Franchising-Is it the go?

[miket]

Has anyone invested in a franchise and can elaborate if it's been good for you?

Are you making good money for that investement? How does it stack up against good property capital gains?

I'd be interested to hear about it because I'm considering going into a franchise business.

Thanks,

MikeT

 

[agent 86]

Miket,

Acey also recently posted along a similiar vein.Maybe PM him.

all the best,
A86

 

[geoffw]

Acey in that thread http://www.somersoft.com/forums/showthread.php?t=15693&highlight=franchise didn't want links.

But there is one link to the most famous franchisor which I found interesting- from a franchisee who did not get a good deal- http://www.licenseenews.com/

 

[Aceyducey]

Miket,

I haven't invested but are looking into it. Happy to compare notes

Cheers,

Aceyducey

 

[Ian (WA)]

G'day Mike & All,

Just cruising the forum and came across your post; thought I would reply here for all to see (will email you privately later).

Mate of mine in Adelaide bought into a franchise; one of these pattern-pave type of groups, not sure which one.

I understand it cost him close to $50K in the end, anyway he worked his butt off to pay it off in 18 months only to have the Franchisor go belly up leaving all the franchisees to carry his debts. They all lost their capital equipment and all had to pay out any outstanding acquisition costs.....one of the poor buggers still owed $20k and with no prospect of any future earnings as the company folded.

Not sure what you're considering Mike but I know you'll leave no stone unturned in researching it. How's that boat going???

Cheers Ian.

 

[geoffw]

I'm coming to a conclusion that there are some good opportunities in strong, well established franchises with good systems.

 

[Ian (WA)]

G'day Geoff,

Yes I suppose it comes down to doing whatever you can in the way of due diligence and indeed getting on board with a well established name franchise.

When I spoke with my mate about what had happened he indicated that he went with a known (in SA) name brand because he felt more secure and felt that he wasn't overly exposed in 'having a go' at working for himself.

I wish I could provide more detail of what transpired but that would be a tad risky. Suffice to say...this group had been around for several years.....but so had Ansett and HIH.

Cheers Ian

 

[geoffw]

Ian,

I've heard statistics (apocryphal) which state an 80% business failure rate (which I often quote to my wife when she asks me about starting a business) vs an 80% success rate for franchises.

But that still does leave a high risk of failure- a 20% chance of failure may not help the SANF.

 

[Aceyducey]

Geoff,

I've heard these figures or similar as well....what isn't explained is that the 80% success rate is success for people in well-established high profile franchise operations.....ie: franchise failure rate is much higher if the figure is calculated across the entire industry (all franchise operations).

What about all those smaller franchises out there.....and what about Amway & other networking marketing organisations.....their distributors aren't considered franchisees in this calculation....perhaps they should be

Cheers,

Aceyducey

 

[geoffw]

I've heard these figures or similar as well....what isn't explained is that the 80% success rate is success for people in well-established high profile franchise operations.....ie: franchise failure rate is much higher if the figure is calculated across the entire industry (all franchise operations).

It would be useful to know the source of these sort of stats- the source may well be the franchise industry itself (and if so they have done a damn good job). It would be much more useful to get an overall view of franchising from that same source (assuming the source was independent),

 

[Olly]

Here's another unhappy franchisee - http://www.ripoffmerchant.net/

He's been doing these websites for ages. Keeps getting them forcibly removed - probably 'cos he kept using the URL of fu*ron and was easy to find.

Be warned - not for the delicate minded.

Cheers
Olly

 

[Savanna100]

The Pedders site

hehe.....I have just read the site you mentioned Olly, it is awesome....I couldn't stop laughing....it has made my day!!!!!

My lawyer-trained brain would have liked a more articulate explanation, in legal terms, of what actually happened to the franchisee but I can asssume from the site that he got really screwed over. On this basis, I totally sympathise with them and will not be using Pedders services again. I don;t need to, there are plenty more players in the market without resorting to those rogues !

There should be more stuff like this. Maybe we need a website for deadbeat tenants where agents can go to check people out cos I know from personal experience that Property Managers often won't blacklist bad tenants on "Ticka" so that they can get rid of them off the books and they need some other agency to take them on. A deadbeat tenants site would mean that landlords could list tenants themselves (after they got them out), taking the power away from the agent.

Just a thought

 

[Sunstone]

Dear Mike,

Franchises do have an established brand and "recipe" for how to do it.

Something to consider is 1) Where is it located and 2) Who owns the block of land the franchise is located on (If a retail front etc etc.).

Have a look in a Westfield shopping centre who makes the money................

Very simply:
1) Landlord
2) Franchisor

All the franchisees in the centre are working for wages at the end of the day.

(If you wanted to go down that path I suggest you get in touch with the Franchise Council of Australia for some pointers.)

Something to think about.............

Cheers,

Sunstone.

 

[Sunfish]

Ian,

I've heard statistics (apocryphal) which state an 80% business failure rate (which I often quote to my wife when she asks me about starting a business) vs an 80% success rate for franchises.

But that still does leave a high risk of failure- a 20% chance of failure may not help the SANF.

Many of the "business" failures would have been small and undercapitalised so there would have been modest losses. As a stab in the dark I'd guess the average franchisee failure would lose well over half a mill. There are very high start-up costs.

Thommo

 

[Olly]

http://www.franchisebusiness.com.au/directory/control/main
http://www.franchise.org.au/
http://www.niche.com.au/fr/general.html

Here's some helpful sites for you to check out.

Cheers
Olly

 

[lissie]

Mortgage broker franchises

I've been looking at franchises in NZ - not v.different from Oz I expect. It seems to me that a lot of them are just either buying a job e.g. lawnmowing or house cleaning or buying a management roll - the fast food type franchises. Neither of these appeal v.much - not v.good at housework or management of teenagers you stop working the income stops. Mortgage broking seems a bit different - as you are paid both an upfront fee and a trail commission- the trail commission provides a passive income and also a potential saleable asset because the trails can be onsold. The franchise fee appears reasonably modest and includes training,software and some leads. The rest is up to you and they take a percentage of the commissions. It seems to be a bit on the too good to be true side - but I am off to see my accountant about it anyway ! Are there obvious downsides of mortgage broking franchises that I'm missing ?

 

[Tandella]

I'm coming to a conclusion that there are some good opportunities in strong, well established franchises with good systems.

Don't bet on it !

This is a hot topic for us at the moment as we are in the process of selling a franchise in one of Australia's largest home services franchise organisations.

The attraction of the franchise was the notion of working for yourself, but also being able to plug into an existing network of technical and business support. However, the feel of it being our own business didn't last long, as you need to conform to the system, and you have almost no power to change something if you don't like it. In the end, it felt like we had little freedom and were still "working for the man", with the politics, red tape, bureaucracy, false claims and empty promises a big turn off for us.

I recently crunched the numbers on what we have spent over the course of the franchise, and when you add up the franchise license, monthly fees, advertising levies, lead fees, etc, we would have been far better off and further ahead if we had harnessed that money into our own business.

I can honestly say that purchasing the franchise has been a big regret, if not the biggest, but unfortunately it's one of those life experiences that you will never quite know how it's going to work out until you try it. In hindsight, perhaps I undersold myself and felt I needed the support and guidance of a franchise system in order to run a successful business, but I often curse myself for not listening to all those people who told me to back myself and go it alone.

Having said all that, from a dollars perspective, my franchise is profitable and we will make (a little) money on the sale. However, for reasons given above, it is not for us, and with our heart not in it, it was time to get out.

From experience, if you are considering taking the plunge into franchising, remember this :
The only person that is really going to care about your business, or care the most about your business, IS YOU !!!

To take that one step further, also keep in mind that there are easier, less stressful and more rewarding ways to make money that don't rely on other people such as franchisors, clients, suppliers, etc for your venture to prosper.

Hope I've been able to answer some of your original questions MikeT

 

[likewow]

While i think most franchises suck. I think along the lines of being the franchisor not the franchisee.

The major due diligence with franchising is to get a printout of ALL the existing franchisees from the franchisor, contact them unannounced and ask them about the system sause there are good franchises and bad ones, good systems and bad systems. If they wont give it you , look elsewhere.

I have a friend who made an absolute motza with a Bakers Delight franchise.
That was both his opertaing profit and CG when he sold it.