Advice: Any Franchisees or Small Business Owners

[GettinIggyWithIt]

Alright I am going to put myself out there on this one and ask for some free and friendly advice

I am wondering if there are any small business owners or franchise owners who would be willing to share their advice for a newbie looking to invest in a franchise. A friend and I have some capital that we are looking to put to some use by investing in a profitable franchise. Something that doesn't take too long to have positive cash flow and will return a decent ROI after 5-6 years if successful. We are trying to stay away from restaurants although we are open to fast food businesses and leaning towards things like retail stores (ex. pet stores). We've also been looking at potentially buying an existing business that has growth potential. Thing is - we do like the idea of having a franchise model where the supply chain, technology and business processes are already set up for us to use.

Any tips on getting the best deals for start up loans, what I should be looking for in terms of a pay back period and ROI? Advice on what to watch out for and what to avoid as I interview different franchises? Any other advice you might suggest to someone stepping into the world of business ownership?

Thanks for any tips you might have and feel free to ask me any questions!

[5abi]

I've gone through this, and sorry to say there is no silver bullet. you can PM me.

[Locke]

I can give a little bit of information as a few clients who are Franchisees.

I guess my first question would be, are you married to this idea? There other ways to grow excess capital.

[bizaro86]

I own a small business, and my biggest piece of advice is to clearly define your goals. What are you hoping to accomplish? Think about that both financially and in terms of lifestyle, and have a serious discussion about that with your potential partner.

If all your employees call in sick on Boxing Day who goes in to open? If you have a flood/tarriff issue/lawsuit etc who puts in the extra money? What happens if one partner can't come up with their share? What happens if one partner dies/gets divorced/wants to sell?

I dislike other people telling me what to do enough that I don't have any franchise experience, but even with a franchise there will be problems that you'll have to solve. If you're planning to have a partner it's a really good idea to have as many eventualities as you can think of discussed in advamce (and the outcome written down!).

[Slava]

Originally Posted by bizaro86

I own a small business, and my biggest piece of advice is to clearly define your goals. What are you hoping to accomplish? Think about that both financially and in terms of lifestyle, and have a serious discussion about that with your potential partner.

If all your employees call in sick on Boxing Day who goes in to open? If you have a flood/tarriff issue/lawsuit etc who puts in the extra money? What happens if one partner can't come up with their share? What happens if one partner dies/gets divorced/wants to sell?

I dislike other people telling me what to do enough that I don't have any franchise experience, but even with a franchise there will be problems that you'll have to solve. If you're planning to have a partner it's a really good idea to have as many eventualities as you can think of discussed in advamce (and the outcome written down!).

There's a fantastic book called the Partnership Charter (https://a.co/d/8TyMewd), and I highly recommend it. While creating a charter is a lot of work and effort, it's entirely worthwhile. It's not altogether different from a Unanimous Shareholders Agreement, but there are some points of departure.

The main thing is to iron out many of the potential issues while everyone likes each other, though, and not try to discuss these things when something has happened and things are acrimonious!

[fotze2]

Originally Posted by Slava

There's a fantastic book called the Partnership Charter (https://a.co/d/8TyMewd), and I highly recommend it. While creating a charter is a lot of work and effort, it's entirely worthwhile. It's not altogether different from a Unanimous Shareholders Agreement, but there are some points of departure.

The main thing is to iron out many of the potential issues while everyone likes each other, though, and not try to discuss these things when something has happened and things are acrimonious!

Bought a house with 2 other guys when we got out of university for the purpose of renovating and flipping. They were best friends prior and now hate the hell out of each other 20+ years later. I spent 4 years placating them and trying to make them hate each other less and not get into fist fights. It was like two abusive parents fighting. Definitely took years off my life/liver.

My old intern bought a Marble Slab franchise in one of those ######ed south communities and he flipped it after a year. I think he did really well with it.

[GettinIggyWithIt]

Originally Posted by Locke

I can give a little bit of information as a few clients who are Franchisees.

I guess my first question would be, are you married to this idea? There other ways to grow excess capital.

Thanks Locke, appreciate the response. I guess I am not married to any idea. What I like about the opportunity is the idea to transition out of my 9 to 5 and working for somebody else to being able to work on something that has higher potential benefit and incentivization for me. I am diversified a bit with some investments in real estate and and the stock market. I am definitely open to other ways.

[GettinIggyWithIt]

Originally Posted by Slava

There's a fantastic book called the Partnership Charter (https://a.co/d/8TyMewd), and I highly recommend it. While creating a charter is a lot of work and effort, it's entirely worthwhile. It's not altogether different from a Unanimous Shareholders Agreement, but there are some points of departure.

The main thing is to iron out many of the potential issues while everyone likes each other, though, and not try to discuss these things when something has happened and things are acrimonious!

Thanks Slava appreciate this! I'll check that out and noted on the advice!

[GettinIggyWithIt]

Originally Posted by 5abi

I've gone through this, and sorry to say there is no silver bullet. you can PM me.

Will do. Thanks!

[Locke]

Originally Posted by GettinIggyWithIt

Thanks Locke, appreciate the response. I guess I am not married to any idea. What I like about the opportunity is the idea to transition out of my 9 to 5 and working for somebody else to being able to work on something that has higher potential benefit and incentivization for me. I am diversified a bit with some investments in real estate and and the stock market. I am definitely open to other ways.

As long as you've got an open mind, because man, if the goal is some passive income to escape the 9-5 grind...? I dont think a Franchise Restaurant is the answer to that.

They always tell you in Business School..."have your own business! Be your own Boss! Work your own hours!"

What they neglect to mention is that by having your own Business you are also your own most reliable employee and 'your own hours?' Its all of them. It is all of the hours.

You get home from a day well worked, pour a glass of wine and....phone rings. Emergency.

or

Employees didn't show up. Emergency.

Or even something as simple as the next day's tasks and responsibilities swirling around your mind as you try and go to sleep but ye ol' treacherous brain refuses to STFU and leave you in peace.

I dont mean to discourage you, not at all. I've had my own business for about 13 years now, I'd never go back to a regular job, but I wont lie and say it was easy either, but I also did it by myself and didn't have a partner.

I had a partner once. Never again.

Partners....make things tricky.

If you have questions, I'll happily answer as best I can.

[Bend it like Bourgeois]

4-5 years ago I was in a similar spot. I looked for about 2 years and at first avoided franchises, but in the end the business that checked the most of my criteria happened to be one. Now I own 2. That's not to say it's perfect, just that the tradeoffs work for me. I decided if I was going to go the franchise route I'd better be prepared to follow the playbook, otherwise it's just a lot of cost, so tried to honestly answer if I thought I could drink enough koolaid for that particular brand or product.

If you're looking new, find out how many they are selling, how they're managing growth etc. They'll be excited to tell you their expansion plans, but if the same staff who rocked 10 openings last year now need to support 50, how much attention will you get? How many of the openings are corporate v franchised? Pluses and minuses to both but who will get their time and attention, and if there are no corporate locations are they building a brand or just churning out new location sales?

If existing, one thing I learned to be wary of is inventory. Small owners have crappy books. $100 of stuff on the books but sitting in the corner might be worth zero to you. the crappy books are an issue for financing too. You can almost count on it. Another thing you can count on is extra costs over the purchase price. There will be a transfer fee, improvements to get the place up to brand standards, onboarding costs etc that could easily be 30%.

Look closely at the US factor. If you need to buy a bunch of things out of the US exchange can sting and be material to what you make. At some point they'll let you talk to existing owners and it's great to learn how they got into it, what other options did they look at etc. Make sure there's a Canadian one.

I'm probably no more help than Google, but feel free to pm me.