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Buying a Franchise - How to Make it SUPER Fastlane and Make MEGA Millions.

thechosen1

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Lol my title is very click-baity but hear me out:

I know the common idea here is not to buy a franchise. But what about multiple units of the same franchise?

I read a story about the top 10 richest homeowners in some section of Florida (it may have been Palm Beach or something - I found the article because Ben Mallah lived on this street in his massive mansion - who is worth $250 million+).

One of the guys with a beachfront mega mansion on that street was a Subway franchisee with 50+ Subway franchises who also developed and owned commercial real estate.

So he started with 1 Subway store and then he had 2, and then he built a commercial building where his 3rd store was located (leasing from his building) then repeat ad nauseum.

Pretty genius.

Here is the link profiling the owners of the most expensive homes bought in Florida in 2019: Here are the 25 most expensive Tampa Bay homes sold in 2019

I Googled each person and that's when I discovered the guy who basically owns a bunch of Subway franchises! Incredible. There's really nothing stopping you from getting started.

Other notable person on the list sold a software/IT company he founded.

Heck, one of the sellers owns (owned?) a Title Company. Pretty mundane if you ask me.

Check this guy out:

 

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OMJ

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He may own a master franchise.
Big difference.
 

alexkuzmov

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Lol my title is very click-baity but hear me out:

I know the common idea here is not to buy a franchise. But what about multiple units of the same franchise?

I read a story about the top 10 richest homeowners in some section of Florida (it may have been Palm Beach or something - I found the article because Ben Mallah lived on this street in his massive mansion - who is worth $250 million+).

One of the guys with a beachfront mega mansion on that street was a Subway franchisee with 50+ Subway franchises who also developed and owned commercial real estate.

So he started with 1 Subway store and then he had 2, and then he built a commercial building where his 3rd store was located (leasing from his building) then repeat ad nauseum.

Pretty genius.

Here is the link profiling the owners of the most expensive homes bought in Florida in 2019: Here are the 25 most expensive Tampa Bay homes sold in 2019

I Googled each person and that's when I discovered the guy who basically owns a bunch of Subway franchises! Incredible. There's really nothing stopping you from getting started.

Other notable person on the list sold a software/IT company he founded.

Heck, one of the sellers owns (owned?) a Title Company. Pretty mundane if you ask me.
I hate to ask you this, but what problem would you be solving? Also, what about control?
 

Harman

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I've always been intrigued by the idea of buying a franchise. Ever since I watched The Blind Side. Who wouldn't want free fast food? Am I right??

Mr. Gerber (E-Myth) talks about turning your small business into a franchise, or at least, systematizing it in such a way that you can literally step away, work ON your business not IN it.

I'm coming from a position of complete ignorance though. I'm no franchisee and haven't done any kind of research into the pros/cons but it seems to me that it's just another method of investment; no different than throwing thousands of $$ into that businesses stock.

To my mind you don't provide any kind of value to the general public when purchasing stock, doesn't mean we shouldn't.

That's how I look at it. Wouldn't be surprised if I'm dead wrong.
 

CruxisKnight

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Lol my title is very click-baity but hear me out:

I know the common idea here is not to buy a franchise. But what about multiple units of the same franchise?

I read a story about the top 10 richest homeowners in some section of Florida (it may have been Palm Beach or something - I found the article because Ben Mallah lived on this street in his massive mansion - who is worth $250 million+).

One of the guys with a beachfront mega mansion on that street was a Subway franchisee with 50+ Subway franchises who also developed and owned commercial real estate.

So he started with 1 Subway store and then he had 2, and then he built a commercial building where his 3rd store was located (leasing from his building) then repeat ad nauseum.

Pretty genius.

Here is the link profiling the owners of the most expensive homes bought in Florida in 2019: Here are the 25 most expensive Tampa Bay homes sold in 2019

I Googled each person and that's when I discovered the guy who basically owns a bunch of Subway franchises! Incredible. There's really nothing stopping you from getting started.

Other notable person on the list sold a software/IT company he founded.

Heck, one of the sellers owns (owned?) a Title Company. Pretty mundane if you ask me.
Only one way to find out and that is to go and do it. Invest your money and let us know your results!
 

MJ DeMarco

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But what about multiple units of the same franchise?

IMO, it's the only way to go, if one goes this route.

That said, when I hung out in the Lamborghini circles, multiple folks I knew owned franchises, but not 1, dozens.
 

JAJT

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Franchises are an avenue to wealth - no doubt there.

But do keep in mind that the reason you see franchise owners owning multiple locations is because you can't go very far with just a single location. It's also the only way to scale that idea.

Also, take a look at franchise requirements before you get excited. Many of the popular ones (Subway, McDonald's, chain corner stores, etc) require you to have access to a fairly significant amount of liquid assets. It's been a while since I looked into it but I think 15 years ago I recall seeing $250k - $500k liquid assets. Plus you have to then qualify to carry a loan for the remaining million(s). It's been a while, and I may be incorrect or outdated, but that's what I recall from memory.

I always liked the idea of franchises personally - but you shouldn't look at them as really building a business, more like buying into an income producing asset.
 

thechosen1

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I hate to ask you this, but what problem would you be solving? Also, what about control?
Really?

what problem does fast food solve?

what problem does any franchised business solve?

You are solving the same problem that the core business solves.

You are bringing a product or service to a local area.
 

thechosen1

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IMO, it's the only way to go, if one goes this route.

That said, when I hung out in the Lamborghini circles, multiple folks I knew owned franchises, but not 1, dozens.
That’s awesome.

Yes I didn’t really point out how expensive this is to get started in, but it is a real path.
 

CruxisKnight

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That’s awesome.

Yes I didn’t really point out how expensive this is to get started in, but it is a real path.
Do you have a ballpark number of how exactly expensive it is?
 

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Really?

what problem does fast food solve?

what problem does any franchised business solve?

You are solving the same problem that the core business solves.

You are bringing a product or service to a local area.

I think he's asking some important questions. The franchise model does lack control. And yes it may solve a problem, but some entrepreneurs may have an ethical dilemma with the value-add (same goes with tobacco, pornography, etc.)
 

CruxisKnight

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I think he's asking some important questions. The franchise model does lack control. And yes it may solve a problem, but some entrepreneurs may have an ethical dilemma with the value-add (same goes with tobacco, pornography, etc.)
I think he is asking what differentiates your franchise from other franchises out there. As in what is the unique selling proposition or USP of your franchise that sets it apart from other franchises.
 

Ronak

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There are many routes to success, the mistake most people make is looking outwards and trying to find the answer vs knowing yourself and what suits your strengths, personality, and mindset. You can make millions from a software startup, real estate development, franchising, etc etc. But those all require different skillets, have their pros/cons; success doesn't always translate from one vehicle to the next. Or you may become successful but miserable with businesses you hate.
 

ShannonK

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I bought a franchise before reading MJ's book, learned that I had made a mistake, and got out of it.

I took on all the risk, the franchisor benefitted risk free. It was very hard on my part to enforce franchisor responsibilities. For example, other franchisees encroached on my territory and the franchisor refused to step in. If the franchisor makes a change like rebranding you will end up spending a lot of money to reprint, repaint, update websites, etc and have very little say.

There are people who make a lot of money owning a franchise, but I think they need to either have exclusive territory rights, or enough money to buy up all the territories in their area. The Blindside story is one example. I have a lady in my neighborhood who is doing quite well as a Church's Fried Chicken franchise owner, but she owns all the stores in my city.

And there is always the risk that your franchisor will ruin their product line or brand and then you will suffer the consequences.

I would be very careful about buying in to a franchise.
 

alexkuzmov

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Really?

what problem does fast food solve?

what problem does any franchised business solve?

You are solving the same problem that the core business solves.

You are bringing a product or service to a local area.
The core business solves a/the problem.
You might solve the local area problem, but you dont own the business.
Unlike selling products from a brand in your own store, you cant skew value for products from a franchise.
Not much, if at all.

Again, you have no control.
 

alexkuzmov

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I think he is asking what differentiates your franchise from other franchises out there. As in what is the unique selling proposition or USP of your franchise that sets it apart from other franchises.
Not really.
I meant, what would HE be doing specifically.
What problem would HE be solving by buying a franchise.
 

thechosen1

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The core business solves a/the problem.
You might solve the local area problem, but you dont own the business.
Unlike selling products from a brand in your own store, you cant skew value for products from a franchise.
Not much, if at all.

Again, you have no control.
You CAN own the business.

Franchisees with multiple locations set up their own corporation and they put their franchises and other holdings in said corporation.

You are just licensing a brand.

It’s a faster way to get going.

If it’s a food franchise, you are solving good demand.

If you own a Hilton, it’s a travel demand you are filling.

It’s very simple!
 

CruxisKnight

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Not really.
I meant, what would HE be doing specifically.
What problem would HE be solving by buying a franchise.
The franchisor most likely has resources he can tap into that he would not otherwise be able to tap into by himself. As in a joint venture. Otherwise he can do everything by himself. Its okay to franchise as long as you can use the partnership as leverage
 

thechosen1

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The franchisor most likely has resources he can tap into that he would not otherwise be able to tap into by himself. As in a joint venture. Otherwise he can do everything by himself. Its okay to franchise as long as you can use the partnership as leverage
Oftentimes a franchisee is very rich already. The franchise is just one of their products that they sell - like a retail store.

If you sell someone else’s product in your store, nobody bats an eye.

But if you sell somebody else’s brand, it is a big problem? The thing is you CAN have Control in CENTS as long as you are diversified and have scale and aren’t just a one-shop owner operator.

Look up Ben Mallah. I’m pretty sure he has some hotels that are franchises, part of his 250 million dollar+ real estate empire.

Or Shaq owning over 100 franchises of Five Guys and Auntie Ann’s.

You could start this with just one franchise that rents from a real estate investment.
 

Mathuin

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One of the richest people in my country owned 146 KFCs. Over £180m a year in turnover.

 

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thechosen1

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One of the richest people in my country owned 146 KFCs. Over £180m a year in turnover.

Bingo!!! Exactly what I’m talking about.

Unless he was already a famous celebrity or pro athlete I’m sure he started like all of us: one small step at a time.

I’m just saying that many people who are missing key parts of CENTS would be better off having a weak “C” with a strong “ENTS” in the beginning, rather than missing half or all the letters.
 

Mathuin

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Bingo!!! Exactly what I’m talking about.

Unless he was already a famous celebrity or pro athlete I’m sure he started like all of us: one small step at a time.

I’m just saying that many people who are missing key parts of CENTS would be better off having a weak “C” with a strong “ENTS” in the beginning, rather than missing half or all the letters.
Yes from what I can find online, opened his first KFC in a town of 21k in the 1980s and just kept buying more.
 

Walter Hay

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Lol my title is very click-baity but hear me out:

I know the common idea here is not to buy a franchise. But what about multiple units of the same franchise?

I read a story about the top 10 richest homeowners in some section of Florida (it may have been Palm Beach or something - I found the article because Ben Mallah lived on this street in his massive mansion - who is worth $250 million+).

One of the guys with a beachfront mega mansion on that street was a Subway franchisee with 50+ Subway franchises who also developed and owned commercial real estate.

So he started with 1 Subway store and then he had 2, and then he built a commercial building where his 3rd store was located (leasing from his building) then repeat ad nauseum.

Pretty genius.

Here is the link profiling the owners of the most expensive homes bought in Florida in 2019: Here are the 25 most expensive Tampa Bay homes sold in 2019

I Googled each person and that's when I discovered the guy who basically owns a bunch of Subway franchises! Incredible. There's really nothing stopping you from getting started.

Other notable person on the list sold a software/IT company he founded.

Heck, one of the sellers owns (owned?) a Title Company. Pretty mundane if you ask me.
See this post:
Rapid Scaling a business by franchising in which I gave information about the plight of many Subway owners. It is not only in the USA. Their brand is in tatters all over the world.

No matter how many franchises you own you are still at the mercy of the franchisor. If his business dies, so does yours. There is no Cents in that.

@Walter Hay always advised against buying franchises, no?
Yes. The best way to make money in the franchising industry is to sell franchises, not buy them.

Walter
 

thechosen1

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See this post:
Rapid Scaling a business by franchising in which I gave information about the plight of many Subway owners. It is not only in the USA. Their brand is in tatters all over the world.

No matter how many franchises you own you are still at the mercy of the franchisor. If his business dies, so does yours. There is no Cents in that.


Yes. The best way to make money in the franchising industry is to sell franchises, not buy them.

Walter
I do agree of course!

I’m just saying it’s possible to use franchises as part of your overall business.

For instance:

Fantastic article. The Billionaire owners of Love’s travel stops would agree.

These are real billions:
 
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Unless you're buying Chick-fill-A* there's solution for control problem.

Take a risk, first, with one franchise, say one location for McDonald's,
earn and then open different franchise** - like Chipotle.
Basically, diversifying . If one brand loses appeal you can keep running others.


*) Chick-fill-A has different model where one owner can have only one restaurant.
**) This is assuming there are no Non-Compete-Agreement or similar clauses in franchise deal.
 

thechosen1

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Unless you're buying Chick-fill-A* there's solution for control problem.

Take a risk, first, with one franchise, say one location for McDonald's,
earn and then open different franchise** - like Chipotle.
Basically, diversifying . If one brand loses appeal you can keep running others.


*) Chick-fill-A has different model where one owner can have only one restaurant.
**) This is assuming there are no Non-Compete-Agreement or similar clauses in franchise deal.
Exactly.

Better yet, combine this with another aspect of your business: like real estate investing, or gas stations, maybe electric charging stations, car washes, mechanic shops, you name it.

Put a donut franchise in the same building as a mechanic shop.

It’s a very common method that is highly effective.

edit: like Walter said, it is very risky to buy a franchise. I would never invest in one unless it was a small aspect of my overall strategy and if it was already a well-established household brand.

And, quite obviously, the franchisor has the upper hand over the franchisee.

Just like it’s better to be Jeff Bezos than an Amazon seller...
 
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Walter Hay

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Never think that buying a franchise is a secure investment.

Here is a list of franchises, complete with failure rates in which franchisees failed in the past 2 years. You should keep in mind that all of these franchises were bought using SBA loans, so that suggests that these were riskier borrowers.
  • Golf Etc 71 percent
  • Mr Goodcents Sub 64 percent
  • Dream Dinners, 60 percent
  • Planet Beach (a spa franchise), 58 percent
  • Carvel Ice Cream, 56 percent
  • Philly Connection, 56 percent
  • Petland, 56 percent
  • Beef O'Brady's, 54 percent
  • Cottman Transmission, 52 percent
  • Taco Del Mar, 51 percent
  • Juice It Up, 51 percent
That's a lot of failures and shattered dreams.

A major point to consider is that the franchisors in general would have lost nothing. In fact in some cases they would have simply banked their fees, shrugged their shoulders, and set about reselling those franchises.

As I have mentioned in my Rapid Scaling thread there are some franchises that are set up to fail, with the foregoing being the objective. I am not suggesting that applies to any of those in my list.

There is no doubt that setting up a franchise network is an excellent way to rapidly scale a business, but buying a franchise is placing yourself under the control of some other party.

Over the years I have advised many people to step back from the brink and not buy that franchise they were about to commit to.

Read my thread. If your business meets my criteria, you have the potential to scale on steroids and make your fortune.

Walter
 

thechosen1

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Never think that buying a franchise is a secure investment.

Here is a list of franchises, complete with failure rates in which franchisees failed in the past 2 years. You should keep in mind that all of these franchises were bought using SBA loans, so that suggests that these were riskier borrowers.
  • Golf Etc 71 percent
  • Mr Goodcents Sub 64 percent
  • Dream Dinners, 60 percent
  • Planet Beach (a spa franchise), 58 percent
  • Carvel Ice Cream, 56 percent
  • Philly Connection, 56 percent
  • Petland, 56 percent
  • Beef O'Brady's, 54 percent
  • Cottman Transmission, 52 percent
  • Taco Del Mar, 51 percent
  • Juice It Up, 51 percent
That's a lot of failures and shattered dreams.

A major point to consider is that the franchisors in general would have lost nothing. In fact in some cases they would have simply banked their fees, shrugged their shoulders, and set about reselling those franchises.

As I have mentioned in my Rapid Scaling thread there are some franchises that are set up to fail, with the foregoing being the objective. I am not suggesting that applies to any of those in my list.

There is no doubt that setting up a franchise network is an excellent way to rapidly scale a business, but buying a franchise is placing yourself under the control of some other party.

Over the years I have advised many people to step back from the brink and not buy that franchise they were about to commit to.

Read my thread. If your business meets my criteria, you have the potential to scale on steroids and make your fortune.

Walter
Thanks Walter.

I’ll go through it in depth. This is great information - being the franchisor IS the ultimate position.
 

Walter Hay

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FRANCHISORS FAIL and when they do it is not always only the loss of their business and investment that the franchisees suffer. In many cases, the failed franchisors seek to blame their franchisees for failure of the system, and in doing so they sue them!

Who would have thought that a franchise as successful as Bennigan's would ever file for bankruptcy? Or Mrs Fields Cookies? Or what about Curves? - probably one of the fastest growing franchises ever. See this : CURVES: The Rise & Painful Fall of the Curves Franchise Chain

For those with no previous interest in franchising, or with poor memories, here are a few more well known franchisors who declared bankruptcy: 7-Eleven, Baker's Square, Boston Market, Ground Round, Denny's, and Burger Chef.

Ground Round was a somewhat unusual case in that many franchisees banded together and formed a cooperative to maintain operation of the system under their control and that saved them from a huge loss.

Most of these failures are history, but some are quite recent and ongoing.

I repeat: Never think that buying a franchise is a secure investment.

I also repeat that selling franchises of your successful business enables what is probably the fastest scaling possible.

Walter
 

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