Overrated Small Business: Franchises

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We got into Ace Hardware which is a co-op, not a franchise. That was over 13 years ago. Despite the addition of taxpayer subsidized big boxes and the current economy, still going strong. Let's hope Obama does not mess it up.

Nick P of FL 11:49AM July 23, 2009

Forty years ago I was in a situation where i had to relocate or find a business. I deceided to take a hard look at franchises when this occured. I found one that
fit the business I was interested in starting. I visited franchisees in nearby towns and really got
favorable comments from them. I went to the bank to get the financing and the banker, who I had just met, said to me, why are you going to a franchise to do this?
You are sharp enough to do this on you own.. Is it lack of confidence in yourself or are you just lazy? I didn't
like what I heard but he was right. I found a man who
operated a chain of business (business that i wanted to
start) and asked him what it would take to give me the
information I would to get started in another town.
He agreed to help me for a very nominal fee. The rest is history...... I am now 75 years old have a 42 year old partner who was previously an employee and am
still semi active in the business. I am financially
secure and am living the good life. MY ADVICE: IF YOU HAVE TO PAY SOME ONE TO SHOW YOU HOW TO SET IT UP AND
PAY THEM PART OF YOUR PROFITS FOREVER, THERE IS A GOOD
CHANCE YOU SHOULD NOT BE IN BUSINESS FOR YOURSELF.IF YOU CAN FIND A WAY TO DO IT ON YOUR OWN YOUR CHANCES ARE MUCH BETTER.

CHUCK ROTHSTEIN of TN 9:38PM April 25, 2009

I have been a sales manager for 2 franchises, both the same company but different territories. I watch the owners pay huge royalties not to mention several hundred thousand dollars to purchase them. I could have shown them how to do the same thing for under 20k. The restrictions placed on where you can operate can put you under and you are probaly paying for another persons marketing. I have been in the window covering business for 32 years, it takes experience not a 2 week class and false promises of great wealth. Do something you love, do your homework, and most of all talk with owners of the same type of business to find out the real truth.

CW of TX 10:05AM April 25, 2009

There was some talk in congress a few years ago to look at the predatory marketing of franchises. It was felt that to many were being lured in with unrealisitic promises. I'm not sure where that went.
My experience in owning a franchise was awful and costly. The only advantage to being associated was when it came time to dump the business. Rather than using a broker, the franchise sold my business quickly to a prospect from a pidgeon list.
He too failed and the store has been sold three times since.
I opened in 97 and I'm guessing that no one has made a penny in that location other than the francise.
Beware!!

je of NY 12:08PM April 10, 2009

As the owner of two small food stores I would recommend you find a way to build on the skills you already have perhaps working for a large hardware store. A small business that someone with no experience can operate are usually labor intensive, on your feet, super jobs. It's a long grind for someone with a bad back.
Second idea go back to school and take accounting courses the world always has room for another bookeeper

Hugh of WA 4:54PM March 16, 2009

Every franchise agreement is weighted in favor of the franchisor; that is what their lawyers are paid for !
These one-sided clauses are usually only relevant if you are having difficulty.
Check out the language in the Subway FDD and Franchise agreements - the harshest language in the industry. Yet they sell over 50 franchises a week and now have over 30,500 around the world.
If the SYSTEM works, apply it and make the effort required by a franchisee. It is hard work - so is an independent business.
Want to investigate franchises more and hear many sides of the franchise question?
mrfranchiseman.com
Fayaz Karim

Fayaz Karim of CA 12:16PM March 05, 2009

AS a business broker I have sold many restaurants and franchises.
The key to success for many is the location!!
Regardless of how famous the brand vs independent(non-franchise), the location is the one of the key factors in success.
You can have a franchise in a lousy location and it will fail inversely you can have a non-franchise in a great location and it will do well or at least survive.
Of course, other factors include the owners experience about that particular business. It is obvious the more experience the better chance of success. However, someone with little experience can do well if they are smart enough to learn quickly on the job and can make the neccessary operational changes for success.
The franchises that seem to do well are McDonalds and subways. Of course, owners have to consider whether you are looking for an owner-operator business or absentee. Depending on what the individual cash flow needs are will determine what type of business makes sense for them.

George S. of CA 7:27PM February 22, 2009

Today is my first time reading U.S. News and I have been blown away. Reading the comments made me feel as though every one was directing their information directly towards me. I have been researching several of the franchise business's and it is scary. I have just turned fifty and I can no longer able to continue being a Carpenter(30) years), due to a bad back.
I am not sure what to do now, this late in life. After doing the same thing for so long, I can not decide on what to do now. I thought about my own Home Inspection business or start up a Maintenance Co. servicing Property Management Companies, and also I thought about a Cigar Shop. Comments would sure be appreciated right now. I am not married, so I don't have to worry so much about a family life. I am really afraid for my future. I have a small nest egg, that I desperately need to use to build some sort of future. I live in Chicago, so there are always many potential customers for the right business. So, what I am asking is, "What is one to do, in times like these, in order to be on my own?

Peter J. of IL 10:34PM January 19, 2009

In this day and age, almost every business concept is being franchised and many of them lack a proven business concept or model yet promise things like "great opportunity", "low work hours", "low risk", "buy-back guarantee", "fun", etc.. Avoid these like the plaque. I speak from personal experience and can attest that the details are the most important aspect of the franchise model and a franchisor is unlikely to disclose the real downsides to the business. Also, beware of franchise agreements that are all one-sided using language like "best efforts" to describe your obligations as a franchisee and language that disclaims all franchisor obligations, such as "we may at our option, but are not required." There is no substitute for a proven franchise model and a fair and equitable arrangement between franchisor and franchisee, but the temptation for the franchisor to get out of operating a difficult business by converting it to a franchise that promises the world to its franchisee while shifting all the burdens of the business to snall mom and pop operations can be too great. Buyer beware!

No More Franchises for Me of TX 2:55PM January 05, 2009

I have successfully started (from scratch) and operated 5 entirely different businesses since my 19th birthday. I am now 47 years old. I have successfully sold the 4 businesses which I no longer operate with the oldest being started in 1981. All but one of the companies are still profitably operating, under successor owners. NONE have ever been or would ever be franchises. Why? Simply because of the following;
1.- The amount of money often required for a franchise is so large that it has never made sense to me to "buy" a job. One particular business I inquired about required total capital of almost $2,000,000 for an average "net" income of about $175,000. That means the $2,000,000 of capital yields 8.75% and 60 to 80 hour workweeks. I simply can't understand why someone would take the risk and work that hard for so little return. I have historically earned that much, including 2008, on investments without the headache of employees, suppliers, etc.
2.- I have always started my different businesses because I wanted as much freedom and flexability as possible. Owning a franchise provides neither true freedom or flexability.
3.- True success in American business comes from better execution of a concept or service than your competitors. Why would you want to be restricted by a franchise to providing the same products and services as others at a controlled price?
4.- Frankly, those who purchase franchises are led to believe that they are somehow getting an advantage which I am convinced is for somone looking either for a "short cut" or a guarantee, neither of which you get in any business.
Honesty, fair dealings, hard work, incredible personal and family sacrifice, understanding your customers needs and premier service are some of the keys to success. Paying others for their ideas, buying your supplies uncompetatively from the dedicated supplier and being restricted in where and how you operate your business are sure fire ways to lose your nest egg and assure yourself of being someone's employee for the rest of your life.
I have always owned my 0wn business's because I demanded control of my destiny. The first step to losing control of your destiny is to buy a franchised business and the burdens, restrictions, operating limitations which come along with them.
I can very honestly say that significantly less than 1% of people should be in business for themselves. Most don't want to work that hard and live the sacrifices you must to succeed. If you think you can buy a franchise and have someone else run it for you while you sit back and collect the money, think again. If it was that simple,everyone would do it. My advice for a successful business in today's economy is one which requires the LEAST employees besides yourself. Over the years, I have had hundreds of employees in my businesses and they are undoubtedly the biggest head and heartache a business owner deals with. Banks and lenders are a close 2nd place with govt coming in 3rd.

No Franchises for Me of MI 4:35PM December 25, 2008