All,
I am wondering whether anyone else on this forum has considered franchise investment?
I am considering investing in a growing fast food chain, employing family members to manage the franchise(s) while I continue earning an income in my regular job.
The potential profit margin is %20 of revenue after all expenses such as wages, commercial rent, equipment leases etc are accounted for.
I guess the only thing against this sort of venture may be the requirement to have a larger down payment (up to %50) up front.
If anyone has any comments they can add to this discussion I would be highly appreciative!
Regards,
Kristoffer Sheather.Kristoffer
I haven’t really considered buying a franchise, but have heard that Westpac will lend 100% for the top performing francises such as McDonalds, so it may be worth giving them a call.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Like any business, if you are taking on franchise just to make money, prepare for failure. You need to at least have some passion or interest in what the franchise does.
Family of ours had a Maccas a decade ago. Basically, family weren’t allowed to be involved in the counter areas, which made sense as a bunch of cranky old loonies screaming in Italian probably was not part of the image. So check for staff restrictions. BTW, Maccas was, and still is , BIG $$$.In business, never employ family, unless youre prepared to treat them like employees.
Jars
Hi K.S.
I strongly advise that you speak to other franchisees, do extreme due dilligence before you invest any money. Best not to work with family, very hard to sack if necessary. Speaking from experience.
regards
JohnJohn,
I agree that I should speak to other franchisees this is a very important point.
The reason for wanting family involved is that the particular franchise I am looking at does not look favourably upon ‘managers’ being employed and the owner not taking the management role themselves.
I want to continue working in my highly paid contracting role, so I figured I could make the purchase, and get a family member to manage the operations of the store instead. This way I beleive I can get around the franchisers concerns.
I am actually quite intersted in the business of the franchiser, and like their product a good deal. I just want to be a ‘B’ instead of continuing to be an ‘S’ and I definitely dont want to buy a ‘Job’, just buy a share of a business that will give good cashflow returns.
Regards,
Kris.Hi Kristoffer
Definitely speak with other franchisees. Pick the ones you want to speak too (don’t ask head office who you can speak to). You will be amazed what people will tell you. In my opinion, that would be the strongest evidence to consider.
Naturally, normal financial and legal due diligence is also required to be completed by your team.
The benefit of a franchise is that the hard work has already been done. They know what works and does work. The downside is that you don’t own the brand name and to some extent you are building the brand name owners goodwill.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auStuart,
Thanks for your advice I also consider speaking to random franchisees a key consideration in the due dillegence process, and I will defintely be doing this.
Once I have spoken to several franchisees, and provided I am satisfied with what I hear, I will then get my accountant to advise me on the fiancial aspects of the deal, and determine what structure I will adpot for the purposes of asset protection and tax minimisation.
I also plan on having a franchise attorney look over the franchise agreements to ensure that I am not going to get screwed on any of the fine print.
I have heard that some financiers are quite receptive to franchising as the business is more likely to succeed as the franchiser *should* have well defined business processes and procedures already in place
I am still intersted in finding out which lender will give me the best deal, in regards to the minimum deposit they will require and the interest rates they offer, if anyone has any good advice on the finance side of things please let me know.
Thanks again,
Kristoffer Sheather.Hi Kristoffer
There are a couple of commercial lenders that will consider franchise. If you email me the purchase price and the name of the franchise I can give you an indication of indicative interest rates, application fees and loan value ratios if you like (alternatively you can always call me during business hours at 03 9909 7100).
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auMail sent..
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