Entrepreneurship & Small Business

Is it okay to own franchise but handled by a partner/manager?

  • Last Updated:
  • Jun 14th, 2018 9:29 am
Jr. Member
May 20, 2002
186 posts
25 upvotes
I have a non owner occupied franchise. It is tough to get margins when you are paying a manager too.
[OP]
Newbie
Nov 17, 2012
8 posts
Edmonton
CowDoc wrote:
Jun 5th, 2018 1:40 pm
I have a non owner occupied franchise. It is tough to get margins when you are paying a manager too.
Thank you CowDoc! IS it possible for you to share some more information? What kind of franchise do you own? Based on investment what % return is expected as silent partner?
Jr. Member
May 20, 2002
186 posts
25 upvotes
Pet store.

400k invested.

Expect 10 to 15 percent of gross in 2 years.

We are year 2 and breaking even.

Had about 10k in profit last year.

If I had to do it over again I am 50 - 50 that I would do it again.

PM me if you want more details
Deal Guru
Aug 2, 2010
12510 posts
3062 upvotes
Here 'n There
CowDoc wrote:
Jun 5th, 2018 9:50 pm
Pet store.

400k invested.

Expect 10 to 15 percent of gross in 2 years.

We are year 2 and breaking even.

Had about 10k in profit last year.

If I had to do it over again I am 50 - 50 that I would do it again.

PM me if you want more details
Franchised pet store?

So, are you saying on a cash flow basis you are down $390k now? ie $400K invested, $10K profit (not sure if pre or post tax but irrelevant given the small number really).
Jr. Member
May 20, 2002
186 posts
25 upvotes
300k invested. 100k loss in 2 years.
Deal Guru
Aug 2, 2010
12510 posts
3062 upvotes
Here 'n There
Wow. Is it a franchise and was the loss expected? If not expected what contributed to it?
Penalty Box
Dec 27, 2013
7173 posts
2984 upvotes
Toronto
i still don't understand the whole concept behind buying these over priced franchises.
I get it, "the name/brand/advertising"
but that comes at a heavy price... shackled... like a slave... to royalties.

Here is the reality:
A franchise is a business built on PROCESS. If you are disciplined, and can make a PROCESS that works, be customer focused, and produce something/sell something , I think you will be better off.
With media being what it is, you can easily get to 10,000 twitter, instagram, facebook followers. yeah you might have to pay a bit of cash, but it will work.

obviously, it's not that easy 1.2.3.... But if you're really set on building a business, I think this is the best way... specially in food industry. People need to eat. specially if you're looking for a place that serves lunches/dinners/snacks, etc.

i think you can go a long way with $100,000. Clean shop. Not to large. A bit of seating. Cater to local businesses. Cater to repeat business. I think you can do really well. Of course, you will need to work.
Deal Guru
Aug 2, 2001
14868 posts
5177 upvotes
daivey wrote:
Jun 6th, 2018 11:02 pm
i still don't understand the whole concept behind buying these over priced franchises.
I get it, "the name/brand/advertising"
but that comes at a heavy price... shackled... like a slave... to royalties.

Here is the reality:
A franchise is a business built on PROCESS. If you are disciplined, and can make a PROCESS that works, be customer focused, and produce something/sell something , I think you will be better off.
With media being what it is, you can easily get to 10,000 twitter, instagram, facebook followers. yeah you might have to pay a bit of cash, but it will work.

obviously, it's not that easy 1.2.3.... But if you're really set on building a business, I think this is the best way... specially in food industry. People need to eat. specially if you're looking for a place that serves lunches/dinners/snacks, etc.

i think you can go a long way with $100,000. Clean shop. Not to large. A bit of seating. Cater to local businesses. Cater to repeat business. I think you can do really well. Of course, you will need to work.
You are discounting the power of the brand. Some brands will generate large sales/profits, whereas an independent shop will struggle to continually get customers in the door. That same small business will struggle to transition as the market changes whereas the franchise will have the corporate employees working to help keep them moving forward.

Franchises provide a blueprint for success. They are able to show you what needs to be done, how it needs to be done, and provide assistance in doing it.


Dairy Queen is a great example. Even with the recent (past 10 years) attempt by Marble Slab, Cold Stone, etc. they are still the "champions" of the ice cream market. People pay $3-$4 for a darn ice cream cone or $8 for a large blizzard. This would be very hard for an independent shop to replicate. And, at least in my market, I know of no non-franchise shops that have reached anywhere near the same level of success as your average franchised DQ.
Penalty Box
Dec 27, 2013
7173 posts
2984 upvotes
Toronto
TrevorK wrote:
Jun 6th, 2018 11:17 pm
You are discounting the power of the brand. Some brands will generate large sales/profits, whereas an independent shop will struggle to continually get customers in the door. That same small business will struggle to transition as the market changes whereas the franchise will have the corporate employees working to help keep them moving forward.

Franchises provide a blueprint for success. They are able to show you what needs to be done, how it needs to be done, and provide assistance in doing it.


Dairy Queen is a great example. Even with the recent (past 10 years) attempt by Marble Slab, Cold Stone, etc. they are still the "champions" of the ice cream market. People pay $3-$4 for a darn ice cream cone or $8 for a large blizzard. This would be very hard for an independent shop to replicate. And, at least in my market, I know of no non-franchise shops that have reached anywhere near the same level of success as your average franchised DQ.
i see lots of independent shops getting people through the doors
Deal Guru
Aug 2, 2001
14868 posts
5177 upvotes
daivey wrote:
Jun 6th, 2018 11:20 pm
i see lots of independent shops getting people through the doors
And I see a lot of independent shops failing or resorting to things like Groupon. What's the point?
Deal Guru
Aug 2, 2010
12510 posts
3062 upvotes
Here 'n There
Daivey is dead on. Look at something like M&M's meat shops, which is a franchise. Then comes along a guy from a family of generations of butchers from Melbourne, Australia who marries a Canadian girl, moves here and starts Cumbrae's butchers. He is not even from Canada, charges more than any other butcher shop in town, but now has multiple locations and is the go to butcher in town if you want the absolute premium quality meat. He could have just taken the brain dead route of opening an M&M Meat shop instead. And, yes I know a butcher shop is different from M&M's but I think you catch my drift. There are many more examples of this.

I've started 8 businesses is my lifetime. 6 successful and 2 never got off the ground after resources were invested. I never invested more than $100K and for my most successful one I never invested a dime. I never for once thought of buying a franchise as I wanted to be an entrepreneur and create something unique and not, as Daivey so correctly states, 'purchase the name/brand/advertising" at a heavy price... shackled... like a slave... to royalties'. Each to his own but if you are buying a franchise you need to realize how limited the control, risks and rewards can be. Fact is, the cost of entry is basically entirely dependent on the size of your checkbook and nothing else.
Newbie
Jun 7, 2018
1 posts
2 upvotes
Why a food franchise?

As someone who coaches people on buying a franchise, people call all the time asking about Subway or McDonalds. Food franchises are the most expensive to get into, have the smallest margins, and have the highest level of competition. Take a look at industries like hair care, fitness, or automotive instead.

Another important aspect is doing the proper research on the franchisor. Just because a company like Subway is big doesn't mean the franchisees are happy. In addition to coming in with crazy promotional deals like the $5 footlong, they're notorious for having little to no territory restrictions. That's why you might see them open up basically across the street from other franchisees.

Back to the original question of having a partner/manager run operations. Yes you can have a partner/manager run operations but it depends on the franchisor and who your partner is. There's a big difference between having a partner or having a manager in place. If your partner does not have relevant experience or a transferrable skill set, don't try forcing it. If you're set on doing a food franchise, you better make sure they have lots of restaurant experience or you won't be set up for success. They have an incentive laden agreement for them to hit benchmarks in order to earn equity.

Of the 3,000+ franchises out there, a small portion are set up to be manager run to allow you to continue working your day job. These are called semi-absentee franchises. You'll typically need to be able to dedicate 5-15 hours/week in order to manage a manager (non-partner). If this person is a partner to start, that will cut out of your profits very early and hurt your chances of success. In addition, should the person not be qualified to manage the place because you picked someone vs finding the right person, you're going to have an awkward situation if it doesn't work out.
Deal Addict
User avatar
Aug 15, 2015
1104 posts
144 upvotes
Markham, ON
Well, just read the top of this page.

I remember a free rich Dad poor Dad seminar I went to, remember there is an exit strategy before you buy anything.
Jr. Member
Jan 19, 2004
168 posts
28 upvotes
I recently financed a few Subway franchises, and they all came from different routes:

1) Successful franchisee with 5+ locations - He had to utilize the cash flow from the other Subways to help with the purchase of the new Subway location. He takes a little bit from each location in order to maintain his lifestyle. He would be considered successful.
2) Person looking to purchase his first franchise - He had to pay approximately a year's worth of revenue for the store (so higher volume places have to pay more, think roughly $700K for the high end). He had to work there with his wife and make $30K/year between him and his wife for the first 3 years, working everyday. That's tough for anyone that isn't a landed immigrant to swallow.

Seeing as this is your first foray into the franchising business, specifically the food franchising business, you have to know that you will need to make sacrifices that will affect your way of living and your ability to get a mortgage or otherwise any sort of debt for a few years, if not 5-10 years.
Penalty Box
Dec 27, 2013
7173 posts
2984 upvotes
Toronto
Ck2 wrote:
Jun 11th, 2018 1:47 pm
I recently financed a few Subway franchises, and they all came from different routes:

1) Successful franchisee with 5+ locations - He had to utilize the cash flow from the other Subways to help with the purchase of the new Subway location. He takes a little bit from each location in order to maintain his lifestyle. He would be considered successful.
2) Person looking to purchase his first franchise - He had to pay approximately a year's worth of revenue for the store (so higher volume places have to pay more, think roughly $700K for the high end). He had to work there with his wife and make $30K/year between him and his wife for the first 3 years, working everyday. That's tough for anyone that isn't a landed immigrant to swallow.

Seeing as this is your first foray into the franchising business, specifically the food franchising business, you have to know that you will need to make sacrifices that will affect your way of living and your ability to get a mortgage or otherwise any sort of debt for a few years, if not 5-10 years.
that's so dumb.
you may as well work minimum wage 40 hours a week
that's $30,000 a year right there....
u dont have to worry about over head, royalties, legal fees, insurance, nothing, customer service... not your problem.

Top