What are the criteria for choosing a franchise business?

[Itct Education]

franchisors are seeking individuals with the ability to soak up their knowledge and systems, and develop a successful business through a mixture of hard work and the proper implementation of their business concept.

 

[Mr D]

The criteria?

Make lots of money.

Not so sure on your reply, surely the business has already developed to be a success hence the franchise. Or what is the point of buying a franchise?

 

[mattk]

A lot of franchises seem to be money for old rope. Unless you are buying into a recognised brand (McDonalds, Subway, Dominos etc.) I genuinely question what benefits the franchise brings compared to starting up yourself.

I think many people feel they are guaranteed success if they purchase a franchise, no doubt driven by the sales patter of the franchisor, however the number of horror stories I have heard about franchises shows this is rarely the case.

 

[Mr D]

A lot of franchises seem to be money for old rope. Unless you are buying into a recognised brand (McDonalds, Subway, Dominos etc.) I genuinely question what benefits the franchise brings compared to starting up yourself.

I think many people feel they are guaranteed success if they purchase a franchise, no doubt driven by the sales patter of the franchisor, however the number of horror stories I have heard about franchises shows this is rarely the case.

From the few I have seen and liked over the years they have proven track records and name recognition.
With systems such that anyone can learn to run it and processes are fairly efficient for the size.

A number of people do seem to believe that any old business can be franchised out without a lot of work.... except sales.

 

[wevet]

I have seen franchises from both side: franchisee and now franchisor.

As franchisee I was tied into one supplier who exploited franchisees by hugely overpriced supplies. A minimum monthly commission irrespective of volume of sales. This was tied to an annual percentage increase. The sales were 98% franchisee generated with the franchisor chipping in a tiny percentage of national contracts (contrary to the promise of it being the other way round).

When I became a franchisor I attended a franchise co-hosted by Ntwast and one of the large franchise brokers. I left that meeting feeling I needed a wash!

The bulk of the meeting was constructing franchise agreements which allowed the franchisor to re-possess part of an allocated territory. None of it was about, what it should have been, about partnership and mutual benefits of the relationship. It was about franchisors squeezing franchisees and churning franchise areas (sack franchisees and resell the areas) to generate revenue.

In fact the whole thrust was not about growing the core businesses on which the franchises were founded but to sell, resell and generally screw franchisees.

It must be said that most of the franchisors present were obscure companies that no one has ever heard of or "me toos" knock offs of other franchise systems.

I take the view of a franchise that it is very much a partnership. Indeed my system has no minimum monthly franchise fee purely commission on sales of the franchise. (98% of the sales are generated centrally).

The initial franchise fees are where, for many franchisors, the money is. I worked out an initial franchise fee at £3,500 wich as far as I am concerned covers the initial set up and subsidizing marketing for the new franchise areas. How, can businesses with no profile justify % figure initial franchise fees.

many franchises on the market have been in existence for years and trends in technology and retail have made them obsolete. When looking at a high street franchise consider is this an idea past its best. Perhaps one of the starkest examples was the Easyinternet cafes: people bought into this at a time when smart phones were making them fairly pointless but most importantly the barriers to entry were negligible the initial initial franchise fee was huge and most franchisees disappeared. A few in tourist traps with massive footfall such as Time Square NY survive.

Why go to a franchise shop specializing in inkjet cartridges when there is a thing called Amazon or pop into Tesco and buy even cheaper?

When advertising, I state the truth, which obviously puts some people off: this franchise will not make you rich. To make real money, my franchise operation is structured to be part of a portfolio on income streams.

Unfortunately many franchise systems require the franchisee to work every minute of the day and the outcome is often no more than an average to middling income. In effect you could be simply buying yourself a job but with no job security and all the risks of running a business but with the equivalant of an employee's income.

Questions to put to a franchisor:

Who are you and what is your track record?
How do you justify the initial franchise fee?
Is there a minimum amount I have to pay to you irrespective of sales?
Do you have your own inhouse operation? If not, why not and if you do is it going to be a competitor of mine trading on better terms than I can give?
can I speak to existing franchisees at random, not from a shortlist you provide?

 

[Forgot password]

I just hypnotised myself reading your post wevet- to many f’ing f’s.. just re composing myself now.

Thing is I think I just bought one of your franchises!! How did that happen

 

[Stedurham]

Whats your franchise wevet, nice to hear an honest description of one for a change

 

[Mark T Jones]

I have seen franchises from both side: franchisee and now franchisor.

As franchisee I was tied into one supplier who exploited franchisees by hugely overpriced supplies. A minimum monthly commission irrespective of volume of sales. This was tied to an annual percentage increase. The sales were 98% franchisee generated with the franchisor chipping in a tiny percentage of national contracts (contrary to the promise of it being the other way round).

When I became a franchisor I attended a franchise co-hosted by Ntwast and one of the large franchise brokers. I left that meeting feeling I needed a wash!

The bulk of the meeting was constructing franchise agreements which allowed the franchisor to re-possess part of an allocated territory. None of it was about, what it should have been, about partnership and mutual benefits of the relationship. It was about franchisors squeezing franchisees and churning franchise areas (sack franchisees and resell the areas) to generate revenue.

In fact the whole thrust was not about growing the core businesses on which the franchises were founded but to sell, resell and generally screw franchisees.

It must be said that most of the franchisors present were obscure companies that no one has ever heard of or "me toos" knock offs of other franchise systems.

I take the view of a franchise that it is very much a partnership. Indeed my system has no minimum monthly franchise fee purely commission on sales of the franchise. (98% of the sales are generated centrally).

The initial franchise fees are where, for many franchisors, the money is. I worked out an initial franchise fee at £3,500 wich as far as I am concerned covers the initial set up and subsidizing marketing for the new franchise areas. How, can businesses with no profile justify % figure initial franchise fees.

many franchises on the market have been in existence for years and trends in technology and retail have made them obsolete. When looking at a high street franchise consider is this an idea past its best. Perhaps one of the starkest examples was the Easyinternet cafes: people bought into this at a time when smart phones were making them fairly pointless but most importantly the barriers to entry were negligible the initial initial franchise fee was huge and most franchisees disappeared. A few in tourist traps with massive footfall such as Time Square NY survive.

Why go to a franchise shop specializing in inkjet cartridges when there is a thing called Amazon or pop into Tesco and buy even cheaper?

When advertising, I state the truth, which obviously puts some people off: this franchise will not make you rich. To make real money, my franchise operation is structured to be part of a portfolio on income streams.

Unfortunately many franchise systems require the franchisee to work every minute of the day and the outcome is often no more than an average to middling income. In effect you could be simply buying yourself a job but with no job security and all the risks of running a business but with the equivalant of an employee's income.

Questions to put to a franchisor:

Who are you and what is your track record?
How do you justify the initial franchise fee?
Is there a minimum amount I have to pay to you irrespective of sales?
Do you have your own inhouse operation? If not, why not and if you do is it going to be a competitor of mine trading on better terms than I can give?
can I speak to existing franchisees at random, not from a shortlist you provide?

This should be a sticky!

 

[Ray272]

I thought subway had dropped off big time.

 

[Mr D]

I thought subway had dropped off big time.

They appear to have opened in / alongside some petrol stations in past couple of years.

 

[Stedurham]

There’s a subway in a high street near me up for sale for 20k, bet the shop fit cost 80k so shows how well that ones doing, subway have own company that sign leases then charge franchisee about another 25% sure that part made 150 mil last year ish

 

[Stedurham]

Some One i know had one in his garage, does ok he said bearing in mind was just really empty space nothing special though

 

[Mr D]

There’s a subway in a high street near me up for sale for 20k, bet the shop fit cost 80k so shows how well that ones doing, subway have own company that sign leases then charge franchisee about another 25% sure that part made 150 mil last year ish

Not like Mcdonalds then who are in the real estate business?

 

[Stedurham]

No one ive looked at they just lease don't purchase property although im sure they will own some of their better sites, Mcdonalds are mostly built for mcdonalds, cant really be used for much else, subways are just normal shops nothing special. Id love a mcdonalds though in right area they will make you rich, subway however from looking at local ones to me might make you skint

 

[Mr D]

No one ive looked at they just lease don't purchase property although im sure they will own some of their better sites, Mcdonalds are mostly built for mcdonalds, cant really be used for much else, subways are just normal shops nothing special. Id love a mcdonalds though in right area they will make you rich, subway however from looking at local ones to me might make you skint

LOL - Mcdonalds own quite a few high footfall sites. You think they may be worth something to other businesses? Say a busy site on a retail park or a two storey large facility in a city centre?
The local Mcdonalds I use when in nearby town used to be Boots years ago. The KFC next door to it used to have New Look in there.
Many places would be suitable for other fast food businesses, town centre ones may well suit a shop. Business owners do a build out to match what they want the premises to be.

Any business in the right area can make you money. In the wrong area you lose out and shut down - I have used McDonalds places that within a few years were gone - perhaps simply not profitable in the end or maybe as times change it didn't do enough trade for the hours.

 

[Stedurham]

Most of the new mcdonalds that they own, though are on retail site and are a custom build not in a high street, know of someone that has 6, that are all on retail parks owned and build by mcdonalds.

 

[Mr D]

Most of the new mcdonalds that they own, though are on retail site and are a custom build not in a high street, know of someone that has 6, that are all on retail parks owned and build by mcdonalds.

New Mcdonalds?
Would have thought the new McDonalds on the retail site was 20 years ago. The move currently appears away from retail sites to where the people go. You may have noticed some retail sites looking a little empty with big retailers pulling out or shutting shops.

As in any business requiring footfall, location matters.

 

[Borim]

I think it's like sort of being "affiliate of some program" but online. So you should value all that risks of conversion like a good place, people with money here, their interest in your product itself, time of the year and other things like that. Owner of franchise would provide all that, or at least should