Franchising What are some of the worst Franchises ??

The OP mentions Yoghurt places, he was right. There were 5 or 6 in Newtown Syd in 2016, now zero

 

What about salsas mexican,

havent read one good review of them

in fact I met the guy who was GIVEN one for FREE by a radio station

Franchise News: 5 December 2013 - Franchise Advisory Centre

said he was bleeding $5k per week,

food was fine, but high rents, overhyped product, too expensive, not unique

I felt so sorry for him

edit: a bit of googling shows

Investment Levels:
$500,000 Above
Concept:
Salsas offers fresh, flavoursome and mouth-watering Mexican food for customers.
Capital Investment Required:
Food court model
$430,000 - $480,000 + GST

Casual dining
$575,000 - $650,000 + GST
Qualifications Required:
The training is delivered by our dedicated Learning & Development team and encompasses both the front-of-house operations and back-of-house management involved in operating a Salsas business. The training programme cost is $14,000 + GST.
Franchise Fee:
$50,000 + GST
damn $14k + gs for training, $50k + gst for franchise fee!

 

I was in Macquarie Centre Ryde a few weeks ago. Lunch time rush in the food court was horrid - dark and noisy and nothing caught my eye.

I looked around for stand alone places and came across Japan City, on the top level next to Fitness First.

Big store / restaurant with additional seating outside the shop line. Heaps of staff, the food was really good - made to order and delivered to my table and the food was cheaper than the food court.

I noticed they were a franchise, but their website is very poor. Maybe in their infancy?

Japancity

 

Oporto and Red Rooster stores are on the verge of collapse

Does not surprise me the least.

Red rooster I'm shocked still exist.

Thoguht Oporto was doing OK

 

Obviously it looked sensationalised But I feel the bottom line is on target.

If I had to guess which franchise would close next out of the big ones I'd say red rooster

 

'I was effectively a slave': broken Red Rooster and Oporto franchisees

 

It amazes me that Red Rooster has survived this long. Those chicken rolls are delicious but the whole one bite is scalding hold and the next is cold takes the fun out of it.

 

scary stuff,

so the franchisor can using some legal clause or whatever to take the guys 6 stores because he misbehaved in one on them

sure this guy is no angel but the process is disgusting,
it makes me sad to see people who go into that much debt and trouble when they think its a safe and reliable model,

 

Not sure if they have sought legal advice as well as accountant advice before entering such franchising agreement. My experience is that the agreement tends to favour the franchisor.

 

of course ht franchisor has all hte power , royalties, supplier agreemtns, rules, hindrances, clauses, investment, the franchisor never loses out,

too many people mistake an accountant as a business expert, they will do analyse how profitable the business is in its current state if its existing and not new, but have not required to have business expertise

legal advice, not sure how useful they are except for telling you of massive legal problems or inconsistencies, I doubt they can or will tell you how good the business is be. Just like a real estate lawyer, thye arent goign to tell you if its a good investment or not

 

correct but legal advice with knowledge of franchising code of conduct can go in some ways to re-balance the agreement. accountant can in some ways work out with all the costs involved, make some projections. I have a feeling (haven't spoken to too many yet) that many went in on the "promises" without looking into the details.
of course these professionals cannot tell you how good the business is or can be. No one can guarantee you success.

 

I think many of these people went in thinking both via their personal beliefs and what they were told that a franchise was fail proof and a license to print money

 

Hahaha so true...

 

The only ones I have seen make profit from a franchise is a buyer group I worked on.
4 blokes owned circa 12-15 HJ's/RR's at a time.
Offloading the ones which underperformed and then sought better performers, reinvesting set profits back into the group to purchase further franchises.

Franchises are nothing but a job. Simple.

 

From that article above

Is there any legal or franchise code of conduct address of this issue? IMO this alone will put the franchisee on a hiding to nothing with respect to the franchisor.

 

'The model is flawed': Endota Spa franchisee left bankrupt

And another one......

 

And more...
‘Destroyed me’: Horror Aussie franchise stories

 

There are two sides to all stories. I have seen some lose and some make a mint. Those that make big $ often walk away when they see bad signs and eventually find a gem. Those that lose believe what they are told and dont look deeply.

Location location location and product are the first four rules of a franchise. How many times have you seen a poor location (cheap rent was lure) fail. I have looked at a few franchises over the years and some just dont stack up. Simply take net income from sales less product cost minus rent minus franchise costs and fees and then deduct minimal staff costs. And there is nothing there to fund owners income. The argument that it will be there in cash sales, sales will increase etc doesnt cut it. Most recent one was a "very profitable cafe"...Broker even said it made 30% net. I reckon it lost money. I demanded owners own tax return. He didnt even get paid. He told me he got cash etc and all sorts of issues which I didnt believe. Then I saw debts had ballooned in the year incl ATO getting paid weekly under an arrangement. Profitable businesses dont rack up debts that way.

The wrong product is death. How many sub, pizza and gyms are there ? And almost next door to each other. 30 years back pizza hut charged $23 a pizza. Now its $5+

I also have a client with franchised retail stores making $250K per store net. Has multiple stores now. Another with fast food major brand. Makes $1m a year net.

I would encourage anyone buying a business to get a independent accountant to walk in and rip into the numbers. May cost $3-$10K but will save far more if its a dud.