| How exciting it is to decide to start a business of your | | | | lucrative. We were left with the business and had to |
| own. You are going to be your own boss. You are | | | | find a manager to run it. In short after about 5 years of |
| going to make lots of money. You have decided to | | | | feeding the business we sold it or closed it down. They |
| buy a franchise; after all they have all the systems in | | | | only way we made money with these businesses |
| place and must have worked out all the bugs. What | | | | were by being the landlord of the business real estate. |
| you lack in inexperience of running your own business, | | | | Unfortunately our investors usually did not want to be |
| they have figured out. They will train you, help set up | | | | a part of this arm of the business so they were lucky |
| the business and even train your staff. Everything is | | | | if they got their initial capital investment out. |
| going to be fantastic or is it? | | | | The points you need to consider in a franchise you are |
| I have personally owned or been a partner in several | | | | thinking of opening are the following: |
| franchise businesses, not as a working partner in the | | | | 1. Initial training is very good, you are paying for it dearly, |
| franchise but as an investor and managing partner. I | | | | however what about follow up training or training for |
| have made lots of money in some franchises and I | | | | the new staff. Remember your initial team of |
| have made no money or lost money in other | | | | employees will be a part of the training but what |
| franchises. Please learn from my experience. It is free. | | | | happens when they leave. How does the new staff |
| I will start by talking about the franchises that I made | | | | get trained? Normally once the store is open and the |
| millions in. My husband and I built and operate several | | | | initial training is done, you are on your own. |
| very successful hotel franchises. After doing the due | | | | 2. Construction of your business may be dictated by |
| diligence we carefully selected locations and the | | | | the franchisor. You may pay considerably more |
| franchise. These projects were multi million dollar | | | | because they say. We negotiated our own |
| projects so found investors to partner with us | | | | construction for one store and saved more than 50% |
| (hopefully as silent partners) and contribute the equity | | | | by doing it ourselves. |
| required by the mortgage company to be able to fund | | | | 3. Advertising dollars are controlled by the franchisor |
| the project. At first I would invest a small amount of | | | | and may not benefit your location at all. We owned |
| cash and perhaps own 2% of the project and | | | | one franchise that was the first in our country and |
| gradually I worked my ownership portion up to as | | | | asked to keep that money to advertise in our country |
| much as 22%. This was over the course of 10 years. | | | | as they were not spending anything locally or regionally. |
| Would I recommend an investment in a hotel | | | | They refused so we paid them out of the franchise |
| franchise? Yes I would if after the due diligence it looks | | | | and started our own. Big mistake for them as they lost |
| like it will be a good investment. Out of the 20 some | | | | millions in franchise revenue. For us we kept the |
| hotels that I have invested in, only 2 turned out to not | | | | money. |
| make any money and until they are sold, which at this | | | | 4. You will be creating a management job for yourself |
| time they are not, the investment cannot be deemed a | | | | but trust me, you will probably be working more than |
| loss yet. | | | | your employees and getting paid no more than you |
| The disadvantages of this franchise for you may be | | | | are making now. Perhaps even less. |
| that you are looking to create a job for yourself, but | | | | 5. Costs must be controlled. If they are not any cost |
| with many partners you only have control if you own | | | | uncontrolled is coming out of your pocket. |
| 51%. A large amount of money is required for this. We | | | | 6. Franchises can change the rules after you get in. |
| had managing partners that we fired for | | | | We owned one restaurant that did well for the first |
| nonperformance so they only bought themselves a | | | | couple of years, and then they started giving away |
| position for awhile. Incidentally to remove them as | | | | salad and breads and making us run specials where |
| manager we ended up buying them out. | | | | there was no profit left. They didn't care as the |
| These are long-term investments. You may see a | | | | franchise fee is paid on gross sales not net. We ended |
| cash return on your investment in 2 to 3 years or it | | | | up closing it down. Incidentally every one of those |
| may take 10 years or longer to see a cash return. | | | | stores in the country did not make money, not just us. |
| The franchises that I invested in that made no money | | | | As an entrepreneur for the past 20 years, there is |
| or even lost money is restaurants. We did alright at | | | | nothing more rewarding than working for yourself. I |
| first. My husband and I would hire a manager and | | | | have found a new opportunity that does not cost a 6 |
| make them a partner and again raise capital with other | | | | figure digit to get into, you are your own boss and it |
| investors. The businesses did alright as long as the | | | | can be run with no employees just yourself at home. |
| managing partner stayed but they never made more | | | | You will get out of this business what you put into it. |
| than a salary so in a few years got complacent and | | | | Please have a look at it. |
| moved on to something they though would be more | | | | |