start a business or buy franchise

[AmericanFighter]

hey everyone i am getting my MBA and when i graduate in 2014 i am going to open a business i was wondering is it better to start my own or buy a franchise.
i am pretty open to the type industry along as i can make good money.

currently i have 17,000 in the bank. and i expect that to grow by a couple thousand by 2014.

 

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[DennisD]

Have you read The Millionaire Fastlane ? The answer's in that book about 5x over.

 

[sigurdur]

As Dennis said, the answer is in the book many times over.

 

[The-J]

Yeah, the answer's in the book. But I, for one, don't want you to feel pressured into buying anything, so I'll tell you outright.

First of all, you can't afford it. $17k? Let's talk $250,000 just for franchising rights. Then you gotta get the real estate, purchase the inventory, pay for marketing, blah blah blah, it's too expensive for you. Period.

Of course, after your MBA, you're going to have good credit, so getting a loan won't be impossible, especially if you are already a homeowner. However, expect to be in the red for a while.

But that's not the reason you shouldn't buy a franchise. The real reason is because you lack control, you lack power to scale, and the venture will be tied to your time. The time issue can be solved by hiring a GM just out of college to do your dirty work. However, the first two, not so much.

The scaling issue can be solved by doing something called Intentional Iteration (II), where you buy one franchise, then two, then five, and suddenly you own all of the fast food franchisees in one town. Then you move to the next town and keep going until you've got enough income to retire and retire well. However, this will take a long time, somewhere between 10 and 15 years to set up completely, and it will cost you a boatload of money up front. That's still not the real problem.

The real problem is that no matter what you do, you lack the control. You, as a franchisee, cannot make corporate decisions. If the company wants to remove your highest grossing item on the menu because nobody in other towns wants that item, well, guess what, your income is blasted. You can't tell them "hey, I want to keep serving this!" because if they don't want you serving it, they'll make sure you don't serve it. They have that kind of power over you that you cannot shake.

How did I learn all this before leaving undergrad? Why, I picked up a book called The Millionaire Fastlane by MJ DeMarco (great guy, you'd love him).

Start a business and don't wait until your MBA is over to do it.

 

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[AmericanFighter]

Yeah, the answer's in the book. But I, for one, don't want you to feel pressured into buying anything, so I'll tell you outright.

First of all, you can't afford it. $17k? Let's talk $250,000 just for franchising rights. Then you gotta get the real estate, purchase the inventory, pay for marketing, blah blah blah, it's too expensive for you. Period.

Of course, after your MBA, you're going to have good credit, so getting a loan won't be impossible, especially if you are already a homeowner. However, expect to be in the red for a while.

But that's not the reason you shouldn't buy a franchise. The real reason is because you lack control, you lack power to scale, and the venture will be tied to your time. The time issue can be solved by hiring a GM just out of college to do your dirty work. However, the first two, not so much.

The scaling issue can be solved by doing something called Intentional Iteration (II), where you buy one franchise, then two, then five, and suddenly you own all of the fast food franchisees in one town. Then you move to the next town and keep going until you've got enough income to retire and retire well. However, this will take a long time, somewhere between 10 and 15 years to set up completely, and it will cost you a boatload of money up front. That's still not the real problem.

The real problem is that no matter what you do, you lack the control. You, as a franchisee, cannot make corporate decisions. If the company wants to remove your highest grossing item on the menu because nobody in other towns wants that item, well, guess what, your income is blasted. You can't tell them "hey, I want to keep serving this!" because if they don't want you serving it, they'll make sure you don't serve it. They have that kind of power over you that you cannot shake.

How did I learn all this before leaving undergrad? Why, I picked up a book called The Millionaire Fastlane by MJ DeMarco (great guy, you'd love him).

Start a business and don't wait until your MBA is over to do it.

thanks lack of control was what i was worried about but i wasn't sure how deep it went. I was wondering if the positives outweighed the negatives. i know i would have to raise money before the move. Thanks.

 

[socaldude]

Start a Business:

1. Low start up costs.
2. You can test the market before you dump your life savings into a black hole worthless business.
3. It can detach you from time for money.
4. The sky is the limit.
5. More control over your business.

Buy a franchise:
1. High start up costs, we are talking 6 digits easily.
2. You pay fees based on revenue not on profits, so you lose.
3. Blasphemous and offensive time investment required on your part.
4. Its difficult to be creative to cut costs because you have to buy all the crap from the company, you can't go to smart and final or walmart and buy supplies.
5. Its a job with the illusion that "you are your own boss".

i'll take starting my own business

 

[socaldude]

the best part about starting your own Fastlane business is where you can violate the space time continuum and make money when you are not even working . The biggest middle finger to the slowlane demons .

 

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[DeletedUser2]

MBA?

Really? didn't get enough abuse 1st time round in school?


Ok, so someone did a great sales job on you. great. why not do it differently. as has been suggested on the forum.
1. drop out, stay broke for 3 semesters, go work for someone who is doing biz on a large scale for free. (better than class) at the end you will end up with a million dollar education. (i suggested this on another thread, still applies)
2. Buy someones Business who is already running it. See this thread (https://www.thefastlaneforum.com/ge...ps-processes-how-tos-post245691.html#poststop )

thats my 2.7 cents. (adjusting for inflation)

 

[InMotion]

I think your title should say....start a business or buy a job.

 

[AmericanFighter]

MBA?

Really? didn't get enough abuse 1st time round in school?


Ok, so someone did a great sales job on you. great. why not do it differently. as has been suggested on the forum.
1. drop out, stay broke for 3 semesters, go work for someone who is doing biz on a large scale for free. (better than class) at the end you will end up with a million dollar education. (i suggested this on another thread, still applies)
2. Buy someones Business who is already running it. See this thread (https://www.thefastlaneforum.com/ge...ps-processes-how-tos-post245691.html#poststop )

thats my 2.7 cents. (adjusting for inflation)

LOL thanks i see where u are coming from the problem is that my undergrad degree of history and economics doesn't get me a whol lot because i don't have the job experience other applicants have but being in the MBA program gets me jobs through the university. they have a top notch career development program. i go part time though so i can still work.

 

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[theBiz]

I would not listen to many people here. Nothing wrong with buying a business, especially if you are inexperienced. Zend didnt you buy a business as your first venture when you first moved onto the internet? Im pretty sure hes killing it now. In theory starting your own business is better, but much higher failure rate. Go work for someone who is where you want to be in life, learn the numbers, what it takes, and either buy the biz off them or go look to buy another. Life is hard when you create a startup, if you buy a biz generating income it makes it easier to keep reinvesting and expanding, the need is validated when you buy it. Either way you go experience doesnt hurt and too many people want over night success and dont know what the hell they are doing. 1 year working for someone in a certain business you will know more than youll learn playing on your computer for 5. If i could go back i would of worked for an internet startup making money, wasted way too much time learning everything on my own... plus you make contacts. For example what if one of the guys at the company was excellent at adwords, media buying etc. Its going to take you alot of money and time to make it work, where as maybe you can just call your old co worker up, meet him for coffee and set everything up for free. There are thousands of different ways to reach the same destination, dont copy someone else, do what you vision and believe will work for you.

 

[The-J]

I would not listen to many people here. Nothing wrong with buying a business, especially if you are inexperienced.

It's one thing to buy a $20,000 Internet business, it's another to buy a $250,000 franchise. The numbers simply don't make sense for him.

Also, I find copying other people to be an excellent way to make money. As you said, it lets you waste less time than learning it on your own.

 

[DennisD]

Even though my goal is creating my own businesses, I can't $%!# all over franchising. And here's why:

Franchising works
There are thousands of successful franchisees out there who own multiple stores, are free from work, and didn't simply 'buy themselves a job'. There are, and I know a few. Franchises do have a few very compelling features to them.

• Branding is done for you. You don't have to swim upstream to establish the name. People already trust it.
• Product line is tested, proven, and WORKS.
• Don't need to spend absurd amounts of cash on marketing. The franchise will advertise FOR you. you don't need to pocket the 200K+ on filming/testing/distributing a television campaign.
• You get the proprietary systems established by the franchise. You don't need to form stellar relationships with distributes to get the best prices for merchandise or materials. This is taken care of before you even start.

If your skills are in branding, marketing, testing, bootstrapping, etc... starting a business might suit you better.

If your advantages lies in having a lot of cash and great management skills... you might be better suited for owning a franchise.

It's an investment
I like to think of franchises as an INVESTMENT the same as buying gold, stocks, etc.

I don't think you'll become a billionaire (or even a millionaire) by owning franchises... but that doesn't mean they're not worth the investment if it fits into your overall strategy.

Franchising different brands and different stores in different locations helps give you a larger degree of control. If you're great at predicting localized market trends then investing in a franchise isn't just "buying a job."


That's not to say I think OP should start a franchise... I just hate to see one industry or method of investing get crapped on.

 

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[theBiz]

It's one thing to buy a $20,000 Internet business, it's another to buy a $250,000 franchise. The numbers simply don't make sense for him.

The numbers never make sense for anyone, we all want more. Second you do not need money to buy a business, read zends post... you need reputation, salesmanship and the ability to find a perfect situation.

Also, I find copying other people to be an excellent way to make money. As you said, it lets you waste less time than learning it on your own.

Well i cant have this debate because i dont know how much money you make but i disagree. I have had friends/competitors try to copy me all the time. Yeah it works today, but what about tomorrow? What happens when markets shift or things change, YOU are the leader, you can only copy for so long. There are 6,323 operations and decisions to make everyday, you may think you know what someone else is doing but you dont. There are internet businesses that are successful because they shook hands with the right person, but your going to do a PPC analysis and think youve got it. If it works for you great but again a real entrepreneur knows the market and knows what their competitors are doing, knows but doesnt copy. Youve either got it... or you dont, for some its natural, others it takes years of hard work. MJ makes money.... why dont you copy his book and copy this forum.

I don't think you'll become a billionaire (or even a millionaire) by owning franchises...

I know an immigrant who owns many many franchises and is worth 60 million dollars. He came here broke 20 years ago, most here are not worth that nor never will be. He branched off later on but most is and come from franchises. He was a great man and inspiration. At some point you need to learn to challenge what
you learn here just as you challenge traditional eduction... its not all about owning a "fastlane". There are real estate brokers that make millions per year, nothing wrong with it. Your goal here is a means to an end, period, how you get there is your decision.

 

[The-J]

Well, you're right about one thing: you can't copy everything in business. If I tried to copy the Fastlane Forum, I would surely fail. If I tried to copy MJ's book or MJ's limo business, I would surely fail, for many reasons. I wouldn't try and copy someone's product, or someone's service, or someone's USP, but I would copy someone's operations. For example, if I had needed an e-mail script to collect e-mail addresses from a Web page and then send a message to those e-mail addresses, I could either code it on my own (or hire a developer to code it for me at a hefty price) or use someone else's code that's already available. The answer is obvious, unless I needed a very specific e-mail script.

In business, there are 6,323 decisions to make every day, and the less you make on your own, the more energy you can put into making more sales. That's just how I see it.

 

[Kak]

after your MBA, you're going to have good credit

@ J ---They have nothing to do with each other.

@ OP--- My advice is to start something now. Your MBA isn't going to send you some magic unicorn pulling a trailer full of ideas for businesses or the ability to make them successful. Waiting a year for your MBA is retarded before you do anything.

I have a business degree. In running multiple businesses not a single partner, associate, employee or customer has ever asked me if I had a college degree as any kind of qualifying factor. Not once.

 

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[DeletedUser2]

It's an investment
I like to think of franchises as an INVESTMENT the same as buying gold, stocks, etc.

ok, the best franchise deal I found was when a private equity group bought 33 Cece pizza places out of bankruptcy, from a guy who was getting divorced. they made millions on the deal, so it can make you a millionaire. the secret to franchises, is own more than 1.

if you did a 5 yr gig, just starting, reinvesting, and growing your franchises to say 15-40 units, you would do great. like anything its a process. do 1, then 3 then 5 then keep on going.

personally there are alot of great biz out there that have no exit plan. and you can get in for little to no money, if you just provide someone enough value, that it makes sense for you to become the exit plan

the baby boomers are getting older, and not many of them have thought up an exit. now is one of the best times for buying biz. (the easy deaths are already done because the last 4 yrs have killed them off, they are probably tired, and its makeing less than it used to. they have no other plan, and the numbers would make it attractive based on being beaten down into the dirt.) so go, buy. learn what trails have already been trampled.

I have bought several, started alot, both have their challenges. personally I like buying now days, because I can see whats wrong, and what I can do to improve them. easier



Z

 

[The-J]

ok, the best franchise deal I found was when a private equity group bought 33 Cece pizza places out of bankruptcy, from a guy who was getting divorced. they made millions on the deal, so it can make you a millionaire. the secret to franchises, is own more than 1.

Sounds a lot like real estate: a way to park a large amount of cash for revenue.

 

[GuestUser8117]

hey everyone i am getting my MBA and when i graduate in 2014 i am going to open a business i was wondering is it better to start my own or buy a franchise.
i am pretty open to the type industry along as i can make good money.

currently i have 17,000 in the bank. and i expect that to grow by a couple thousand by 2014.

Buying a franchise = fastlane passenger

Starting a business = fastlane driver

Big money is made when you are the ultimate driver of your vehicle. Start a business and sell franchises via intentional iteration, as explained in the book. Just think about Starbucks or Mcdonald's.

 

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[TheBigPill]

You're the only one who can answer this question. What are your strengths and weaknesses. Assess your abilities and what you want then go forth and conquer.

First of all, you can't afford it. $17k? Let's talk $250,000 just for franchising rights. Then you gotta get the real estate, purchase the inventory, pay for marketing, blah blah blah, it's too expensive for you. Period.

Not every franchise requires that much capital. In fact there are many that don't. Your statement is not accurate. but I do agree with you on the control issue. That's the biggest obstacle I'd have if I we're starting a franchise. You'll run into things like being forced to use a certain supplier even though you can source supplies cheaper elsewhere. In other cases your marketing will need to be approved by the corporate office. It's highly dependent on the industry and the franchisor. To get a better idea of what you're be dealing with try to get their franchise disclosure document and ask questions lots of questions both to the corporate office and to other current and former franchisees.

 

[DeletedUser2]

LOL thanks i see where u are coming from the problem is that my undergrad degree of history and economics doesn't get me a whol lot because i don't have the job experience other applicants have but being in the MBA program gets me jobs through the university. they have a top notch career development program. i go part time though so i can still work.

I dont have a degree at all.
zero,
none,
nada.

that makes Zero Difference.

most of the businesses i started or bought, I never had a whit of experience in, before i started them or bought. Period.

you get it on the way...


Z

 

[AmericanFighter]

I dont have a degree at all.
zero,
none,
nada.

that makes Zero Difference.
most of the businesses i started or bought, I never had a whit od experience in, before i started them or bought. Period.

you get it on the way...

Z

thanks guesss i need to reevaluate where im am

 

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[mrsilva]

Let me fix for you:

Start a business or buy a job?