I have $2 million in inheritance.
I want to purchase a franchise. Let's say it costs 200K.
Can I purchase 50 franchise branches at once? I would put 20K down (10%) on each at 10% interest.
When it comes time to pay the loans, I simply renew them.
This is a win-win for me and the bank. They eventually get their cash back and much more.
Thoughts?
| +90 | GF doesn’t care about her looks | 57 | 10h | |
| +60 | Affair with my Associate… In Desperate Need for Advice | 23 | 1d | |
| +51 | How to sound more eloquent? | 19 | 5h | |
| +40 | 400k/year in HVAC sales? | 26 | 2d | |
| +37 | WSO Ranking On Resume??? | 9 | 5h | |
| +35 | Are you “less ambitious” for having long term goals outside of NYC | 13 | 12h | |
| +33 | Would you rather live alone in an outer borough or with roommates in Manhattan? | 23 | 3d | |
| +28 | Why do people listen to Jim Cramer Investing Advice? | 11 | 10h | |
| +27 | Carnivore Diet | 12 | 11h | |
| +26 | Is my boss gaslighting me? | 3 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Better yet, couldn't I just ask for a $10 million loan?
20% down at 10% interest.
Feasible?
I honestly don't see how this fails.. Honestly.
"Turbo-leverage for capital explosion" - BDC Capital
Heard they made 5000% returns last month from a reputable summer intern from a nontarget.
If you go the franchise route, start with 1 or 2 before you invest in another 48-49. Learn how to run it well; buying 50 franchises at once when you've never managed one before is an easy way to stretch yourself way too thin and ultimately fail.
Thanks for the advice. Do you think the core principles of my plan are sound, if I plan on being absentee owner?
It doesn't matter if you want to be an absentee owner, you better know the shit out of your business. Start with one to test the waters and learn the business for 2-3 years. You also need to make sure your manager is a pro. If he is, you open another one. Give it another 2 years to adjust, make sure you find another great manager, then maybe open up two more. Give yourself some time to learn and understand the business, that's the only way you'll be able to know you've hired good people to run it for you.
Also, your franchise might not take off. The last thing you want to do is invest all your money and have them all tank. This is especially likely if you have no real business experience, no entrepreneurial experience, no experience in the industry, etc.
No. You'll see why when you purchase your first one. Make sure you have EVERYTHING nailed down for 6-12 months before you start buying others.
You're too high level for anyone to give you a serious response here. Provide some more details on what kind of franchise you'd want to be buying.
Also - I would be shocked if a bank gave you 10% on 90% leverage... Frankly I'd be surprised if they gave you 90% of the purchase price as debt at all, this isn't a home mortgage loan. Possibly the only way they'd let you get away with this is if you collateralized other liquid securities you have in a savings trust or something like that (or perhaps another member of your family is willing to stake their securities as collateral for you). I know people who have done that to attain this kind of leverage.
As a high level principle: buying cashflows with lots of leverage will get you rich, providing they don't stop giving you cashflow...
Thanks for the reply.
What would you do with $2 million? I have been attracted to high leverage stuff recently.
Where could I find a $10 million loan with 20% down and 10% interest? Or something similar. . .
Maybe with a $2MM inheritance you should get some advice first and spend some time studying basics behind business / investing. Then if you still want a franchise, you go and run one and only one for about a year or two before expanding. Having a ton of franschises is a 10 year plan minimum, not a first year plan.
Also, most franchises won't allow absentee owners / operators (unless maybe you've proven yourself over time). I'm pretty sure Subway will say no to this plan anyway, so all your questions are irrelevant.
Start small and make your mistakes on a small scale, learn from them, then succeed on a larger scale. Don't go and fail on a large scale. If you really want to be an 'absentee' owner, I'd recommend investing in someone else who wants to run one, assuming you have a solid trust in this person's character and ability. That way you are the investor behind someone, not the owner / operator
Why are you interested in a franchise anyway? I'd say there are a few better options out there if you have a $2MM head start.
I appreciate your post, sir. What would they be?
You could start small and leverage via real estate. But keep it small and keep it simple. As you learn more, you grow from there. Alternatively, you could invest in low risk investments that return 2-5% and live pretty comfortably while you read and speak to other investors / business owners. It buys you some time to learn first.
If you want to succeed and play the long game, you should resist leveraging up too much. It's fine to try it on a small scale if you want a case study in leverage (but make sure you have large cash reserves). You'll quickly see how it can be a double edged sword which can get away from you real fast. If I were you I'd just take the slower approach from the beginning
I agree with the poster above who said you are too high level. Provide us more detail about yourself and your personal situation, and then ideas can form around that. For instance, if you are in school, investing in an oil company would not be for you. I work in oil, so if I got a similar inheritance, I'd possibly consider an opportunity in the oil space. I wouldn't necessarily go into that space, but all I'm trying to say is that your options somewhat depend on your background, skills, interests, etc. It's not as simple as saying you now have $2MM and should do something with it.
If I were you, I'd make sure to get an education, possibly buy a house (depending on where in the world you live though, in my city it's a no brainer, but that's not true everywhere) and then invest the rest in a balanced portfolio until you figure out what direction you want to go in. Franchises are a tough business and a tough lifestyle. $2MM gives you a head start, so do something where you'll enjoy the process at least, because whatever you think, it'll still be a grind. No easy life for you yet, sorry
jcpenney's looking nice. Stick $1M there, $1M left over to buy some bitcoins and gold
College real estate
Are franchises generally better to own than small independent businesses if you want to be an absentee owner?
I feel like you could find the right managers to run your drycleaners or whatever and hardly have to do anything. But with a franchise, you have to deal with the corporation.
Take that 2MM and buy corporate run specialty coffee farms in South America. I just bought 100 acres of production land on a managed farm. Numbers are good, demand is rising, fair trade, land is rising in value.
Tell us more, sounds pretty good
Some global PE and RE funds have purchased large coffee plantations are selling off small portions of the farms to individual sellers, the fund group I am involved with doesn't take any of the proceeds from the crop sale. The split is 80(owner)/20(farmer). The fund makes some money on the parcel sale and on the down line sale as they are the import/export leg. This allows them to cut out some of the middle people, pay a slightly higher rate for the bulk crop and create ease of management. I am on track to clear around ~20% ROI for the year. You just have to target the specialty coffee farms. The mass production coffee might have a higher ROI but I see issues in the next 5 years with the fair trade debate. Besides happier farmers means they take better care of my land.
Interesting. I did something similar but with Banana plantations in Ecuador.
Seed marijuana companies. (pun) Plus you'll be a venture capitalist not a franchisee. Much better sounding answer to "what do you do" imo
First of all, what decent franchise even costs $200k to own? That seems incredibly low. Second, no bank will give you a 90% loan especially considering the lack of experience in the area.
You can buy many good franchises for under 200k, however what the OP hasn't considered is that is just for the name and business plan most of the time. Many franchises have strict building, machinery, and other goods requirements and often require large reserve and you have to pay your own construction costs. So that 200k franchise will likely cost you in the range of 400 to 500k.
I would get a job at Chic-fil-A and work there for 2-3 years, become a manager, then apply to own and operate a Chick-fil-A. Obtaining an elite fast food brand is like threading the needle--you need both extensive fast food experience plus excellent liquidity and net worth. You'd have both, which would be exceedingly rare.
Chick-fil-A requires the owner to actively manage. Once I had acquired the Chick-fil-A I'd try to purchase/develop a McDonald's, Burger King, etc. (a top brand) that wouldn't require me to actively manage the franchise. Could build a small empire in 10 years.
Truth
"Ladies, liquor and leverage. The three things that ruin a man." Charlie Munger
From personal experience this is what happens for real estate, lets say you have 2 million, bank will ask you to do a 20-25% down payment on any loan you take, lets say its 25%, you put 2 million down they'll give you 8 million ( 6 million if you remove the down payment) and then you have to pay them back after 10 years.
Safest bet is to go with real estate and hiring a real estate agent to manage the properties. The properties will bring enough profit to pay for the loan. This means 10 years down the line you will have 8 million - 10 million ( depending size of down payment) .
With 8 million you can buy around 80 small houses giving you at least 1K per month thats 960,000 a year over 10 its 9.6 million, those extra 1.6 million will be taken by the bank due to interest payments.
Worked out for my family only down side is the fact you have to wait round 10 years, but its much safer than a franchise.
Aliquam tempore et exercitationem commodi nesciunt aut nisi. Sed dolore quaerat veniam. Beatae sunt in omnis minus. Rem nihil id molestias eligendi.
Accusamus aut exercitationem rerum porro numquam ducimus vitae. Quibusdam vel temporibus repellendus laboriosam soluta. Et temporibus soluta ea. Velit aut voluptatem cupiditate exercitationem. Molestias odit quia temporibus eveniet sapiente occaecati quo perferendis.
Soluta illo vel ut non. Blanditiis iure minus maxime dolores consequuntur. Repudiandae quo est in accusamus ratione ut at aut. Eos amet nam enim minima eum et quas perspiciatis. Et et atque repellat reiciendis possimus repellendus natus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Sequi omnis dolorum non nemo quasi earum mollitia. Sint aperiam earum quis natus. Dolores est accusantium occaecati reprehenderit nihil. Iste quis repudiandae non libero fugit. Qui nisi sunt itaque.
Laboriosam fugit vel eum quibusdam molestias molestiae iusto. Dolor voluptas consequatur facere autem aliquid. Ut rem quas asperiores est repudiandae. Eos in maxime incidunt odio et aut. Maiores nostrum ut sunt eum autem.
Iusto architecto quis repudiandae optio eos dolor veniam. Ea perspiciatis quo et eligendi ex quod asperiores soluta. Nihil quos excepturi blanditiis est eum necessitatibus.
Veniam dolor aut omnis. Qui iusto eum possimus possimus. Quisquam commodi doloremque sapiente illo voluptas id quis. Repellendus quo modi consequuntur sed illo aspernatur cupiditate.