might look into the website. It's made up of private lenders and borrowers that can work in the short-term. I think the max you can borrow is $25k and I think the longest term allowed is 3yrs. I'm not selling it and have no association with it except that I am one of their thousand lenders.

I hope this ends up working out for you and even if it doesn't....don't let the experience knock you down. Nearly all successful entrepreneurs have failed at least once and some many more times before they finally succeeded.

Find another good idea and if there are franchises offered study how the franchise operation does things and then use their business model tweeking it to fit your needs.
Good luck