Franchising Franchise discussions

Discussion in 'Starting & Running a Business' started by TMNT, 10th Aug, 2015.

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  1. 733

    733 Well-Known Member

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    My business partner and I looked closely at franchises initially - essentially our takeway learnings included: (1) some businesses are in the business to sell franchises; (2) the overt marketing slows down two months after the franchise expo is over; (3) the royalty fees make it tough to profit and expand including the control on what products you can purchase losing opportunities to do your own deals locally; (4) there is no such thing as an éasy'option - a bit like property investing - trust the marketeers and their recommended ''investment support team of brokers/lawyers etc and you get stitched up learning the huge price of 'having someone hold your hand' when we are all capable of our own DD and research which essentially means (5) do the hard work and open your own business - hard at the start but much easier in the long run in many ways
     
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  2. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    I honestly believe dominos make a lot of their money from selling the initial franchise which start at around $400k++

    The franchisee just makes a wage and has to do about 70hours of work a week.

    Also all of this talk of them increasing profits will soon end. When they open too many stores.

    Their latest thing is allowing the customer to pay an extra $5 on top of normal price to get the pizza delivered in 15minutes or it's free. The CEO was saying he is not sure how the franchisees will take it...so shows you how much they care about the poor ******* that put their ass on the line to buy it.

    The 15 or 30minutea or it's free thing has been done about 20 years ago. It won't last.
    Also there is no money in selling a pizza for $4.95.

    A dominos store near me has changed hands about 4 times in 10 years. So they tells you they aren't making much money to only stay maximum 3 years at a time.

    The most recent owners are Pakistan. Who are buying it to gain residency. Not being racist but have heard this is what happens.
     
    Last edited: 19th Aug, 2015
  3. Tony Fleming

    Tony Fleming Well-Known Member

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    100% correct
     
  4. Ace in the Hole

    Ace in the Hole Well-Known Member

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    I just heard that a Donut King in a smallish local shopping centre have to leave next week because they did something pretty dumb.
    They forgot to renew their lease.
    What hope do they have now of continuing their business, as surely they are restricted to zones they can operate out of, doesn't leave them many, if any options of finding another suitable location.

    Same thing happened to a guy I know who owned a newsagency a couple of years ago.
    His lease was limited to a certain number of years when he bought the business and he was unable to renew it because the small shopping centre he was operating out of was getting re-developed.
    He simply had to let his licence and business expire and lost his total purchase price because there was nothing left to sell, as his territory was restricted and there were no other viable options available to lease another suitable property to operate from.

    Both these issues show that not paying attention to lease details can destroy you.
     
  5. geoffw

    geoffw Moderator Staff Member

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    That sounds as if the landlord didn't want to renew the lease with them. If they really wanted to keep the tenant they would have started negotiations twelve months before renewal was due. They probably got a much higher rent from a new business.
     
  6. Ace in the Hole

    Ace in the Hole Well-Known Member

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    That's my thought's too.
    The DK owners should learn a lesson from this one.
     
  7. TMNT

    TMNT Well-Known Member

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  8. TMNT

    TMNT Well-Known Member

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  9. Tillie

    Tillie Well-Known Member

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  10. clint05

    clint05 Well-Known Member

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    I'm seriously looking into purchasing a Hire a Hubby franchise. Does anyone have any advice or comments with relation to the way their franchising structure works, or if they've heard any horror stories.

    They seem very honest and transparent, and the seem to have a very good business model.

    I've not called any other franchisees as of yet, but this will definitely be part of my due diligence.

    Cheers,
    Clint
     
  11. Coconutwheels

    Coconutwheels Well-Known Member

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    G'day clint, I haven't heard much about them, do have details on their business model wrt buy in price, ongoing fees, advertising etc etc I'd be happy to give my 2 cents in comparison what I know of other franchises.
     
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  12. clint05

    clint05 Well-Known Member

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    There is different prices depending on the area you buy into. The areas are split into Bronze, Silver and Gold depending on the demographics in that area.

    Here is a snapshot of costs for bronze and gold territories.
     

    Attached Files:

  13. clint05

    clint05 Well-Known Member

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    Last photos were a bit hard to read, hopefully these are a little better
     

    Attached Files:

  14. Tony Fleming

    Tony Fleming Well-Known Member

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    I remember my wife was looking into a jims home cleaning service with a friend. They guaranteed a certain amount of work. Her friend contacted a franchisee a couple of territorys over and he said the work was barely guaranteed. They give you numbers of potential cleints and you have to try and get them to use you. So just be careful of that aspect if they offer guaranteed work.
     
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  15. EK01

    EK01 Well-Known Member

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    I use Trevor Fon-Lowe from Hire a Hubby Paddington for maintenance in Brisbane. Good operator and a nice guy. If you go down the DD road, I'm sure he'd give you an honest appraisal.
     
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  16. Blacky

    Blacky Well-Known Member

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    A life time ago I used to bank the WA franchise owner.
    His business model was pretty easy. He managed a number of 'franchisees' and their areas, and generally tried to keep them from moving outside their area.

    At the time, they had to purchase the franchise, all tools/equipment and pay a % for marketing. I struggled to see the value of it. As the business was young guys were able to purchase regions, and would recieve a much larger area, as there werent other guys "next door". A lot of them were tradies who had specialties - and would regularly team up for big jobs.

    If you contact them, they will often let you go around with one of the other franchisees for a couple of days to ask questions and see how it was working.

    The business model was meant for small 'odd jobs' but in WA at least, they mostly ignored these and worked on much larger 'projects'. Building decks, installing fences, landscaping etc. Stuff that would keep them busy for a few days to a few weeks at a time. One franchisee employed at least 4other guys with him.

    To me it was basically you running a handyman business, but paying a % to someone else to paint your van pink. In saying that though... they seemed busy enough.

    How much the franchisees made, I couldnt tell you. The Franchisor made a healthy living.

    Blacky
     
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  17. Ace in the Hole

    Ace in the Hole Well-Known Member

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    Hi Clint,

    I have a few questions regarding those screenshots.
    The Gold package for instance.
    65k buy in.
    20k/annum for management and advertising fees.

    100k/annum income guarantee, here is where the questions are:
    1. Is this total gross income inclusive of GST
    2. Or, is it net profit after all operating costs accounting for management and advertising fees.
    3. Or, some other combination.
    4. Do you actually get any significant physical product for the 65k buy in, or just the rights to an area, in which you have to ray rent for anyway?
    There is a huge difference on how they interpret this.
    If it's simply gross sales inc GST, you could be making as little as 20-25k, or considerably less depending on materials costs and other running costs and still fall within the income guarantee.
     
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  18. clint05

    clint05 Well-Known Member

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    Hi Ace, thanks for the reply.

    The income guarantee is for $2000/ week gross profit. It was explained as total revenue minus direct costs such as labour and materials. All expenses such as motor vehicle, insurances and franchise fees are not taken into account for the purpose of the income guarantee. It's paid on a week by week basis and from what I understand I would need to call mid-week to let them know Im not looking like I will be making my $2k and then they will bombard me with jobs to get me over the threshold.

    From memory for the $65,000 you do receive:
    * all abn and business registration etc
    * flights and accommodation to Melbourne for 10 days training (combination of workshop training and also business management)
    * computer and phone
    * sign writing on your car.
    * uniforms
    * your territory
    I may have missed some stuff.

    I have made the decision that I will start my own maintenance and smaller construction work company. As I think the biggest appeal of the franchise was the support base of the parent company and fellow franchisees. Much of that appeal probably comes from my lack of confidence in running my own business because I have never done it before.

    My boss gave me a pep talk today and boosted my confidence telling me I've got nothing to worry about and I'll be fine. So that was nice to hear.

    When I think how far I make that $65000 go myself it really is a pretty easy decision to make.

    Cheers,
    Clint.
     
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  19. Coconutwheels

    Coconutwheels Well-Known Member

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    My thoughts also, take less than half that money and spend it on business coaching, accounting, marketing etc and you'll be miles ahead without the ongoing franchise cost and ascosiated franchisor constraints.

    Also your boss sounds pretty good, I'd be interested in following your progress as you start up and get going.
     
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  20. clint05

    clint05 Well-Known Member

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    Yes, that's exactly the plan. Lots of hard work ahead, but I'm feeling liberated and energised. So I plan to get that big ball rolling and I'm sure I'll be providing clients with some excellent maintenance and renovation work in no time.

    Yes, my boss is a very nice bloke. He has offered to help out with anything I need from quoting to website set up and anything and everything in between.

    I'd love to post some updates of my progress. Having some witnesses cheering on might push me along that little bit and get me striving for that little bit better ;)

    Cheers,
    Clint.
     
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