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The best description I have seen for single store franchisees is, you’ve paid a lot to give yourself a job. They are not lucrative, and in fact, are capital intensive, and often predatory.
There is a very high up front cost, and you generally do not own the real estate. This means you are locked into 30 year leases, often with complicated terms that are solely beneficial to the land owner.
Next, with regards to liquidity, if you don’t own the real estate, you often can’t get multiple business loans with a single franchise, so you must secure the loan with your personal assets, which means you will go personally bankrupt if you hit a rough patch.
Then, after dealing with the complicated business to business transactions and legal work, you still have to deal with the corporate bullshit, taxes, and supervisory duties, particularly if you do not already have a strong business partner to do this for you.
Pretty much, unless you are independently wealthy, own the real estate in a high traffic location, or already have multiple other franchises, it’s a losing venture that will kill your soul and eat every dollar you have.
Been there, done that. Would not recommend. Space Pirate has nailed the experience. I paid a lot of money for essentially a job, and ended up selling at a loss just to get my time and mental health back.
That was back around 2010 so I’m sure it’s an even more difficult situation for franchisees today.
Ask me anything, I guess?
I'm interested what kind of franchise you ran, so like was it a big national chain? Or a small thing with a few locations? I wonder whether either is better.
It was a national tech store, so had a few hundred locations around the country. I just had the one.
One of the big challenges was having little to no say in brand or supplier decisions etc. Specifically, we also struggled with paying inflated wholesale prices with the franchisee or then benefiting from volume rebates which weren’t shared. Really crushed our margins!
I suppose in a smaller chain you might be a little closer to the franchisor, and you might have some influence, but ultimately you’ll always be the little guy.