Seriously considering becoming a fast/casual dining entrepreneur.
Pros:
Established brand names, less downside risk with right franchise/location
Benefit from franchisor bulk purchases/marketing
Taxed significantly less than a worker bee
More free time
Cons:
Lack of creative licence
Buying a job
Dealing with low paid employees
Considerable capital requirement
Royalty (Offsets against bulk purchase benefits I believe)
High overheads
I'm talking about the big name burger, chicken and pizza places. I have enough capital for essentially every single brand name you've heard of, I've researched how much debt is needed/how long to pay off on most, and visited some franchisors webinars during lockdown. Ideally would like to expand to several units, and look to sell off once debt is paid down.
I've also been trying some curve balls on casual dining places that are gaining popularity but don't openly franchise. I approached a chain in LA to try bring their model over to the UK. I approached another Chicken place yesterday.
Anyone got any first hand experience or considered it themselves?
"Dealing with low paid employees." --- Biggest con by far. You are dealing with people who are 99% of the time not caring about the job, and generally have low aptitude. Atleast in developing countries, one can argue that they lacked ability to recieve an education. In the U.S, in most cases if you are working at Wendy's at 45, it's on you.
I wonder if higher pay to attract more competitive workers has a chance here.. i know it'd be tough with margins, but in theory could be the answer.
All the downsides of entrepreneurship without any of the upside.
Way too easy to get stuck being in the business instead of working on the business IMO. So many franchises seem like they are designed to extract every dollar from you and keep you comfortably broke...
Yeah I like business opportunities with unlimited upside.
I know this site isn’t the biggest fan of Garret Station, but look at Flynn Group. There is upside, and plenty of people have 10-50 unit plus franchise groups and kill it
CFA seems to have happy employees and kills it at most locations.
My dad has a friend that owns several. It's tough to get "in" from what I hear. I do not think you can just buy a CFA franchise. But yeah, the guy kills it from what I hear.
This is correct, very low cost barriers to entry compared to other franchises but have to check many, many other boxes to even be considered. I have worked with a few franchisees who are also operating consultants for other franchises.
great point. they dont currently operate in the UK. I have looked in to it in the past, I think their terms are too rigid. but still definitely worth looking in to - https://www.chick-fil-a.com/franchise
Don't you need to own like a bunch to make it work? Otherwise you just bought yourself a frycook manager job
yeah think so. the main burger franchise has 3 tiers of restaurant cashflows a) 80-107k GBP b) 125-158k GBP c) 186k-233k GBP. even if the first store was the absolute minimum cashflow, you're still getting taxed @ 20%, so you'd do not bad.
Your initial post already shows the high/lowlights of operating a QSR franchise.
I live in the UK and the US and have approached multiple franchise companies - normally they are not quick to jump over the pond to launch globally. There are many legal and franchise regulations, and branding/marketing reasons for this behavior and I have not heard that many companies are willing to do it.
Generally speaking, I would look at the upcoming brands which are actively expanding, i.e. Randy's Donuts, Mr. Fries, Golden Bird Chicken, or the various mobile food selling places. There are quite a few that are expanding.
Some of my friends are multi-unit operators and it makes financial sense, but they all started with 1 unit.
I am currently in discussions with 7-11 for a unit in California or Nevada.
Great points on the brand reasoning against franchising, which I hadn't thought of. Are you looking to run the business full-time or on the side? There was a post recently about 7-11s, may have some interesting points in there - https://www.wallstreetoasis.com/forums/economics-of-a-7-11-or-a-dry-cle…
It is a fact that many US brands or franchise types might not work in the UK or EU. A good example is Chic-Fil-A which, after massive success in the US, opened their first ever EU franchise in Reading (Berkshire) - and failed.
I am considering being a part-time manager at my 7-11, but I am also looking into other franchise opportunities. Franchising has a bad rep in many business circles, there are a lot of entrepreneurs who "know what they are doing" and who won't be happy in a franchisee situation. It is a controlled environment without too much freedom to make business decisions, and it is meant to be like that.
There is another (big?) advantage for non US citizens - if an investor were to seek a visa in the US, a franchise investment might give the opportunity to file for the E2 visa (non-immigrant) to live and work in the USA. Many people from Japan, Korea, UK and Europe get a chance to move to the US with a franchise (to clarify: other investments also allow filing for the E2, but a franchise is a "generally more accepted, proven way of how an investment might turn out"). The E2 visa has no minimum requirement for the investment in contrast to the EB-5. The E2 visa is one of the few flexible investor visas available in the Western world.
paying six figures to work in food service?
yikes
Many of my clients are franchisees and they all hate it. It's hard to find employment nowadays so they spend their entire week working in the business, waking up in the very early morning to get the stoves going and staying late to close.
You also get screwed over by the corporation as they charge ever increasing royalties and very strict standards. There might be some corporations that are better than others but to my understanding, it all eventually works against the franchisee in the long run.
thanks for the info. are they fast-food operators? how much do you recon they take in each year?
Subway, 7-Eleven, Del Taco, etc.
Our Subway clients all lost money last year. Years ago they made over $150k net, before tax. With the cost of employment going up as well as the cost of food, royalties, etc. it slowly declined to barely $100k before COVID, and that is with the owners working full time.
Our 7-Eleven clients are bringing in anywhere from $40k - $60k net but 7-Eleven royalties are insane and keep going up.
The rest of our clients are a mix of fast food but none of them are cracking $50k. QSR's, like gas stations, are highly dependent upon location and just because many of these companies have dedicated real estate teams choosing locations, doesn't mean they always get it right. In the end, the franchisee gets screwed over. Something to keep in mind.
edit
Running even one franchise is tons of work. You're going to have to put in a lot of time and effort before you get to a level where you can coast and be MIA.
Yeah I think ideally you start with one and make sure everyone is up to speed and have a good manager overseeing the 1st place. Then trust that manager and move to a 2nd place and eventually a 3rd+ with solid managers at each location.
In my home town, there is this immigrant family that owns like 10 Dunkin' Donuts in the area. They have an entire LLC with its own management set up just the manage the various stores. Back when I worked there in high school, sometimes the main guy who's name is printed on our checks would come in through the drive through in a Ferrari and order a coffee and a donut.
Apparently a lot of times these Franchisees reserve slots for stores well in advance so it can be almost impossible to start in a high-demand location. Either way, it seems like a pretty sweet gig if being a start-up entrepreneur isn't your thing or if you don't have an original idea.
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