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A Subway zee is not a allowed to source their products(last time I read the FDD and FA, which has been a long while) so the zee has no control over the cost of the goods sold. Every Subway zee I spoke to indicated they could source for far, far less locally (and at higher quality). But that is not how it works at Subway, you buy at a mark-up from the zor. Understand that the sandwiches are audited by mystery shoppers who will weigh out the ingredients and fine the zee for being on either side of the scale.
Dominos is the same way..........you have to buy the ingredients from the parent company (cha ching!) even though you could source better stuff locally at a cheaper price. Dominos also charges you per box, so if they sold you 30,000 boxes then you made 30,000 pizzas so the franchisee has to pay the "per pizza" money back to the parent company. They don't care if you had 1000 boxes get wet, infested with bugs and had to through them out. They want to be paid as if you sold 1000 pizzas in those boxes!
Dominos is the same way..........you have to buy the ingredients from the parent company (cha ching!) even though you could source better stuff locally at a cheaper price. Dominos also charges you per box, so if they sold you 30,000 boxes then you made 30,000 pizzas so the franchisee has to pay the "per pizza" money back to the parent company. They don't care if you had 1000 boxes get wet, infested with bugs and had to through them out. They want to be paid as if you sold 1000 pizzas in those boxes!
Exactly, it is very, very common in the quick serve food industry (far less so in the sit down casual concepts), hence why I keep emphasizing the need to read the FDD and FA very carefully. To Dominoes credit, I have not seen them try and force zees out in order to flip/resell their franchises the way Subway and Quiznos do. But your point is well taken. The other area where Dominoes fists its zees is on the remodels at renewal. As an unrelated aside, Little Caesars use to treat their zees very fairly. I am not current on the who does what to whom any longer but they were one of the good ones.
Of course anyone who buys a pizza franchise as a zee is sort of...well, special in the first place.
But given that owning a restaurant is an all-consuming business even for people who know what they're doing, it was a terrible idea for a guy in the NFL who could get traded any day.
I hear you on that. One of our VP's grew up in the restaurant business. His dad owned a Burger place that was not part of a chain. Just a place that he had owned for years. The parents worked there 7 days a week. Since the place was making money they invested in residential properties. They also owned the real estate of the restaurant.
One thing that they did was made sure that both of the kids did well in school. They would come to the restaurant after work to first do home work and second to help out. When each son graduated from high school they went on to get a degree or two. The VP I am talking about has his MBA. The parents goal was that they wanted the kids to have an education so that they wouldn't have to work in a restaurant.
When the parents decided to retire they sold the successful restaurant to someone else.
Funny that when they left the place did not last a year or two. In the past 15 years several different places have gone into that location.
I hear you on that. One of our VP's grew up in the restaurant business. His dad owned a Burger place that was not part of a chain. Just a place that he had owned for years. The parents worked there 7 days a week. Since the place was making money they invested in residential properties. They also owned the real estate of the restaurant.
One thing that they did was made sure that both of the kids did well in school. They would come to the restaurant after work to first do home work and second to help out. When each son graduated from high school they went on to get a degree or two. The VP I am talking about has his MBA. The parents goal was that they wanted the kids to have an education so that they wouldn't have to work in a restaurant.
When the parents decided to retire they sold the successful restaurant to someone else.
Funny that when they left the place did not last a year or two. In the past 15 years several different places have gone into that location.
Management is the key determinant for success.
I consulted for a restaurant chain. The owner had a simple principle: Take the worst performing restaurant in a chain and the best performing restaurant in a chain, switch managers, and the two restaurants will reflect the skill of their managers within a year.
The cheapest franchise to open is a Chick-fil-A. Franchise cost is only $10,000 and they pay ALL startup costs: real estate, construction, equipment, everything. Then they lease it to you. So much higher on-going costs. Sound good? They get about 20,000 applications per year and select between 70-80.
There's got to be a catch.....
Yep, there's a catch - I believe you have to work there for 10 years before you even get considered for franchise ownership.
Yep, there's a catch - I believe you have to work there for 10 years before you even get considered for franchise ownership.
No not at all,but you are not a typical zee. Essentially you are a manager who gets an incentive. As a zee you little at risk, other than your time. Almost all the zees I know make 110-180K a year. But the trick is getting by their screening process. It is very Christian. I do not think they have a single zee who is divorced for example.
Dominos is the same way..........you have to buy the ingredients from the parent company (cha ching!) even though you could source better stuff locally at a cheaper price. Dominos also charges you per box, so if they sold you 30,000 boxes then you made 30,000 pizzas so the franchisee has to pay the "per pizza" money back to the parent company. They don't care if you had 1000 boxes get wet, infested with bugs and had to through them out. They want to be paid as if you sold 1000 pizzas in those boxes!
If this is the case, things have changed since I worked there in the mid 90's. They charged a flat royalty back in those days. I think it was 4% of sales. Now, yes, you had to buy all product from them, but.. that's not uncommon and only partly has to do with making a profit on those items. It's more about product control and consistency.
Quote:
Originally Posted by GhostOfAndrewJackson
No not at all,but you are not a typical zee. Essentially you are a manager who gets an incentive. As a zee you little at risk, other than your time. Almost all the zees I know make 110-180K a year. But the trick is getting by their screening process. It is very Christian. I do not think they have a single zee who is divorced for example.
All true. Something else to look at.. How many Chick-Fil-A's have you seen close? At least close for a reason other than building a new location or something?
it's hard to argue with their success. You can say "Oh, it's too difficult".. Well, they are protecting the brand they've built. KFC has a number of franchises. You seen some of those places? Total dumps.
A local Chick-Fil-A to me has closed for several weeks twice in the past 4 years for remodels. And the store itself is only 15 years old or so. (Mainly redesigning the drive-thru.. Probably part to do with the city complaining because they'd have lines out into the street)
Now, the downside is.. You're not building anything to leave for your family as you can't pass the store down to your kids. It's VERY rare that a Chick-Fil-A franchisee has more than 1 store. They require and expect you to work in the store. All of which is completely foreign in the fast food scene.. But.. again.. Argue with the success. You can't.
Ever seen Quizno's? Read up on the franchising agreement with them. Basically, they will do the same thing as Chick-Fil-A.. I think you can open a Quizno's for about $5000. They'll build the store, put in all the equipment, etc, etc, etc.. But you're required to work at the store, can pull.. Something like a $40k/year salary.. And all that money for building the store, etc? That goes into a loan where they take 75% of the store's profits until it's paid back.. And, oh, btw.. The interest rate is 20% or something like that. Which is why, in my area, we've had Quizno's come and go at least twice. They open, and then about a year later, they're all gone.
If this is the case, things have changed since I worked there in the mid 90's. They charged a flat royalty back in those days. I think it was 4% of sales. Now, yes, you had to buy all product from them, but.. that's not uncommon and only partly has to do with making a profit on those items. It's more about product control and consistency.
All true. Something else to look at.. How many Chick-Fil-A's have you seen close? At least close for a reason other than building a new location or something?
it's hard to argue with their success. You can say "Oh, it's too difficult".. Well, they are protecting the brand they've built. KFC has a number of franchises. You seen some of those places? Total dumps.
A local Chick-Fil-A to me has closed for several weeks twice in the past 4 years for remodels. And the store itself is only 15 years old or so. (Mainly redesigning the drive-thru.. Probably part to do with the city complaining because they'd have lines out into the street)
Now, the downside is.. You're not building anything to leave for your family as you can't pass the store down to your kids. It's VERY rare that a Chick-Fil-A franchisee has more than 1 store. They require and expect you to work in the store. All of which is completely foreign in the fast food scene.. But.. again.. Argue with the success. You can't.
Ever seen Quizno's? Read up on the franchising agreement with them. Basically, they will do the same thing as Chick-Fil-A.. I think you can open a Quizno's for about $5000. They'll build the store, put in all the equipment, etc, etc, etc.. But you're required to work at the store, can pull.. Something like a $40k/year salary.. And all that money for building the store, etc? That goes into a loan where they take 75% of the store's profits until it's paid back.. And, oh, btw.. The interest rate is 20% or something like that. Which is why, in my area, we've had Quizno's come and go at least twice. They open, and then about a year later, they're all gone.
Great comments by the way.
Amigo, please never ever put Chick-Fil-A in a paragraph with Quiznos again. Even having them on the same server in the cloud is kind of yucky. Unless it changed after Truett passed, Chick-Fil-A grows organically like ALDI does. They don't take on loans, they build out of their own cash flow. Simply put they do not believe in debt, for themselves or their zees. They also will, in the end, release you from any commitment you made as a matter of principle. That is part of why it is so hard to become a zee with them, they will look into your background and only partner with people with demonstrated integrity (or rarer as part of biblical precept), hence no divorces. This is also why you will not see a Chick-Fil-A close, the cost to build the store is not accrued to the zee, Chick-Fil-A as a business entity will honor its commitment to the zee and keep the store open.
Quiznos, is about the most despicable concepts I ever ran across(Dale Nabor's Cuppy's Coffee is a close second). They make some of the sleazeball business opportunities seem like bastions of integrity by comparison. Quiznos is unique in that the use to routinely (and I mean routinely) use the FA in the following manner:
Zee signs the FA
The FA states that the zee will open their shop within X days of signing the agreement
The FA states that Quiznos must approve the location.
...Quiznos would simply refuse every location and run out the clock on the date to open the store and pocket the franchise fee.
They had the heck sued out of them for it.
Zee signs the FA
The FA states that the zee will open their shop within X days of signing the agreement.
Quiznos then would approve a location and let the zee start building but would hold back key elements (signage, POS system) in order to bring the zee into default and them, then buy the assets for a song, and then sell it as a turnkey to another zee saddling the former zee with the buildout costs.
And they had the heck sued out of them for that too.
And then if you did get to open your shop you paid inflated prices, were at the mercy of their captive vendors etc (more lawsuits, only these were class action ones)
How bad was/is Quiznos, Bhupinder Baber, a zee of Quiznos commited suicide for the sole purpose of trying to bring national attention to the plight of Quiznos franchisees.
Bhupinder’s suicide note read:, ”Quiznos has killed me. Destroyed my life. Destroyed my family life for the past seven years.”
Amigo, please never ever put Chick-Fil-A in a paragraph with Quiznos again.
Well, it was just comparing good and bad franchises.. Was certainly putting Quizno's in the 'bad' category.
I do recall the suicide.. I believe part of the reason for that was something that Subway does.. Opening up more franchises within a small area and killing their business.
Well, it was just comparing good and bad franchises.. Was certainly putting Quizno's in the 'bad' category.
I do recall the suicide.. I believe part of the reason for that was something that Subway does.. Opening up more franchises within a small area and killing their business.
You are right, and that was before they started the nasty practices I mentioned above.
As I have told people for years when you vet a franchised concept you should not vet the current zor, but rather what the zor could morph into if they chose to utilize all the latitude granted to them in the FA. It happens often enough when a franchise is sold and a new zor suddenly enforces provisions that the FA allows for but previously not enforced or utilized.
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