RSSFranchising, worth it or not?
The franchise opportunity sounds kind of enticing, and even sounds like a good home based business model. After reading an article about how many people are jumping off the 9-to-5 clock to pursue the ol’ entrepreneurial dream, it kind of gives me goose bumps to think I could instantly get my “business in a box” with customers, orders and profits… OH MY!! After all, I’d gain the marketing genius of a franchiser as well as the right to hang the company’s instantly recognizable logo on the storefront. I’d probably have customers lining up, just waiting to rush in at the moment we unlocked the door. Then, I would just hire a few good workers and I’d be well on my way down the yellow brick road of true Financial Freedom and making money online!
WRONG!
The franchise opportunity is full of lurking demons just waiting to gobble you up, but what boggles my mind is that people will pay in excess of $100,000 (and that is cheap for some of the big names) for something that will only pay them a meager salary. In addition, there are no guarantees of success. It is estimated that 1/3 of all franchises make money, 1/3 break even, and 1/3 lose money. Can you afford to lose in excess of $100,000?
Now, I don’t want to pour cold water on anybody’s dream. However, I do want to point out that there are significant risks for wannabe entrepreneurs. If owning a McDonald’s restaurant would make you happy, then go for it. Someone’s got to do it, right?
However, one gentleman I met who ended up owning a large number of Subway franchises described his experience as “owning a job babysitting hundreds upon hundreds of pimple faced teenagers (or maybe it was millions)?” When you “own a job”, it is very difficult to leave it, in fact, most of the time, you can’t stop thinking about it.
So, if that tickles your funny bone, then a franchise is certainly the right move for you. However, what I have come to realize is that there are many home based business opportunities with much lower risks and much greater reward potentials. One of the biggest mistakes new entrepreneurs make is overextending themselves to begin with. In addition, they don’t learn some of the basic marketing skills that will help propel them to success. Why invest hundreds of thousands, when you can do so much more with so much less in terms of investment?
I’ve never understood why entrepreneurs are attracted to franchises. I know I’m gonna tick off a lot of people but give me a break, there’s got to be a better choice.
The big thing that franchises brag about, and seems to attract entrepreneurs, is that they have the business operations down to a science. Ok, as business operations may be a weakness for many entrepreneurs I can see why this drawing card appeals to a certain crowd.
But all I have to say to that is …. yuuucckkk! Good grief, isn’t one of the compelling reasons people start a business is because they are sick and tired of being told what to do?
Good grief, if you’re that weak on business operations get involved in the local community college entrepreneurial program or find a business mentor to teach you that kind of stuff. Hell, you’re gonna have to learn it anyway. Why pay someone to tell you what to do.
Perhaps you think me to harsh. I think not. Here’s why.
This morning I read an article about a Harvard graduate tax attorney who left his high paying cushy job in the corporate fast lane to buy a dog-training franchise. Why did he do that?
Ok, he was probably burned out and wanted to get out of the corporate fast lane and do something he loved. It certianly wasn’t for the money! He readily admited that he “hoped” that eventually his new business would replace 75% of his corporate salary. Yeah right!
I hope he’s got plenty socked away from corporate life and his mortgage paid off because their isn’t a snowballs chance in a Arizona 4th of July parade that will happen.
You see, part of the franchise business operations requires he give a guarantee for the life of the dog that was trained, meaning there isn’t going to be much repeat business until Rover kiels over dead and his master replaces him with a brand new ignorant puppy that doesn’t know where to pee.
And the franchise also prohibits him from hiring another trainer. Which as you can understand severely prohibits his growth potential.
And for all this he get the “privilege” of paying the franchise an 8% royalty fee. Yipee! Free at last!
Look, I don’t know about you but I believe a guy with a degree from Harvard is entirely smart enough to start and operate a dog training business on his own. Am I missing something?
Are You Ready For Some Real Franchise Fun?
Just for fun I took the top 10 franchise’s of 2005, according to wsj.com (wallstreetjournal.com), and ran a few numbers.
To get into one of these top 10 franchises, which means you’re making sandwiches, cleaning toilets, or doing taxes all day, your total investment is going to run between $150,000 and $558,170.
And according to the dog-training Harvard graduate, based on proir experience with another franchise, there ain’t no guarantees of success.
I’ve tried to dig around and find out how much money you can make operating a franchise but because of government regulations no one can promise anything. That’s probably good for the franchises because the best I can figure out is you’re required to have your butt in the business everyday and maybe you’re gonna pull down $30,000-$50,000 a year to start.
So congratulations, you’re in business for yourself! You own your job, you work long hours, with little return, you’re told what to do and how to do it… boy ain’t owning a franchise great!
Oh yeah did I mention you don’t get to escape the headache of hiring and firing employees. Such fun! I’ll bet you can’t wait!
There’s Got To Be A Better Choice
So whats the better choice? Ok, here’s my view of the world and granted, like everyone else it’s slanted.
So, if I’m gonna start a business with all the headaches of operations and employees, marketing etc… I’m gonna do it on my own and seek out the help of mentors or other business programs.
But why not look into a business without all the headaches of brick and mortar, employees, schedules, business operations etc? I recommend you avoid that all together. How?
Well take a look at whats going on in the country today. You see this on TV and read about it in magazines but there are people that are starting business from their homes and pulling down big bucks without the investment or headache with a huge upside. What are these businesses? Here’s a few to check out.
1. Real estate investing-did you know that Donald Trump purchased his first appartment complex with nothing down? That’s right, this guy with the funny hairdo, had access to a ton of family money and he didn’t have to come up with any of it.
And don’t make the mistake that he could do that because he had a wealthy family. Ordinary people are buying real estate every day in this country with little or no money down. You’ve just got to learn how. Just like you’ve got to learn how to run a franchise is you’re still enamoured with that idea!
John a retired air traffic controller got involved in a real estate mentoring program and within 60 days of starting the program closed on 3 properties valued at over a half a million bucks, using none of his own money and pocketed $28,400 dollars at the same time. Now the properties pay for themselves and he builds up equity and can sell them for a profit down the road.
In a single transaction that took about 40 days for John to put together he he pocketed $28,400. He didn’t risk any of his own money. Didn’t have the headaches of being required to be at work everyday and his time was completely his to spend as he wished. Quite a contrast to own a franchise wouldn’t you say?
On his very first real estate deal, Greg from New York, purchased a $5.7 million dollar 91 appartment building for $4.25 million using none of his own money. Greg didn’t tell me what the rents from the 91 apartments bring in but it provided tidy residual income.
I can give you hundreds of these stories if you want but I figure I’ll save the space and talk about more of them over in the Real Estate Investment blog.
2. Stock Market investing. That’s right the big bad scary complicated stock market. If that’s your paradigm you’ve got some catching up to do. With stop loss strategies you’ll never have anything at risk you’re not comfortable with.
With the advent of the new technology Online Investing is a great way for ordinary people to make a living from home. Yes, once again you’ve got to get the education but guess what that’s the way it is with anything you do. So invest in yourself not some franchise.
One Texas man learned how to trade stocks with a group of coaches that guided him through the whole Online investing process and he managed to net $3,369 in 24 hours using one of the strategies his coaches taught him. All the while limiting his risk.
Rob started trading online the 25th of May. He took $32,014, less than the Dunkin’ Donut franchise fee, and within 4 months he experienced a 312% ROI (return on investment). Granted not everyone that gets involved in Online Stock Investing sees that kind of return on their money. But no one see’s that kind of return on their money with a Dunkin’ Donut franchise in 9 months, ever.
3. Internet Business. I know you’ve heard about starting an Internet business. Well why not? Especially when you can get the right training. You don’t have to go it on your own anymore.
Even if you’ve got a site up on the net but it isn’t doing much you can fix it with the right education.
One man from the UK thought he was pretty good at making money on the Internet and he should have felt that way, he was making a living doing it! Then eh got with the right group of Internet mentors and before he knew it he was dragging down $3000 a week!
And don’t get me wrong, not all Internet business can be operated strickly from home. Sam a West Virginia entrepreneur reported he had to replace his 800 square foot warehouse with a 4,000 square foot one to keep up with the exponential growth from his website. I think those are the kind of problems you want in a growing business.
The upside was that the Internet drove the business growth before he got a bigger building. In comparisons to a franchise you have to invest all your money up front in the building and then hope you can drive enough business to pay for it.
But for my money, I’m passing on the franchise “opportunity” and all the traditional hassle that comes with it and checking out businesses that I can operate from home, without anyone telling me what I’ve got to do and without the stress of getting in debt a half a million bucks.
Filed Under: Internet Business
August 4, 2011 at 5:22 am |
Mighty useful. Make no mistake, I appreictae it.
August 5, 2011 at 5:22 pm |
I love reading these articles because they’re short but informative.
October 17, 2011 at 12:45 am |
Hats off to wheoevr wrote this up and posted it.
October 17, 2011 at 2:15 am |
I don’t know who you wrote this for but you helepd a brother out.
October 16, 2011 at 11:53 pm |
Ecoonmeis are in dire straits, but I can count on this!