Have You Thought About Starting A Franchise

[Justice44]

$30,000 is the average fee for starting up a franchise. This is a significant amount of money for most individuals. This fact compelled me to ask our forum members the following questions:

1. Can you afford the $30,000 start up fee?
2. How do you determine whether a franchise opportunity is marketable?
3. Is the average profit incurred in owning a franchise worth the initial expense?

Feel free to answer these questions if you can share opinions that are based upon your knowledge of franchises. This may help forum members, who are contemplating starting a franchise, to make an educated decision.

[eileen1]

Let me preface my statements by saying I don't have personal experience owning a franchise, but I do know there are a lot of pitfalls. A couple we know bought a coffee franchise. Then through a number of unfortunate conditions, lost the entire thing. Some thoughts - know a LOT about the financial stability of the company. Have a lawyer who is familiar with franchises go through the contract carefully. The husband of the couple was himself an attorney, and felt competent to assess the contract, but in hindsite, missed many important issues. Maybe talk to at least three or four others who own the franchises for their top pieces of advice.

[cschin4]

It would be a pretty expensive undertaking and in this economy I wouldn't do it. It seems like a lot of businesses are coming and going. I think the coffee franchises have a very romantic notion to them but don't seem that sustainable.

[PetMom]

First off, the $30,000.00 start up fee. That sounds reasonable good deal but then you have to figure in all sorts of expenses:

Does that include the realty (I don't think it would be) - where are you going to have your business location and what are the costs, including costs of getting a building 'up to code' - which can be quite high.

What is the actual business you are considering? Remember the people selling the franchise are going to make it sound far better than it really is.

Legal fees: I agree with the poster about contract law - this is a very specialized area - you need to spend the money on an expert who can read through all the loopholes involved.

Also: accountant fees, tax issues, fees for the franchise that are not just a one time fee, etc.

Basic costs: what about uniforms, insurance, cleaning costs, utilities.

There are always so many costs involved with a business.

I really don't think you pay $30,000.00 and then there you have an up and running business.

But, Magic Johnson, actually built a business empire with careful and slow obtaining with money he had saved getting franchises with fast food businesses and strategically locating them and always monitoring them closely.

It can be done, but you have to realize all the costs to do this and carefully plan and invest.

A really good option might be to work in the franchise as an employee to get to know the business and save your money you make - it may take longer but you would have a good foundation to work from.

[jeffrey]

Some questions you need to ask: 10 Key Questions To Ask About Franchises - Personal Finance Advice

[Broken Arrow]

First, let me qualify that I don't have any franchise experience either. I just know someone that does. Two in fact. In particular, most of my response is based on a guy who has opened two successful Subways.

Getting into certain franchises isn't actually a bad idea in general. Some brands will give you instant recognition, and perhaps most importantly, capitalize on the franchise company's marketing. Plus, what's included in the franchise fee is training on how to create the franchise product.

That said, $30k is on the absolute low end that I've ever heard of for any franchise. The real range for franchise fees are more along the lines of $50k to $500k and more. Subways and Quizno franchise fees are on the low end.

Also, I would argue that there is such a thing as a "good" and "bad" franchise name. Some brands, or perhaps many, are not worth the franchise fee. It also depends on how much of a "jump start" you think you may need. Certainly, for a first time business, perhaps it would be worth the cost for their marketing and helping hand. For others, maybe not.

Lots to consider, and this is NOT a decision to be taken lightly.

In my personal opinion, and this is only my opinion, I've seen highly successful business start up from both franchising and from original brands. There is a cafe that I frequent all too often simply because their food is absolutely superb. The quality of the food rivals a sit down restaurant, and because it's an original branding (mom & pop store), it also gives it more of a quaint, home town feel. It's a personal touch that I just don't sense when I am at a Subway.

Bottom line, I think the quality of the product and service is more important than price, price is more important than location, and location is more important than brand (thus franchising). That's how I feel based on what I've experienced.

[zetta]

I thought about looking into franchises as a road to building wealth. The more I thought about it, and the more I pictured myself doing the day to day work involved in something like a Subway or a Mailboxes, Etc., the more I said Ugh. It's just not for me. I'll stick with earning a salary and investing part of my income.