This may be long but I need some input. Here goes…
Back in December I bought a local franchise pizzeria inthe midwestern US. There were a few years ago about 20 of these around, now it is down to 12. The owners sold it to me on Land contract for $36,000, I put $8,000 down. They told me and showed me paperwork that said they made a “$60,000 PURE PROFIT” per year. I they also showed me their paperwork that showed their food cost and labor goals well within the franchise goals of 36% (food) and 20% (labor) The sales they showed me were about $2,500 a week. (For comparison I learned later that the Little Ceasers down the block that does about 16-17 grand a week. A Dominoes across the street that does 10 grand a week and a Jets down the street that does 13 grand a week)
Within 2 weeks it was clear that the numbers were not accurate. Food cost was in the mid-40’s! Sales slumped to the $2000/week range though mostly aboput $2100 or $2200. I have plugged away and plugged away. Customers have come in and told me complete horror stories about the place. I found out that I am the 8th owner in it’s 11 year history. I found out that at least 2 of the former owners were dealing dope out of the place. I found out that the reputation in the area is horrible. On top of that a new local indie store is opening soon in the area. I am sure there is some way I could have found this out by better due diligence but I am not sure how exactly.
Our pizza, by corporate recipe, is the only pizza in the entire area that uses both bottom and top cheese (60% bottom/40% top) with the ingredients that we are supposed to use the pizza is not very good. I figured that radical change was the only thing that could work. We barely use the business name in any advertising. No logos on anything. We switched to pure 100% whole milk mozzarella. I also use a better quality ham and use a fresh lettuce, carrot, cabbage mix for my salads.I use only fresh stuff now not the old rotten nasty stuff the old owners used. I use my own homemade flyers and menus that corp. gets mad about but it is not plastering the tainted company name all over. I got the black book and have used the million dollar letter. Kamron Karrington, in his seminar, said that the average store gets about a 10.5% return on these. I get about 5%. The franchise also borrowed my black book to check it out and now all of the other stores are doing it too and most of them get a worse response than me. However the cusotmers we do get in we do a great job on customer service with them. Also I scrapped the bottom/top cheese thing and now only do top cheese if they get extra cheese. The pizzas look 1000% better and no one complains about not getting enough toppings (because the toppings were covered by cheese on a really ugly looking pie) We get at least 5 or 6 calls a week now from people who took their pizza home and loved it so much they called to compliment us. We have maybe 1 complaint a week about the pepperoni being no good (we use margarita pepperoni which I personally will not eat because it is too spicey and greasy) but corporate threw a complete fit when I tried out Hormel, even though customers loved it and told me so.
Deep breath, ahh…onward,
Financially I am ruined. I have worked almost all the hours that the store is open (53 hours a week open and I work 45-50 of them) and not made one single penny. I am slave labor. The store would have closed a long time ago if I had to pay someone to work those hours. But as I am working at the store it is not possible to go get myself a 9-5 job to pay the bills so I have lost my home back to the bank and have buried myself in debt that I have no real hope of repaying in the next 5 years.
Now one of the employees that I have (who also worked under the old regime) is telling me that sales now are MUCH higher than they ever were under the old regime. She said she felt sorry for me becuase my son was at the store one day recently and was crying because he has to have pizza everyday because I can’t afford to buy food for us and he is not sure where we are going to live and is scared by the whole situation.
I borrowed the $15,000 for the downpayment of $8000 and then inventory ($800) First months rent and deposit ($2900) about $1500 to do some very needed improvements in the store and then $750 for flyer drops in the first few weeks I owned the store (which got exactly ZERO response)
I was subsequently offered $5000 to walk away by the owner of another franchise store that the former owner is working at. He would then give it back to her (I heard that she is or was sleeping with him) But that will not cover the $15,000 I owe for the downstroke let alone the money I have paid on the land contract so far. So I list the store for sale but all I get are offers to take over the land contract and walk away with zero in my hand or offers in the high teens low twenties. I spoke to the franchise owner and he told me to “make sure the numbers look right and nothing is out of line” I asked him what he meant and he said “well if food cost is 45% and labor is 35% no one will want to buy the store” and then said “all anyone can ever get from me is the numbers that you give to me” I then replied that “but the numbers are what they are, how do I make something look good if it doesn’t?” He paused for a long time and then said “well be careful but make sure they look good” AHAH! Now I know what the happened to me. I have subsquently spoken to several other owners in the chain. No one is happy. Everyone feels like they got ripped off buying their store. They all bought in the past 2 years. Apparently it is a real merry-go-round of owners coming and going.
That all being said I have all of my friends telling me to sue the hell out of everyone. One cop buddy of mine said that he thought it was a conspiracy to defraud and that it was actually criminal. I am about an inch away from suing and the person who loaned me the 15 grand is pushing me hard to do so. The employee who worked for them is willing to testify and is going to meet my lawyers this week and do an affidavit. I am told that if the former owners can’t prove they made the $60 grand they showed that they would be in trouble. I am sure they can’t. It is impossible for them to. My attorneys say my chances of winning are about 100% or better. But the former owners are probably uncollectible. Now what? Well sales are steadily improving. We are doign things the way I want to and the only corp gets their royalties but everything I am doing now is as I want to do it. Guess what sales are climbing. We had two weeks in a row over 2500 and one week over 3000. The hot snap right now is hurting us but that is pretty much expected during the 90+ degree days. I think I can keep working and get this to about 3500 a week in the next 5-6 months.That would be about the one year mark. Granted I will have lost everyhting I own, but at least I can maybe sell it for a few more bucks or actually make money at it. Not sure what to do. I get motivated on good days and horribly depressed on bad ones. there are some days I swear I just wish I had a gun and 1 bullet. I cannot stand defeat and I feel like I have lost it all.
Sorry for the long-winded-bare-my-soul-even-though-we-just-met rambling on and on and on and not very cohesive post but I do not know what the heck to do. What would you do?
PS if I think of anything I forgot I will edit my post