Owning a franchise?

Question

A friend of mine has 3 subways and making a ton of money. Is it easy opening a franchise and what does it require. I wanted to ask him but hes been busy with his new baby. Thank you.

Answer 1

Whether it’s worth owning can only be answered after the fact by people such as your friend. The best way to truly assess whether to buy any franchise is to speak directly with several (at least six, preferably more) franchisees for the company you are considering. A self-examination as to whether owning a business is what you really want is also essential, as is a very thorough due diligence. Here are 10 steps that should be taken by anyone considering investing in a franchise:

1 - Conduct due diligence on yourself
2 - Find a great accountant
3 - Find a great attorney specialized in franchise law
4 - Conduct due diligence on the business
5 - Refresh and enhance your business acumen
6 - Write a business plan
7 - Identify and hire a great team- then create a culture to retain it
8 - Hone your leadership skills
9 - Hone your sales skills
10 -Create a schedule that allows some time for family and friends

Some other information you may find helpful:

Most franchise contracts are 10-year commitments for which the franchisee has virtually no rights. They're structured such that the franchisee has very little latitude or say in how the business is operated. You have flexibility to hire your staff, manage them and set your own prices, but most everything else, from displays to products you may/may not carry to signage/advertising, equipment, technology, etc. is usually either governed by or subject to the approval of the franchisor. It's not like owning your own business, it's more like being a store manager who, if the business is profitable, takes home most of that. And if the business is not profitable and you want to sell it or close it after five years, these are both very difficult to do. The former is usually via either a very large fee (an example is a local franchisee who paid $100,000 to terminate his franchise contract with one of the more popular women's fitness center franchises) or personal bankruptcy (franchise contracts generally require you that you be personally liable your business debts, not just through whatever type of corporate entity you might establish; e.g., LLC, S Corp., Partnership, etc.). The latter option of selling your franchise is generally accomplished only at a very large discount.

There are dozens of things to investigate when considering investing in a franchise, but here are some fundamental questions to ask current franchisees of any company you might be interested in:

About how many hours per week do you dedicate to your franchise business?

How would you describe your relations/communications with your franchisor?

Is the franchisor fair with you in resolving any grievances?

Are territories equitably granted?

How would you describe the initial and ongoing training provided by your franchisor?

In what ways could the parent company most improve?

Is your income A) more, B) less or C) about what you expected prior to opening your business?

If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?

The last one is of course the most important. There are many very happy, wealthy franchisees out there, but it's not a guaranteed formula for success. Every opportunity is unique and requires extensive due diligence of both the franchise itself as well as the regulations governing the industry. If you have more specific questions, please feel free to contact me.

Good luck.

p.s. Here are results of a survey answered by more than 3,000 franchise owners in over 200 different companies:

Is your income A) more, B) less or C) about what you expected prior to opening your business?

A) More: 17%
B) Less: 48%
C) About what you expected: 35%

If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?

Cumulative Average
A) Yes 70%
B) No 30%

Answer 2

There is no guarantee that if your friend has made profit with subways you will do the same. There is many factor which needs to be looked into before you invest in franchise. Unless you do so your investment will not return as much as profit you would expect.
So my suggestion will be to ensure all these issues before you make the investment. And you should find out the best franchise for you to invest. That will vary depending on the capability of your investment. Also if you don't have enough time and experience to do all these yourself, I would suggest you to consult someone who is experienced.

Answer 3

I think investing in a franchise is always a good option not only because you can be your own boss but also you minimize the hassle of pulling in your business up from the scratch. I have just read a good article on benefits of franchise business. Source is given in the below.

Hope it helps! :)

Answer 4

I think you should wait til the baby is asleep
He is the best to ask this question.
How much is franchise fee, and residuals (Payments on sales)
How much money do you have to have to open your shop
What is staff pay as percentage of sales
Who handles government paperwork of all types including payroll
How many hours a day does the owner work.
How many of these franchises fail.
How do you ensure good location.
What courses are necessary for staff to have on food handling rules

Answer 5

WIth new businesses converting to franchise opportunities, the franchise industry that we know of has changed. We attended the most recent Franchise Brokers Conference & Expo and it was filled with new franchise businesses that required only $10k to start. Of course those were online services. Food & Beverage franchises can start from $125k with frozen yogurt style establishments to as much as $500k for restaurant style. We have a list of franchises from our FLS system that shows franchises and how much they require to start - http://www.franchisedirect1.com

Answer 6

Here's a good article on the actual process of opening a franchise... http://freefranchisefinder.com/Getting_Started_In_Franchising.html

Answer 7

Based on statistics, the chances that he pays his full (fair) share of taxes is about 9-1 against!

Answer 8

$100,000.00 USD.