Hi,

I work in software (own small business) but I want to setup a franchise or something else (also considering renovation of properties) as I'm a service company with little income from products - therefore if anything happens to me the income will plummet.

Has anyone on here bought a franchise?
Good or bad idea?
Was it worth it?
Do you wish you'd just setup on your own with a new "brand"?

I am considering Subway, Cash Converters or a hairdressers, I need something where I can work to set it up and then pretty much leave it to tick over itself. If I do the hairdressing option I am most likely not paying the franchise costs, I will just setup a new brand.

Franchising doesn't offer this kind of "easy options" Most franchisees work long hours and have high costs to pay. The restrictions the franchisor may impose on prices, methods, suppliers etc are not for everybody.

Do a strong due diligence on whether you should just set up your own business. And I would be concerned at the prospects of anyone who was unable to decide between three fundamentally different businesses - you should already know your skill set well enough to narrow down the choice.

Isn't franchising a great way to make money... for the people who sell you the franchise?

That's what everyone I've met who set up a franchise business said, anyway . After all, if there were big profits to be made, why would the company be giving them to the people running the franchise rather than keeping them to itself?

Yep, companies selling them do make lots of money but if the franchisees didn't make any they'd soon stop selling them as they'd be no market.

McDonalds, Subway, Tim Hortons to name a few, there are plenty of people making good money after buying those franchises

My strength is software but I want something away from software and something that I can setup and leave ticking over. Hairdressing seems the easiest option and I don't have to pay a franchise fee really.

They might do it as a way to quickly reach critical mass, a brand isn't a household name until there are a lot of outlets and financing the opening of all those outlets is expensive. Some firms operate both franchised and owned outlets, I'd be inclined to see that as a plus.

I don't have a franchise but work with someone who owns a Subway store, it entails working masses of hours (since he has a day job he's there every evening and both days of the weekend) and generates very little money (rule of thumb, you need four stores to make a living wage). His idea is that, since it was a new location, he should be able to build up the traffic and sell the franchise for a profit. I dunno about that, he'll have several years worth of accounting showing it generated less than a buck an hour in income but time will tell.

That isn't great. I choose Subway as I know someone in Leicester, England and he bought a Subway franchise which completely paid for itself in 4 years. He has one outlet, no other source of income and drives a new Porsche Cayman. All down to location I guess. He can't sing their praises enough.

Not true. There are always suckers^H^H^H^H^Hpeople who think they can make easy money running their own franchise... they look at how many customers the local Subway has and how it's 'just' a matter of sticking a few bits and pieces in a bit of bread and assume that it must be making a lot of money.

Subway in the UK has little competition; I was glad when one opened in the town where I work and have spent quite a bit of money there. But they're everywhere in the Canadian towns and cities I've visited.

That's not to say you can't make a profit, but don't expect it to be easy.

You're right, there are always suckers, and they will probably buy crappy franchises in companies with no track record.

I don't expect it to be easy. Its a backup plan. Right now I'm financially ok off. I'm looking "just in case". I owned a software business that specialised in providing software to airlines. I went from me to 10 employees inside 5 months and then came 9/11. I know more than most how situations and income can u-turn instantly - luckily I sold the business to a PLC. I could sit back now and do nothing but I don't I'm working 50-60 hours per week to ensure my daughter has a very secure future. With me out of the frame that situation might change, with a franchise that doesn't rely upon my specific software skills an income and business would still continue for my wife and daughter. Thats all I want.

Why not just buy stock in a company that sells franchises? Similar risk level, aside from initial due diligence very little work involved and if they offer dividends, better taxation on income (in Canada - don't know if you're talking Canada or UK).

Plus it's fun. Buying stock is my answer to most life problems.

I saw a road once in America with three McDonalds' within a hundred yards; somehow I doubt that three franchise owners are all making money there.

Some franchise purchasers make a great success of it. I do legal work in commercial real estate, and we have a business brokerage that specialises in selling franchises. Just about all buyers have gone on to make a great success of it, but I know you have to be careful which ones to buy into. And a friend of mine from the UK bought into a landscaping franchise, and makes good money. Places like KFC, Buck or Two, Subway, Blenz, Sportschek etc etc - all have good marketing departments and are pretty strict about who they sell to because their name and reputation is at risk. You have to go through quite a process of approval and training to buy into most of them. Someone else mentioned 3 McDonalds within a hundred yards or so of each other, which I find hard to believe because there are strict rules about how many per area. But that was in the States, so who knows?! No matter what business you are in, you have to be willing to put in lots of hours and effort in the first few years to make it successful. There are pros and cons about buying into a franchise, but a good one will give you lots of backup, too.

Just my opinion, for what it's worth.

I agree with hot wassabi, you can get out of the market by selling the stock for just $29.00 commission.I bought pipelines, residential real estate,
oil and gas royalty trusts and I get dividends monthly and some quarterly.
Also bought TSX corporation and banks for dividends ,so that I could get the
cash flow to play the juniors for fun.

I looked at owning a business and I am not good in dealing with staff or
tenants. Thank God for those dividend stocks and the royalty trusts.
Royalty Trusts took a hit last Nov. in response to the Govt. taxation
rules in 2010. Oh well,they will get our money one way or another.

I have heard of people that done well in franchises,in Vancouver there
is a free newspaper called Immigrants featuring how they
become successful in Canada.
If you are looking into Subway franchise, find one in the food court
at a shopping mall.The overhead will be lower due to the smaller space
and lower the risk of being robbed I think.
Good luck.
Yoong

Thanks. Your comments are pretty much what I expected.