Anyone here own a franchise? Curious to hear general thoughts, experiences, and considerations associated with franchise ownership.

No specific industry or brand in mind.

I've got a buddy putting together a group to buy out a fast food owner of ~30 stores in TX

Waiting on the data room but if the historical numbers hold up we're buying in.

How many people in the group and how big is the buy-in? Just curious

Small group - total equity raise $3M-$4M

I've seen several LPs formed in the last few months doing the same thing, what's the thesis specific to fast food/restaurants in TX? Also, if opportunity is so good, why are current owners selling?

I have yet to see a franchise that I would advise anyone to buy into. That doesn't mean they don't exist but do your homework.

Lots of things can trigger a change in ownership and it isn't always the fault of the underlying asset

OP, I've owned multiple locations of a franchise. What i took away from it all was:

1. there's a lot outside your control both with corporate and market forces
2. even in good times the return on capital isn't much more than you could get in more hands-off ventures
3. in general, they are a pain in the ass, some with a lot of moving parts

just my thoughts

Before pulling the trigger -

• talk with other franchisee's to find out what the franchise strengths and weaknesses are in that business model.
• How good is the product/service... Product/service support?
• How good is the business support
• How good is the marketing advertising support.
• Royalties/fees
• Do they trap you into buying product/supplies from the franchisee exclusively?
• Are the trending upward/downward?
• How much is the actual investment to break even?
• Employment requirements - is there enough qualified people in your local region?
• Territory size and do you have any neighboring franchisees? Are they easy to deal with and will they be willing to coop advertising cost?
• How much competition is there in your region? Are they growing?

Just because you buy into a franchisee - it doesn't mean you're going to be successful. Any business takes a lot of time, energy and effort. Most franchisors don't have all the answers and you have to adjust and pivot as you go.
I think there are a lot of franchises out there that could be knocked off and done much better!

Ag in tu land said:

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I have yet to see a franchise that I would advise anyone to buy into. That doesn't mean they don't exist but do your homework.

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Whataburger?

Our deal got rejected by the franchiser - no one knows why but the bank/franchise lender (CFO) met with their CFO and it looked like a done deal a couple of weeks ago

Current owners threatening to sue for interference now - I doubt we'll get it but We were the only bidders (supposedly)

$3-$4 million for ~30 stores, or a little over $100k per store?

Considering that some restaurants require $1 million liquid just to talk about a franchise, that is dirt cheap.

I realize it is a store and not a franchise, but still....

I had a franchise that wasn't a nationally or even regionally know franchise to the public. Several things I took from the experience was this (Of course there are hundreds more):

1. The royalty you pay on your sales hurts big time. That 7-10% is a lot of money.
2. You need to buy a franchise that is a known commodity.
3. They didn't know the South. I should have pushed harder for things. I realize now they only knew about the Northeast and Midwest, which didn't translate to the South.

I own a franchise. My fees are pretty rediculous and I dont get much support but the marketing they do is much more than I can afford so it's a wash.

Lots of hard work...Local franchises for me are essentially competition so I'm on an island....But it's been successful because of my market and location

You're only looking at the F&F equity raise not purchase price

Ag in tu land said:

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I have yet to see a franchise that I would advise anyone to buy into. That doesn't mean they don't exist but do your homework.

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Chick-fil-a?

My cousin has 3 Chic Fil A; incredibly lucrative and fantastic locations but he bought in before they changed their model.

CFA is not as good as it used to be - can be a real pain. I know one franchisee who had to "give up" his store for a new one/better location and he's been in CFA real estate limbo going on two years. But I don't know all the specifics they're pretty guarded

For CFA there are usually networking groups you can find to get more knowledge.

These days it sounds like franchisee is more of a glorified manager and you have to work in a store before you can buy

texrover91 said:

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My cousin has 3 Chic Fil A; incredibly lucrative and fantastic locations but he bought in before they changed their model.

CFA is not as good as it used to be - can be a real pain. I know one franchisee who had to "give up" his store for a new one/better location and he's been in CFA real estate limbo going on two years. But I don't know all the specifics they're pretty guarded

For CFA there are usually networking groups you can find to get more knowledge.

These days it sounds like franchisee is more of a glorified manager and you have to work in a store before you can buy

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My understanding with CFA is that they have one of the lowest franchise fees anywhere, only $5k. The trick is, you have to get through their interview process, which can be grueling. It apparently helps if you hold the same religious beliefs as corporate ownership, hence why some call the company a 'chicken cult'.

For the $5k, you basically are a glorified manager, you clear $100k a year for yourself, but CFA still owns the store. I believe you are able to buy equity in the store from them as time goes on.

It's not the greatest model in the world, but it is a path to wealth for some.

We currently have a franchise. Some pointers:

1. If it's young, get to know the owners very well. Your fate is tied to theirs.
2. As another poster mentioned, you lose a level of control. Know how you will react when there's a conflict, because it's YOUR money.
3. Be wary of franchises that won't let you talk to every single franchisee. If they won't, they're hiding something.
4. If they make any promises during discovery, get it in writing. The franchise agreement puts the entire burden on you if there's a dispute of any kind.
5. Look for franchisors that balance your skillset. If you're a salesperson, find one that has heavy backend support. If your strength is administrative tasks, find a franchise that's a marketing powerhouse and known brand.
6. Know why you're doing it. For us, it was an investment. We knew we'd have to build it up, but saw it as a long term annuity more than our primary source of income, so we found a model that could be semi-absentee in time with the right hires. The royalty to us was a cost justified by our decreased involvement as the business has grown.

Looking back, the only way I wouldn't have done the franchise model is if it was going to be my primary source of income. It allowed us to scale quickly, avoid mistakes and took branding and content creation off our plate.

PM me if you want to talk - happy to jump on a call if you have specific questions.

texrover91 said:

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I've got a buddy putting together a group to buy out a fast food owner of ~30 stores in TX

Waiting on the data room but if the historical numbers hold up we're buying in.

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I'd love to hear an update on how this worked out...assuming the deal went through.

CFA franchise is insanely hard to get. They do 50-150 new stores per year and have around 30k outstanding applications on file. Once you are told you will get a location, it can still be a multi year wait.

SACR said:

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texrover91 said:

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My cousin has 3 Chic Fil A; incredibly lucrative and fantastic locations but he bought in before they changed their model.

CFA is not as good as it used to be - can be a real pain. I know one franchisee who had to "give up" his store for a new one/better location and he's been in CFA real estate limbo going on two years. But I don't know all the specifics they're pretty guarded

For CFA there are usually networking groups you can find to get more knowledge.

These days it sounds like franchisee is more of a glorified manager and you have to work in a store before you can buy

---

My understanding with CFA is that they have one of the lowest franchise fees anywhere, only $5k. The trick is, you have to get through their interview process, which can be grueling. It apparently helps if you hold the same religious beliefs as corporate ownership, hence why some call the company a 'chicken cult'.

For the $5k, you basically are a glorified manager, you clear $100k a year for yourself, but CFA still owns the store. I believe you are able to buy equity in the store from them as time goes on.

It's not the greatest model in the world, but it is a path to wealth for some.

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CFA has a set of values and principles, some of which may appear religious related. I see no issue with asking for a partner in your business, spreading your brand, supporting your reputation to at the very least share the same values as you the owner.