I started my business almost 3 years ago. Its a franchise. I have had no help from them at all. After 6 months of opening, I was in trouble already. Thats when the credit card debt started to pile up. I then had to sell my house to pay off my SBA and home equity loan. I'm on the verge of filing for bankruptcy. Does anyone have any suggestions?
#2. "RE: in debt up to my eye balls!" In response to Reply # 0
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 prosper.com 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
#3. "RE: in debt up to my eye balls!" In response to Reply # 2
Thanks for your input! My franchise kinda did the same thing a few months ago. They were going to buy it from me, dirt cheap I might add, but I wouldnt get any of the money until they sold it. But then they turned around and said since you only have 4 years with a 5 year option after that it wouldnt be sellable. So they didnt help me there. And they had the nerve to say if I sold it to someone else who wanted to make it a different type of store I would have to pay $30k. They havent brought 1 prospective buyer in for me. They said they would "try". And they want me to talk good about the franchise to other prospective buyers for other locations, I dont think so! They have screwed me from day 1. They gave me "projected" numbers for my SBA loan that were so far off.. If I had anything close to reality I'm POSITIVE I would have never been approved for the loan. Your right, the only person that wins in a franchise is the franchisor!
#4. "RE: in debt up to my eye balls!" In response to Reply # 2
I agree that Franchises usually run into this issue. I used to work with a company when they had the cost bumped up, so that they could potentially buy back the franchise. You may want to start looking for partners for your business to compensate for the cost. But, you are going to need to incorporate? You need to start thinking about what you need to survive this problem.
#5. "RE: in debt up to my eye balls!" In response to Reply # 0
Hi, I am sorry to hear that you are in this what must feel like an impossible situation and it is possible that the bankruptcy option may end up being your only choice.
However i would urge you to get some profesional advice from an independant financial advisor and i don't know what other advice place's you have there but the thing is to get as much advice as possible, always keep in contact with the people you owe money to and keep records of all contact made.
Is it possible to offer them a payment plan/extend the terms of your loan,or ask them if they will give you a payment holiday for a month or so while you re-structure the business.
It may sound obvious but what can be done to get more busines in through the door, can you get family or friends to help you with some kind of promotion.
Is it possible to bolt together some kind of discount deal for a short time that your customers can't refuse?
Get on the phone and try and build some links with local government agents or other business's in your area or even out of your area,anything really but just keep talking to people as many as you can!!
I wish i could give you a secret code that would sort it all out for you, i know how hard it can be , but you were brave enough to start this business and if you are a true entrepreneur which i hope you are,you wil get things back on track or you will pull the plug and start again!!
All the very best of luck to my friend , however hard it is now it will all work out in the end.
#6. "RE: in debt up to my eye balls!" In response to Reply # 0
My name is Lora and I am with a major funding company. If your business generates monthly credit card revenue we can help you. We do not use your personal or business credit score. Hopefully you haven't filed bankruptcy yet.
The dollar amount we are able and willing to fund you is based on that monthly dollar amount.
Basically giving you money against future credit card earnings of your business. We help people save, improve, and achieve there goals for a better business.
Before anyone starts posting about scams, true they are out there. We are just offering you an obtion. If your interested and need more information you can contact me. Send me your name and number and a good time to reach you.
Looking forward to serving your future financial needs.
#7. "RE: in debt up to my eye balls!" In response to Reply # 0
Sorry if this is too late, I haven't been on in awhile.
Given that most franchisees realize that to make serious money it takes multiple units, have you tried selling your unit to another franchisee nearby? It should save them the franchise fee over again and their taking over a business that is up and running rather than an empty building.
Ironically enough, I was talking with a franchise owner the other day and they said that their franchisor requires them to purchase three franchises and felt this was unfair. I pointed out to him that their experience has probably told them that people who purchase a single franchise finally figure out that they work too hard for in many cases what's less than they were making at their previous jobs, and by starting people off with more than one they'll make enough to keep them interested. Not a bad idea really...it eliminates a lot of franchisee turnover. Hope this helps Denny