looking into the possibility of buying an existing franchise

I have been exploring the idea of opening my own shop or buying a shop for the past couple of years now. but the other day i came across an opportunity to make an offer on an existing franchise located within 2.5 miles of a university and a high school plus all of the campus housing.

(I’m patently waiting for the fixture and all of the financial data) …NOT

so i guess my main question is how should i go about making an offer ( if all the financial data’s good…i’m almost 100% sure it will be)

the bad things about it

  1. Employees s===… i have called before and they did not want to deliver. even though the did a week before it was only 5 miles.

  2. absolutely no dress code (guy was wearing a dirty pair of jeans and a shirt)

  3. sometimes its good and sometimes it is not…no portion controll

  4. and worst of all the place is dirty.

Good’s

they are almost always packed

loyal customers

so what do i do

I plan on making an offer based on the fixtures and supply’s plus ???

Re: looking into the possibility of buying an existing franc

The 1st thing that enters my mind is if this is a franchise, how come the franchise company does not care?..I worked for a franchise company years ago and one of my jobs was to inspect stores every so often…Bad stores were not allowed to stay bad very long…They either cleaned up their act almost instantly or they were shut down…

Re: looking into the possibility of buying an existing franc

Ya i know its weird… any how i actually emailed the CEO complaining about the store how dirty and disrespectful the employees were.I told him that i thought it had potential and i asked him if it was available.

he replied and said this “Thanks Bryan…Yes that one is Franchise and we are looking for a buyer….please give me your contact info and I will get back with you….we are offering some great incentives for the right person”

Re: looking into the possibility of buying an existing franc

I think it would be worth a road trip to look at a few other stores…If they are generally well run and look good there might be something worth pursuing…Especially if a “fire sale” is involved…Good luck…

Re: looking into the possibility of buying an existing franc

absolutely… making plans to do so now

Re: looking into the possibility of buying an existing franc

I would put these things in the “good things” column. Whenever I look at deals like this I want to know what I can do to improve the business. Those are easy things to improve.

Royster gives some excellent advice.

Are you sure you want to be a franchise? Its not for most of the people in this forum. Usually there are some substantial fees involved in acquiring a franchise as well.

Re: looking into the possibility of buying an existing franc

am i sure? nope but im gonna let them give me their pitch. im gonna have my dad (accountant) look at the numbers and if it looks like it would be a solid investment then i will go for it.

im really nervous about opening my own place…with no established clients and the cost also is way higher

Re: looking into the possibility of buying an existing franc

You could always buy an independent. My point really is about happiness. This is a rough business but its easier to handle if you really enjoy it and take great pride in it. Since you are just starting out in this maybe a franchise is the way to go to learn the ropes but don’t be in a hurray. I know when you’re anxious to get into something it seems like its a deal not to be passed up on but there are always deals to be had. There’s nothing worse than making a deal because you thought it was the best “at the time” and finding better situations down the line. I made that mistake my the first time around.

Re: looking into the possibility of buying an existing franc

I’d have to agree with pizzapirate… Working for franchises sucks. They do have pro’s and con’s obviously. But here’s a little story from my experience of working for a franchise.

I was hired as an general manager for a noodle place (that was like no other noodle place in the world, Noodles & Company and the rest of the chains had NOTHING on us what so ever) and they sent me out to New Mexico for 3 weeks for training with the corporate store. Those 3 weeks were awesome… I literally became obsessed with our food, the quality, and the menu offerings. I have never been so proud and happy to be a part of something in my entire life. Well long story short, in the next year I ate 2-3 times a day and not once ever got sick of it. I was building up quite a customer base that shared the same thoughts about our food as I did. Well one day I got an email from the corporates saying they are in the works for a new menu and wanted to use our store for testing. Although they didn’t elaborate I knew I was headed for trouble. Well as time went on, I heard a little bit more and little bit more about the changes, and then over night we made a complete menu overhaul. We went from a super nicely printed, glossy custom 3-fold menu with great colors and descriptions, to a single page, double sided piece of cheap paper with only black and white! Everything on the menu went down to five bucks, shorted the menu greatly, and all the meats and vegetables were now pre-cooked garbage. I was soooo unhappy with it (so were the customers and the rest of the staff) that I emailed back the corporates to go screw themselves with the new menu. I ended up getting fired the next day (obviously) and within 3 weeks the place went out of business cause nobody wanted to eat there anymore. Bottom line, is you have no control over what goes on. No matter how passionate or strongly you feel about something, its not your decision to make.

Re: looking into the possibility of buying an existing franc

thanks for the info… i will keep that in mind.

BAD NEWS!!!

so for the past couple of weeks i have been talking with the CEO of the company and it turns out hes really dumb and thought i was talking about another place. He thought i said a different location the city names sound the same. so it was a big shocker when i saw the numbers today. until i figured out it was a totally different store.

anyhow the owner made me the first offer surprisingly and he wants 10K plus 2k transfer for all of the equipment.

The store is only doing 3500 a week and only open for dinner, absentee owner, who is paranoid everyone’s stealing from him
the CEO said i can move it where ever i want to.

Re: looking into the possibility of buying an existing franc

what are the royalty fees and the advertising fees? Are you forced to purchase your ingredients through one supplier?

Re: looking into the possibility of buying an existing franc

i just got the franchise contracts and info just now and will let you guys know

Re: looking into the possibility of buying an existing franc

just so you are aware, if you are stuck purchasing from one distributor, look at invoice prices before you sign a deal. Bring them to another distributor to make sure prices are in line. Alot of franchises pad the price the franchisee pays the distributor while the franchisor gets a rebate check for the padded costs.

Re: looking into the possibility of buying an existing franc

Paul brings up good points to check into.

For 10k this could be a good deal whether you want a franchise or not. If everything checks out, find out what is involved should you decide to sell it yourself later. With an absentee owner there could be a lot of improvements you could make to increase sales. Do that and flip the business.

Re: looking into the possibility of buying an existing franc

Obviously, there are a ton of variables in this business, but getting shop that is as poorly run as you say and still doing $3,500/wk could be blown up fast if it’s the right opportunity. Our shop was doing a little less than that when we got it, but we’re getting close to $5K/wk and still has a lot of room for improvement.

Is this a del/co, or do you have a dinning room? What type of setting is it in (downtown, suberb, campus shop, etc.)? Are you buying the building or is it a lease? If it’s a lease, what are the terms? I’m pretty sure everyone here is perking up their ears about a poorly run shop for a $12K investment that is still doing that kind of sales. If you don’t take it, will you at least pass the info to the rest of us?

Re: looking into the possibility of buying an existing franc

It will cost so much money to move the equipment that it might not be worth it…So you need to consider the removal costs and fit-up costs at a new location…If it is a decent location and lease and a “fire sale” price it might be better to turn the store around, ride out this short period of economic uncertainty and then sell it and use the proceeds to start at a different location…

Re: looking into the possibility of buying an existing franc

If i decide to pass on it i will give everyone the info. i may pass because how far away it is from me. idk im going down tomorrow and were gonna do a fixture list and value everything out

Re: looking into the possibility of buying an existing franc

Restaurant Owner says the average restaurant (albeit a generalization) does about a $10,000 a week. So if that one is doing $3,500 a week, I am not sure it is worth working for that franchise.

PJ’s company-owned stores averaged $836,000 in annual sales in 2007, or $16,000 a week to give you an idea of the opportunity out there.

Re: looking into the possibility of buying an existing franc

Averages without standard deviations aren’t of much comparative value. You want to see how much variation there is . . . huge stores versus tiny ones. $836K average gross sales with a standard deviation of $50K is far different than a standard deviation of $275k. (standard deviation is the average difference of each total from the Mean, in this case $836,000).

Median revenue is probably most useful, if you are getting one, stand-alone number. Sure, $836K is still light years from slogging away at $5K or $6K a week.

Re: looking into the possibility of buying an existing franc

I agree. But I do not have have and standard deviations, thus my caveat of “(albeit a generalization)”. But quoting PJ’s average store revenue I think gives a pretty good idea of how low $3,500K is.