Need advise on franchise profit share

[KimT]

Hello

I am in talk with a company ( owned by a family member ) to collaborate and open a new restaurant in london.

In the initial talks, we informally said that we find a place and invest equal amount, and they help us for 3 months to run the restaurant and leave the business in my hands to run. And we equally distribute the profit.

That was fine with me and we found a place and all the paperwork is almost complete.

Now they told me as a company they want to see the new place a franchise. They wont make any cash investment. Their invest will be that they will help me to set up everything related to the restaurant. They do everything and i do not need to know anything. And they want 51% share and 49% to me.
I negotiated and try to cut down their share amount after a certain point, like after 2 years reduce it to 25%.
But they want the share to stay 51% life long.

I know after 3 months their physical involvement in the business will be less.

Should i agree to their proposal. !

Any danger attached to it ?

 

[Mark T Jones]

The key danger is that you are setting out with a deal you aren't happy with. That situation will only get worse

They are offering consultancy - pay a consultancy fee or walk away

 

[cjd]

Forget it. Try again. If you're not happy with the structure at the start it will only get worse.

 

[WaveJumper]

Walk away

 

[KimT]

what would be an acceptable deal ?

I understand u dont know the full story.

Based on the info i gave anyone got any recommendations

 

[Mark T Jones]

what would be an acceptable deal ?

I understand u dont know the full story.

Based on the info i gave anyone got any recommendations

Yes. Pay a consultancy fee - that's the value they are adding

 

[cjd]

what would be an acceptable deal ?

I understand u dont know the full story.

Based on the info i gave anyone got any recommendations

Only you can say that. But given that you want this to eventually be your business to run not theirs, you need to be in control of it. 51% to them tells you everything you need to know about who they think will be in control of the business. Ideally you'd eventually want to own 75% of it and 100% if you can.

People often make big mistakes at the beginning of a business in setting up its structure. They think it's something that they can deal with and they're keen to get going. But once done it's almost impossible to undue and routinely results in disputes that can destroy a business. You have to be really tough right at the start. Understand what value each of you are adding - if it's not right, walk away.

 

[BGS]

From the info provided, Run away. You're taking on all the risk and the work load, and they take maj profit!!
Unless of course there's more to the story.

 

[KimT]

Thank you for the valuable advice