Franchising What are some of the worst Franchises ??

You can’t help but feel for people who get involved with franchises- most are pretty naive as what it takes to run a business to turn a profit and believe in the franchisor in trust that they will hold their hand and in faith they will support them and help them succeed . -
Otherwise why would anyone pay the massive $400k plus to these companies ??!!
They could go and set up themselves up for a quarter of that price and have all the freedom to do what they want but they are too afraid of the unknowns - the franchisors play on this in a massive way

 

Jamaica Blue franchisees speak amid calls for franchise reform


What a mess

If it turns out the couple were misled, i hope they get a huge lumpsum to start their lives again.

Dunno why youd even buy one of these franchises that sell all the same stuff of coffee, cakes and biscuits

And jamaica blue to me is a nothing franchise

 

Always sad to read stories like this. The stress must be unbelievable during and after the purchase of the business.

 

Misled or just poor at business ? They bought the second one knowing the first was stuffed. That just stupid. Vendor driven finance should have been the first warning alarm. A lot of people blindly buy a business and assume the vendors numbers etc. They tell them....Oh and 35% will be cash sales so it will always perform well and blah blah blah. Reality is they tell you to go get legal, tax and other advice. They often dont. They cry about it later.

If I told you a property can pull $1k a week in rent you would check that ...And its condition etc. But people buy a business and just assume a good name makes profit because its busy. Busy losing money. Oh and three staff at $15hr = $45 a hour in labour. Rubbish. Its closer to $25 a hour when oncosts etc are added.

I looked at buying an apparent well performing cafe. After just four or five hours of diligent review and the right info from the broker all their numbers fell apart. I asked for all major supplier statements for the past two months. It gave me all the details I needed. Costs = revenue and balances were growing meaning cashflow was a issue. I didnt see the ATO account but there was debt. Profitable businesses wont have rising debts. I asked for financials....None. Oh but its profitable.

The 30% net margin was single digit at best. And this explained why the sale was happening. It was a dog. I sat down with the broker who slowly stopped arguing. He called up the client and had a piece of him. He admitted it was struggling. Even the broker walked away.

 

probably a bit of both, I couldnt imagine any sane or normal person saying "oh first one is not working, lets buy a second one to compensate/fix it"

it has to be the franchisor pushing them, and misleading/leading them,
some of these sales people are pretty convincing,
im sure in hindsight they would have done differently

Just like those pie face franchisees who bought 2 stores at the same time, buying 2 at a time is not someone who is new/inexperienced would do unless pushed

 

When I was younger and less stupider, I looked seriously at a cafe that according to the broker/owner was pulling in $100k inclusive of the owners salary,
I met the owners, and they presented similar figures, and I remember the broker saying out of all the businesses he had for sale, this would be the best ROI he had on his books and he would be buying it if he was in my position.plus I believed the owners reason for selling being going back overseas, and I fell for the spiel,

I then passed the figures to my accountant, who basically said "did you include this, this, this, that, according to my figures this business is breaking even if you work for free"

Lesson learnt! thank god I didnt proceed

 

yep im like benjamin button, mentally!

 

‘Very dangerous truth’ about franchises


Excelllent article.

Looks like grill'd "we are different" image is no longer

 

“A franchise is a small business. A big franchising company sells you the right to use their brand and follow their rules.‘

That is the heart of franchising to me. It’s your business - but it’s not. The right to use the franchise name is only yours while you stay within the contract; the benefit you receive may far be outweighed by the inherent restrictions you are agreeing to. While all business are risky, it’s sad to hear how franchises can go so bad with little recourse to the franchisor.

 

This is what i dont understand because ive never had a franchise but, i would have thought its in the best interests for brand image and profit for the franchisee to be doing well and looked after

 

I think that is the logical viewpoint. It makes sense; you’d think increasing your franchise’s profit, and therefore your profit from them would be a simple win-win. However, it seems in many cases the initial franchise fee captured when the business is resold and the cycle begins again is a powerful way to keep the franchise model going...

 

In a Mall not too far from where I live, there has been a Red Rooster, a Sportsco, A SpecSavers, a Donut King close down over the last couple of years.
There is also a Bakers Delight (owned by friends of mine) which they have been trying to sell for at least a year, because they have had enough of long hours and just ok returns, and increasing Mall rents, but have just had a recent boost to sales due to another Bakers delight closing down in another smaller boutique Mall not too far away from them.

 

Queensland franchisees reveal ‘excruciating’ business struggle

Baskin robbins this time....

 

The collapse of shopping mall cafes

what a joke these corporate CEOs are, I have a few extended family members involved in cafes, you dont need to be a CEO earning millions to know that these michels, gloria jeans type of cookie clutter franchises, the actual coffee product isnt that unique and are a dime a dozen, and that melbournites are coffee snobs/ whilst most people cant tell the difference,
and to change your core product from fresh to frozen cakes is going to kill the business

 

Dont just blame the franchise. Many people blindly buy in thinking they can make a mint. Simple maths often fails when you can calculate its not even possible to make that many cups of coffee in a day to pull in the revenue. I assisted one with due diligence that seemed to assume a new customer pair arrived and left each table each 8 minutes....When its busy takeaway coffee thakes that long. That was coffee and food. So the revenue would NEVER happen. 34 mins was a typical average stay....So they looked to have 1/4 the projected revenue. The master franchise agreed and added a few extra tables. Not 18 but 21......that wouldnt do anything. And in the centre was 3 other similar cafes. One with four times the seats and tables