Business/Franchise Ownership??

[JR Ewing]

Serious shit YAYa, a friend showed me some tape he took at his Amway convention fuuudge..what a bunch a wackos. reminded me of a Jim Jones re-union. Seriously nutty people out there

MLM people approach me constantly - Primerica "Financial Services" especially. I still cannot wrap my head around the idea of a financial advisor / insurance producer / mortgage broker type of org being "multilevel". Most people don't have the actual desire nor the personality traits to be successful in such fields, and most people with money to invest are either making tons of it already by working 60-80 hours a week or more as a surgeon, attorney, CPA, oilman, or whatever. Or else they inherited the money and won't have the burning desire to network and cold call 60 hours or more a week for several years to build a client base (and especially recruit more producers under them) anyway.

I can usually spot the MLM types a mile away - they're almost like panhandlers. I can understand they need to be aggressive to make money, but their business models are flawed and usually repel anyone who isn't desperate. And desperate people themselves tend to repel others. Tough way to make a buck.

 

[woodswise]

When doing your business plan, don't forget your balance sheet doesn't include the principal you owe on any loans. So while you may be making money on paper, you still have to pay the principal on the loans out of the "profits".

Also, the first few years, you won't get a good picture of the business. It is after 5 or 7 years that you will start to understand it. So in those early years while business is good, don't get over optimistic and spend more than you can afford.

Also, most new businesses fail for lack of sufficient cash reserves. Play tight with your money and be sure you have a cash reserves to get through a year or two of zero or negative cash flow. Until you have those reserves built up, a second source of income will be key to getting through the hard times.

 

[graniteman]

MLM people approach me constantly - Primerica "Financial Services" especially. I still cannot wrap my head around the idea of a financial advisor / insurance producer / mortgage broker type of org being "multilevel". Most people don't have the actual desire nor the personality traits to be successful in such fields, and most people with money to invest are either making tons of it already by working 60-80 hours a week or more as a surgeon, attorney, CPA, oilman, or whatever. Or else they inherited the money and won't have the burning desire to network and cold call 60 hours or more a week for several years to build a client base (and especially recruit more producers under them) anyway.

I can usually spot the MLM types a mile away - they're almost like panhandlers. I can understand they need to be aggressive to make money, but their business models are flawed and usually repel anyone who isn't desperate. And desperate people themselves tend to repel others. Tough way to make a buck.

I've had so many friends and FAMILY get into these and who's the 1st set of lucky potentila customers...Family n friends. You're right , they usually end up alienating everyone they come in contact with.

When doing your business plan, don't forget your balance sheet doesn't include the principal you owe on any loans. So while you may be making money on paper, you still have to pay the principal on the loans out of the "profits".

Also, the first few years, you won't get a good picture of the business. It is after 5 or 7 years that you will start to understand it. So in those early years while business is good, don't get over optimistic and spend more than you can afford.

Also, most new businesses fail for lack of sufficient cash reserves. Play tight with your money and be sure you have a cash reserves to get through a year or two of zero or negative cash flow. Until you have those reserves built up, a second source of income will be key to getting through the hard times.

Truth Woody, I would reccomend staying out of debt as much as possible Rider. Save as much as you can, find potential partners you are 100% totally comfortable and familiar with. Business debt is usually the killer of small start ups

 

[Rider]

Guys, I really appreciate the input.

Graniteman and Joliver, you nailed it about Royalty fees. When conducting my reseach, I noticed so many franchises take an enormous amount from the top line.
So guys, what are some good franchises to look at? I looked at food, but the startup costs are tremendous. I'm leaning toward something like Supplements stores or maybe logistics like UPS store? Thoughts?? Suggestions?

 

[Stumpy]

I bought into a franchise a few years ago, shortly afterwards I realized I could have done it myself much cheaper. Why not look at the franchises/business you like then just research it and set up your own.

 

[woodswise]

I bought into a franchise a few years ago, shortly afterwards I realized I could have done it myself much cheaper. Why not look at the franchises/business you like then just research it and set up your own.

It's a real conundrum whether to go with a franchise and have the advantage of all the brand advertizing (yes advertizing does work, especially on that level) or to do something yourself. I think whether a franchise would be more profitable than a mom and pop business would depend on the business and location. Is the business something that can attract customers without all that deep pocket advertizing, can you develop a local following, is there sufficient commerce where you are setting up, how good is your location for attracting your key customers, and how much competition is there from other franchises?

We owned a lunch restaurant in a busy New England town. At first it was the only nice lunch place in town and did very well, then others opened similar stores, and the franchises moved in. Even though our place was constantly in the New York Times, Boston Globe, USA Today, the Food Network, Yankee Magazine, and many others, it was off the beaten path, and faced all this other competition that (though the food was not nearly as good) had advantages of either being a chain restaurant or having a better, more visible location. When the downturn came we lasted 3 years with a negative cash flow, then had to sell at the bottom of the market, losing considerable money in the process.

The biggest mistakes: 1. our location and space was not ideal; 2. we did not cater to the locals (no burgers and fries or beer, no bar or television); 3. we did not serve dinner; 4. we did not get out when the restaurant was doing well, and waited until it was doing poorly; 5. we did not have deep enough pockets to get through the hard times (if we had had an extra $50,000 on hand when the downturn started, we would have been okay).

 

[graniteman]

Guys, I really appreciate the input.

Graniteman and Joliver, you nailed it about Royalty fees. When conducting my reseach, I noticed so many franchises take an enormous amount from the top line.
So guys, what are some good franchises to look at? I looked at food, but the startup costs are tremendous. I'm leaning toward something like Supplements stores or maybe logistics like UPS store? Thoughts?? Suggestions?

Depends on your experience adn what you like to do. If this is a later life adventure make sure it's something you like. Or if it's a strict moneymaking endeavor make it something people need and us elots of. I really kick myself in the ass for not jumping on a Maaco franchise a few years back but ot menat uprooting the family to Arizona. A growing and very lucrative segment is nursing homes. One of you should be licensed, makes it easier dependeing where you live.
This lists the top 500 http://www.entrepreneur.com/franchise500/index.html

 

[Rider]

Depends on your experience adn what you like to do. If this is a later life adventure make sure it's something you like. Or if it's a strict moneymaking endeavor make it something people need and us elots of. I really kick myself in the ass for not jumping on a Maaco franchise a few years back but ot menat uprooting the family to Arizona. A growing and very lucrative segment is nursing homes. One of you should be licensed, makes it easier dependeing where you live.
This lists the top 500 http://www.entrepreneur.com/franchise500/index.html

Hey Graniteman, thanks a lot of that link. Just noticed your post now. I'd like to get into the nursing home segment, but I think the startup costs and financing is very high.

 

[Joliver]

Guys, I really appreciate the input.

Graniteman and Joliver, you nailed it about Royalty fees. When conducting my reseach, I noticed so many franchises take an enormous amount from the top line.
So guys, what are some good franchises to look at? I looked at food, but the startup costs are tremendous. I'm leaning toward something like Supplements stores or maybe logistics like UPS store? Thoughts?? Suggestions?

I tend to look at a brand where each franchisee owns multiple locations. That tells me something about the business--business is good. This excludes some franchises that want you to make a commitment to multiple locations and cross branding---which is why I balked.

You dont want to pigeon hole yourself into a small niche when you first begin. The best advice I can give you is to open a sandwich shop like subway or Jimmy John's. The cost is significantly less than you would find with larger fast food service chains.

The only problem with a sandwich type place is that your location dictates your fate. Fast food has historically never been a destination store. You dont leave home drive 20 minutes for a big mac. You commute in the area--you practically contract the virus of fast food. I love fast food...sorry. Cant help myself.
Your location also dictates your funding. Decent b-plan and great location, with a dash of experience, and the bank will fund the hell out of a sandwich shop. You could be the kung fu master of cold cuts and never get a line of credit for a shop in Iraq.

I would stick a few feelers out there. These companies want to expand. That cant do it without a host. They will be very helpful. If they aren't....then that is kind of an answer in itself. You dont want to have a major issue and not have support.

 

[Rider]

I tend to look at a brand where each franchisee owns multiple locations. That tells me something about the business--business is good. This excludes some franchises that want you to make a commitment to multiple locations and cross branding---which is why I balked.

You dont want to pigeon hole yourself into a small niche when you first begin. The best advice I can give you is to open a sandwich shop like subway or Jimmy John's. The cost is significantly less than you would find with larger fast food service chains.

The only problem with a sandwich type place is that your location dictates your fate. Fast food has historically never been a destination store. You dont leave home drive 20 minutes for a big mac. You commute in the area--you practically contract the virus of fast food. I love fast food...sorry. Cant help myself.
Your location also dictates your funding. Decent b-plan and great location, with a dash of experience, and the bank will fund the hell out of a sandwich shop. You could be the kung fu master of cold cuts and never get a line of credit for a shop in Iraq.

I would stick a few feelers out there. These companies want to expand. That cant do it without a host. They will be very helpful. If they aren't....then that is kind of an answer in itself. You dont want to have a major issue and not have support.

Great post! Thanks Joliver, I was thinking of a sandwich shop.

 

[FLBB89]

I own 2 franchised businesses as well as the licenses to open up 2 more. i am an absentee owner but a majority investor. feel free to pm me with questions.

 

[Rider]

I own 2 franchised businesses as well as the licenses to open up 2 more. i am an absentee owner but a majority investor. feel free to pm me with questions.

PM incoming FLBB89, I was hoping you'd see this thread brother.