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Old 07-06-2018, 03:52 PM
 
Location: Silicon Valley
3,553 posts, read 1,597,789 times
Reputation: 6054

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Hey CD,

There's a spot that's going to open up in a plaza we know. It was previously a semi-naughty Vietnamese coffee place that got pinched for illegal gambling. It has nice road visibility, decent parking and with the faux generic 7-11 masquerade to the side, comes to about 4000 sf total.

The corner is Vietnamese, but with very few restaurants. The area is having a population boom of high density housing being built as a major train station is being put in nearby. To the north is a large Chinese population, but there are many restaurants catering to the crowd there. The rest is a mix of Filipino, Indian and Vietnamese. While the neighborhood has historically been 1st generation, the new units are being bought by 2nd generation tech workers. The average family income for the zip code is approximately $144K and rising.

Currently to the west is nothing, and where the station is being built with industrial beyond it, so the plaza, while full, didn't really get overbuilt. More retail and residential mixed is expected at the station site.

I think the location could do very well for a franchise, but I've never seriously looked into franchises before. About 3 blocks to the south a new franchise started serving American breakfasts and has a line out the door each weekend. I spoke with the owner and they said....there's really no competition here for western food. Having lived in the area, I couldn't agree more. A French styled bakery/restaurant, perhaps French-Vietnamese, might do very well in the spot.

Picking one will be hard. What do I look for? Any thoughts? I had some serving experience a couple decades ago, but it's not my area of expertise. I'm wondering if the franchise experience is worthwhile compared to developing my own menu.
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Old 07-09-2018, 10:26 AM
 
608 posts, read 340,570 times
Reputation: 1967
I hear franchises are great if you can afford multiple locations and have revenues high enough to pay managers to run them. Otherwise you're just buying yourself a job, working 12 hours a day running the joint, and paying ~ 10% off the top line to the franchise company.
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Old 07-09-2018, 02:37 PM
 
729 posts, read 384,497 times
Reputation: 1151
I know of only one person who bought a franchise. He told me the franchise fee seemed cheap at first, but when you send 5% to the franchisor, it becomes pretty expensive over time. I think he regretted it.
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Old 07-09-2018, 03:30 PM
 
28,430 posts, read 70,779,494 times
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Default THIS! 100% agree.

Quote:
Originally Posted by TimAZ View Post
I hear franchises are great if you can afford multiple locations and have revenues high enough to pay managers to run them. Otherwise you're just buying yourself a job, working 12 hours a day running the joint, and paying ~ 10% off the top line to the franchise company.

I have worked for / with a few firms that have to lease LOTS of retail space and the see the same patterns over and over. The vast majority of even "perfect location" type franchise situations don't make much sense as the overhead associated with not just the obvious things like retail hours / inventory managment / fees for everything but the often HUGE headaches associated with staffing / location selection - lease negioation / ongoing training mean that folks who scale up to the "multi-location" franchise are much more likely to actually profit than anyone else. Too often the sorts of folks who plunk down a huge pile of retirement money when they are forced out of a firm end up really regretting trying to be a single location franchise and they just don't have the necessary time frame to scale up to multiple locations...


The OP is badly mistaken if they believe the lies about "franchise firm won't let your fail". Even the most "pro franchise" type consulting firms see tremendous rates of failure -- https://www.franchoice.com/wp-conten...-Franchise.pdf Much of the conflict boils down to the corporation overseeing the brand having innate conflicts with promoting the brand's success ahead of the success of any franchisee -- Survey doesn't sugarcoat Dunkin' franchisees' discontentment - Franchise Times - April 2008 - FranchiseTimes.com


I really cannot stress strongly enough that the true "ideal owner" for most franchise chains is NOT somebody who wants a single store, but that super rare individual with sufficient CASH and young enough age to have many more stores per area. In this very interesting article the CEO of Smashburger is quoted as admitting this -- The mad scientist of Smashburger - Franchise Times - June-July 2018 - FranchiseTimes.com


The fact is similar profile is needed to really be successful in any kind of franchise...
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Old 07-09-2018, 03:46 PM
 
11,256 posts, read 43,199,644 times
Reputation: 14905
Quote:
Originally Posted by artillery77 View Post

What do I look for? Any thoughts? I had some serving experience a couple decades ago, but it's not my area of expertise. I'm wondering if the franchise experience is worthwhile compared to developing my own menu.
What I've not yet read in your background/qualifications is any real experience in the food industry, let alone owning/managing a restaurant.

Nor am I reading that you have the financial resources to put at risk for such a venture.

Have you even researched what the financial guidelines for net worth and cash on hand to open the doors are for any franchise?

From my perspective, you're doing nothing but setting yourself up for buying yourself a job and the likelihood of a business failure. Folks with pro training and degrees in restaurant management can't even consistently quantify what makes a restaurant successful. Do you have any better qualifications?

Starting a restaurant from scratch with your background would be a highly risky venture. Unless you've got the assets to personally pledge to cover the financing, few lenders will even want to talk to you … let alone a landlord, restaurant equipment suppliers, utilities, and food suppliers. Can you put out mid-6 figures in cash expenses and still have money to live on in the interim before a new venture can possibly deliver an ROI? Your local tax district authorities will be on your case from day one for timely tax deposits … UI, WC, health and safety requirements, your business insurance will want a lot of money up front, your suppliers won't be giving you open lines of credit without some security, and your labor needs to get their paychecks every week without fail. All of these expenses come off the top before you capture one penny of "profit", let alone compensation for what will be a full-time job. Do you have the resources to do all this? are you willing to pledge other assets to secure this business venture?

Based upon what you've posted, I think you'd be better off placing your investment capital in something that you know rather than a restaurant. There's a huge difference between identifying a possible market opportunity and opening/staffing/running a restaurant. As others have pointed out, the path to restaurant franchise success for an investor is owning multiple outlets and taking on the role of a senior manager rather than individual site management tasks.

Last edited by sunsprit; 07-09-2018 at 04:02 PM..
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Old 07-09-2018, 08:00 PM
 
1,184 posts, read 426,109 times
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My research showed that for the average investor franchises are risky money pits, ball and chains, or both, but rarely good investments.. except for the parent company.
YMMV
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Old 07-10-2018, 01:00 AM
 
Location: Honolulu
1,054 posts, read 1,456,582 times
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I used to own my own restaurant, though not a franchise. Your "serving experience" mean nothing when it comes to running a restaurant. Assuming you've never had your own business, much less a restaurant business, I think you'd be in for a huge shock as to how much work it really is. Running a restaurant is extremely hard work, even harder to make a profit. Besides all the physical labor that needs to be done, there's a ton of behind the scenes work that needs to be done to keep a restaurant running. Ex. accounting, permits, taxes, payroll, etc. I know I sound negative but you really have to think of a worst case scenario and see if you can survive if it happens. And assuming you're in Silicon Valley I'd assume the worst case scenario would be pretty bad. Another option would be to find someone to partner with who you trust with your life who has expertise in running a successful restaurant then maybe you should consider exploring this idea further. However if not, I wouldn't even waste my time thinking about this further.
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Old 07-10-2018, 02:49 AM
 
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
22,403 posts, read 39,722,706 times
Reputation: 23426
A franchise (maybe) successful (franchises come in all types and colors.. from tires to Chiropractors with a little food tossed in the side)

STUDY, and go talk to SCORE (free) and SBDC (free) They even have experts on-line who owned many franchises (that is the key: MANY franchises, as in YOU do not do the work, you PAY people to do your work, you just get them rolling (in dough))

Subway supposedly is one of the best, Quizmos one of the worst (as far as food franchises)

Start with $300k - $500k, AND with many yrs of proven success in operating a franchise and the franchize-or... might talk to you. If you have ZERO experience and only a couple hundred thousand k... Of what value are you to a Franchise company? (They have a reputation to uphold. )
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Old 07-10-2018, 08:02 AM
 
28,430 posts, read 70,779,494 times
Reputation: 18364
Subway is a trainwreck, many doubt they will survive -- Subway's cannibalization, poor leadership threatens survival - Business Insider


Quiznos always has large number disgruntled franchisees -- https://www.denverpost.com/2013/03/1...d-franchisees/
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Old 07-10-2018, 04:49 PM
 
Location: USA
185 posts, read 93,167 times
Reputation: 369
Quote:
Originally Posted by StealthRabbit View Post
A franchise (maybe) successful (franchises come in all types and colors.. from tires to Chiropractors with a little food tossed in the side)

STUDY, and go talk to SCORE (free) and SBDC (free) They even have experts on-line who owned many franchises (that is the key: MANY franchises, as in YOU do not do the work, you PAY people to do your work, you just get them rolling (in dough))

Subway supposedly is one of the best, Quizmos one of the worst (as far as food franchises)

Start with $300k - $500k, AND with many yrs of proven success in operating a franchise and the franchize-or... might talk to you. If you have ZERO experience and only a couple hundred thousand k... Of what value are you to a Franchise company? (They have a reputation to uphold. )
OMG!!!! Stop that nonsense!! If you don't know anything (and your comment proves it) don't say anything! Psst: your comment about SCORE is okay, however they usually have little to no experience with franchises.

Op, a franchise is only good for the franchisor - they got your money and you OWE them 10 years!! Just do a little research on the web about good and/or bad franchises. Franchises (hundreds) may be an option for seriously wealthy individuals, think of a certain football QB or retired bank executives to park some of the 'chut money.

If you want to open a restaurant, then do it yourself. If you fail, then say good bye after a year or 2 (whatever you set for yourself). An FA obligates you for TEN YEARS!!! (standard agreements) Chet summed it up pretty well. Personally, I think there are far better and less risky opportunities available for investment than a damn franchise (of any kind!).
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