Interesting conversation with a hotel owner

[TexasHusker]

So let's discuss that.

What is the motivation for this hotel franchisee to keep busting his butt week after week? What's your motivation for maintaining your salons when there are months where you not only don't make a profit but you even operate at a loss? What's the end game? If you aren't making enough to draw out a healthy income for your efforts, why keep doing it?

Or are all of these owners actually crying their way to the bank? Is a 3% profit margin still a worthwhile amount of money? Maybe they're grossing $500,000/month so that 3% margin earns them 180K/year. Nobody ever wants to share actual numbers so it's hard to understand how much of an issue it really is.

No one is crying. This is a discussion.

[disneysteve]

No one is crying. This is a discussion.

Great. That’s a helpful contribution to the discussion. Maybe you should try actually answering the questions.

[TexasHusker]

Great. That’s a helpful contribution to the discussion. Maybe you should try actually answering the questions.

Wow. What businesses are open Memorial Day again?

[disneysteve]

Wow. What businesses are open Memorial Day again?

Why bother posting something worthy of discussion if you are unwilling to have a discussion? Surely you have something better to do with your time.

[james.hendrickson]

SA - forum members. I had to moderate some responses back on this thread, and I'm closing it to keep the peace.

Please note, if you'd really rather not hear from someone, the 'ignore' option is always a possibility.

To do this:

1. Go to your user profile.
2. Click on "edit settings"
3. Navigate to to the "account" tab.
4. Copy and paste the users name in the bottom of the account tab where says "ignore list".

[bjl584]

We're all adults.
I'm reopening this
Short of a small bantering side track, this thread was very informative and constructive.
Keep the discussion and professional debate rolling everyone.

[corn18]

Next time I find myself talking to my daughter's COO (they own 1,000 Wendy's and all Dibella's), I am going to ask him why they keep underperforming locations open. Baffles me why they hold on to one site in a bad neighborhood that always loses money.

[bjl584]

Next time I find myself talking to my daughter's COO (they own 1,000 Wendy's and all Dibella's), I am going to ask him why they keep underperforming locations open. Baffles me why they hold on to one site in a bad neighborhood that always loses money.

could be economy of scale. they might have a plan to revive the location, or they might own the real estate and pay rent to themselves so they can take depreciation and other tax benefits.

I'm speculating of course.

[disneysteve]

Baffles me why they hold on to one site in a bad neighborhood that always loses money.

I wonder if they do it as a community service. The bad neighborhoods are often lacking options for shopping and dining because of high crime rates, low incomes, etc. I suspect they may also get some sort of tax break in the process along with some good PR.

[HundredK]

Next time I find myself talking to my daughter's COO (they own 1,000 Wendy's and all Dibella's), I am going to ask him why they keep underperforming locations open. Baffles me why they hold on to one site in a bad neighborhood that always loses money.

Losses aren't always a bad thing.

[corn18]

Losses aren't always a bad thing.

The group I was in had $5B annual sales with 55 divisions. If any of them were not profitable on their own, they got a lot of attention and not the good kind. Losses were always a bad thing. But we were a public company.

When we bought a private company one year for $600M, the sole owner was an interesting businessman. He hated paying taxes. Any taxes. So he found any way he could to spend as much profit as he could. Fortunately, he was a visionary, so he invested in growth (R&D, people, CAPEX). Then he grew more and made more so he had to spend more to avoid taxes. He lived frugally during the 15 years he built his company from scratch. The all of a sudden he had $600M.

[HundredK]

Losses were always a bad thing.

Perhaps I should have said losses can be useful, especially as part of a larger portfolio.

[LivingAlmostLarge]

So let's discuss that.

What is the motivation for this hotel franchisee to keep busting his butt week after week? What's your motivation for maintaining your salons when there are months where you not only don't make a profit but you even operate at a loss? What's the end game? If you aren't making enough to draw out a healthy income for your efforts, why keep doing it?

Or are all of these owners actually crying their way to the bank? Is a 3% profit margin still a worthwhile amount of money? Maybe they're grossing $500,000/month so that 3% margin earns them 180K/year. Nobody ever wants to share actual numbers so it's hard to understand how much of an issue it really is.

TexasHusker why are you busting your Behind for a negative profit for $24k/month in May? What is driving you?

So I'll answer that question for myself personally. We are taking a large financial hit much like Corn suggested to invest in DH's company. This is a "risk" analysis. He is risking income and comfortable salary to make well a lot of money. The risk = reward we feel. That say we are risking $1m over the next two years potentially more if we invested and compounded the money. We think that we are long term to make a lot more than $1m in 2 years of work. That is the potential rewards. We're not doing it for fun or chance. There is a risk but reasonable expectation that the work DH is doing will pay off.

I'm not sure but I believe like STR texas owns he's holding onto long term because of appreciation and someone else paying the mortgage. Perhaps some months it's not enough to cover the mortgage but then other month it is. I'm not sure about the franchise. I have to assume also seeing people's tax returns that there is profit. It's feast and famine sometimes.

But the risk is often betting on yourself. Or the amount of work. DK1's BFF's parents own a dental practice. Her mom (the dentist) said to me when I discussed vacations and taking the kids on a trip, that she's never taken in the nearly 20 years she's owned the business a trip longer than 10 days and even then she's uncomfortable doing it. Closing her office and she still has overhead of rent, salaries, etc. It'll be ugly. So mostly they take short 1 week trips and do one country in europe or mexico or hawaii and spend a lot because that's it. That's their trip. They are not about to spend a month in hawaii like DH and I did at Christmas and I'm doing it again. But that's the choice she made in a lucrative field of being a dentist and owning her own business. How do I know?

My neighbor also a dentist just bought a practice and is trying to turn it around. She really wanted to be a business owner. She told me it's hard and insanely not profitable now. But she's starting to turn a profit., but to grow her business it'll cost her more and increase the risk involved in hiring a dental hygienist. Also she said the same thing, before she could leave for a month for vacation to Korea (where's she's from) and be fine. But now there is no way she can go to korea for a month but instead she has to go for at most 10 days. 10 days seems short to me. But that's the cost of owning your own business.

For us right now I don't know when we'll take a family trip more than a weekend. It's a bit sketchy. DH has to work and has "unlmited" vacation. But he really doesn't. He really doesn't get to go on vacation without taking his computer and working. He doesn't really have any planned days off. It's more well it's your money and you are on a team and contributing. Maybe in a few years. Right now everything is a little more uncertain versus working for a big company with 20 days of vacation a year and 11 holidays. He could make a plan and do it. Now it's like we'll see how things are going.

[TexasHusker]

TexasHusker why are you busting your Behind for a negative profit for $24k/month in May? What is driving you?

So I'll answer that question for myself personally. We are taking a large financial hit much like Corn suggested to invest in DH's company. This is a "risk" analysis. He is risking income and comfortable salary to make well a lot of money. The risk = reward we feel. That say we are risking $1m over the next two years potentially more if we invested and compounded the money. We think that we are long term to make a lot more than $1m in 2 years of work. That is the potential rewards. We're not doing it for fun or chance. There is a risk but reasonable expectation that the work DH is doing will pay off.

I'm not sure but I believe like STR texas owns he's holding onto long term because of appreciation and someone else paying the mortgage. Perhaps some months it's not enough to cover the mortgage but then other month it is. I'm not sure about the franchise. I have to assume also seeing people's tax returns that there is profit. It's feast and famine sometimes.

But the risk is often betting on yourself. Or the amount of work. DK1's BFF's parents own a dental practice. Her mom (the dentist) said to me when I discussed vacations and taking the kids on a trip, that she's never taken in the nearly 20 years she's owned the business a trip longer than 10 days and even then she's uncomfortable doing it. Closing her office and she still has overhead of rent, salaries, etc. It'll be ugly. So mostly they take short 1 week trips and do one country in europe or mexico or hawaii and spend a lot because that's it. That's their trip. They are not about to spend a month in hawaii like DH and I did at Christmas and I'm doing it again. But that's the choice she made in a lucrative field of being a dentist and owning her own business. How do I know?

My neighbor also a dentist just bought a practice and is trying to turn it around. She really wanted to be a business owner. She told me it's hard and insanely not profitable now. But she's starting to turn a profit., but to grow her business it'll cost her more and increase the risk involved in hiring a dental hygienist. Also she said the same thing, before she could leave for a month for vacation to Korea (where's she's from) and be fine. But now there is no way she can go to korea for a month but instead she has to go for at most 10 days. 10 days seems short to me. But that's the cost of owning your own business.

For us right now I don't know when we'll take a family trip more than a weekend. It's a bit sketchy. DH has to work and has "unlmited" vacation. But he really doesn't. He really doesn't get to go on vacation without taking his computer and working. He doesn't really have any planned days off. It's more well it's your money and you are on a team and contributing. Maybe in a few years. Right now everything is a little more uncertain versus working for a big company with 20 days of vacation a year and 11 holidays. He could make a plan and do it. Now it's like we'll see how things are going.

We do well. We have two months per year with 3 pay periods, and have losses each of those months. You can't make money with three pay periods in a month. In a normal month, labor consumes over half of your income. In a 3-pay-period month, it consumes three fourths. My point is, non-business owners tend to way over-estimate business margins. Folks think if you own a business, you by consequence live a life of luxury, travel first class, and eat things you can't pronounce.

In each of my business locations, the manager is earning more than me. And that's how it should be. I've taken the financial risk, but they are making things happen.

[TexasHusker]

As for Short Term Rentals, yes, they make a substantial profit on a yearly basis. Certainly things are slower in January and February, but I am more interested in what they do annually than month-to-month. If they didn't do well, I wouldn't have them. I've posted a proforma or two on here in other threads.