Side Hustle in IB: is it wise to buy a franchise
Is it wise to buy a franchise think subway, Tim Hortons, not McDonald's because of price but a smaller but known chain? I am thinking into the future and want to have an asset that pays me dividends and something I can build and focus on into retirement. Start with one accumulate capital and buy another.
Thoughts ?
bump
Not speaking from personal experience, however know a significant amount of people in my network / social circle that own franchises.
It's not very easy, especially in the beginning. The work in quite labor intensive and staffing is always an issue. Everyone I know who has their hands in franchises are owner operator, or have some sort of responsibility, even if they have multiple (talking about 5+). For example, they may have to go in if someone calls in sick last minute and can't find a replacement (which happens frequently, think of the type of employees franchises typically have).
Someone I know just recently purchased a Subway and works 9 hours a day, 6 days a week. Although, he is working this hard to cut down on staff wages as this is only responsibility.
Hopefully this helps.
Edit for grammar / spelling.
Go back to CANADA Tim Hortons is for LIBERAL SNOW MEXICAN CUCKS
While some small businesses maybe listed as semi-absentee or whatever, you're still going to have to spend a good amount of time on the franchise if you want it to do well. Knew someone that bought three local sandwich chains (one which he built up from the ground up) while working his FT job and he would basically spend his whole weekend on the business so be prepared for it to be a time sink. Recently he was forced to spend less time on it and his revenues went down quite a bit.
Franchises are for people who want to buy themselves a job. The only benefit is buy owning a large number of them and installing a professional manager. Margins are super thin, wages are high and you will loose 6-10% of your profit in franchise fees.
Alluded to above but not explicitly stated: will you have the time?
IB or any job as a junior is not a cakewalk hours-wise. Owning a franchise does not seem to be very passive unless you are a silent partner.
Good Luck
If a franchise is not a strong asset.... what is one that someone can obtain in IB and use it to pay them dividends.
$SPYD
You could purchase condos or apartments and rent them out on airbnb. You'd likely need to spend time finding good real estate and locations. Then also find a cleaning service. It would take some time but it's more passive than running a franchise.
Why not start rehabbing distressed properties?
Find someone you can trust to lead the projects and you focus on the capital end of things?
Buying a franchise costs $$.
You would make a better return on investment by starting your own business with a similar theme....but now you don' have to pay that hefty franchise fee.
Everything else is the same. Perhaps you don't get the same instant name-brand recognition that comes with a franchise like McDonalds, Dominoes, or DunkinDonuts...but the franchise fee you save by going on your own should more than make up the difference.
You can still look to existing franchise success models and use them to help design your own theme...in fact, this is how many new franchise models were born.
Want to start a burger place? Goto all the burger plaes you can find and take notes of the best and worst aspects...then design your own taking the best of the best, and removing the bad. With a little creativity, you should be able to dominate. Use the skills learned from the finance world...focus, hard work, critical thinking, economies of scale, leverage, etc...you will be competing against lots of dumb lazy people...so you should be able to outperform and earn a much better return.
I WILL BUY YOU
Dude, what level are you? when do you think you'll have time to deal with it?
Also, let's assume you're a year three anything (assoc, VP, D) if you're running a business outside the bank, I'm not giving you a vote for a promotion, your focus is outside the bank. Hustle is good, but in a bank, they want it all.
Basically this. I think most people in finance underestimate the time and effort it takes to manage any investments that are not passive (stocks/bonds). I don't think you can do banking and own any businesses on the side.
Are you just going to peace out one afternoon to interview managers? What happens if one day no one shows up to work? I mean some people are able to manage these without putting too much effort but typically it takes a few years of ground work before getting that, which you cannot do while working in finance.
I once was able to view an enormous data set showing charge-off rates of loans to franchises. Of all the ones I looked at that had above a 95% success rate, Jimmy Johns seemed to be the best opportunity considering low start-up costs, great brand recognition/marketing, and simple business model.
Wow that sounds pretty interesting, any recollection of the top 5?
Christian Brothers Automotive and Taco Bell had no charge-offs. Jimmy John's, Domino's, 7-Eleven, and Mathnasium all did very well. Subway has a 30%+ charge-off rate along with Blimpie and Hardee's. Gyms faired poorly comparatively.
You'll see this for yourself if you pursue it, but the math only on a franchise only works if the purchaser is also the manager / cashier / cook / bathroom cleaner / bookkeeper / etc. Restaurants and retail in general are brutal - margins, hours, competition, shifting consumer tastes - so there's probably no room in the model to buy the franchise then pay someone enough to run it with the focus and dedication of an owner/operator.
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