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Dear Franny (Guests Post Questions Here)

Franny answers franchisee questions

Ask FrannyThis forum was created so that readers and members of Blue MauMau can post questions to Franny about issues of interest to small business and franchise owners. Franny sometimes invites world-class subject matter experts to answer tough questions

If your post is answered by Franny, it will be featured on the front page of this journal under the "Ask Franny" column.

In your post, please do not mention your franchisor's, vendor's or your own firm's name. The intent of this forum is not to give press to a brand name but rather to ask general questions that franchise owners within and outside one's brand might find of interest. (There are press release areas to sell what's great about a brand or other forums to tell tales of franchisee rip off.) Your question may be edited for clarity, brevity and frankly, some entertainment value.

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Haagen Dazs

Hello, does anyone know about Haagen Dazs' new look for their stores and if they'll be requiring all shops to rebrand? It seems this would put a huge burden on existing stores and lead to a lot of them closing.

Instant Tax Service

Considering buying 3-4 territories. Anybody have some good or bad stories about the company?

caveat emptor

I would suggest you think long and hard about engaging this company. I do not want to bash them because I know some have had a good experience with them; however, I would encourage you to get everything in writing from the outset and take special care to negotiate your money back guarantee prior to signing anything. I am currently involved in a buy back myself and the process has been slow and cumbersome. Also, decide what you are paying for. Does ITS have a presence in that area, if not, you will be building a brand for them and paying them at the same time! Not exactly good business. Advertising is something you will want to firmly understand in addition to launch date and purchasing supplies. They grossly overcharge for shipping on everything! If you can secure an HR Block (no franchise fee) do it! People know that company and will flock to it during tax season. Good Luck and plan smart, it can quickly turn into a nightmare. Good Luck.

Instant Tax Service - RUN AWAY!

Instant Tax Service over estimates the income potential. They do not honor their buy back agreement, instead they pay a portion over 2 years leaving many franchisee's bankrupt. Todd Kirby is a snake oil salesman, so you can bet if his mouth is moving he's telling you lies. Todd Kirby and ITS do not honor anything that they promise or put in writing. RUN AWAY AS FAST AS YOU CAN!!!!!!!

Instant Tax Service

Do you have a list of those that have been taken advantage of; if so email me at amann@plms.us

Instant Tax Service

I had a similar experience! They promised me the moon and the stars and delivered Nothing in the end i lost all my money. i hate them. RUN AWAY

Instant Tax Service intentional fraud and tax violations

I was hired in Arizona, to work for Instant Tax as the Arizona Tax expert instructor and to run an top producing office location ---I and every employee of all the franchizes in Arizona were not paid properly. No withholding what ever---most were paid in cash. I was so angry that I wrote all the employees e-mail I could reach, I was then physically threatened by the Instant Tax Inc. state marketing franchise organizer. I filed complaint for fraud, tax violations, labor extortion with Attorney General of Arizona Terry Goddard. Many other employees filed labor actions. The franchisee made no money and all Instant Tax Offices in Arizona were closed down by mid March in Arizona. Contact me at insurancebyjoyce@yahoo.com if you are or want to sue Instant Tax----I'm a retired California attorney.

Re: Instant Tax Service intentional fraud and tax violations

If you knew anything about the income tax service, you should have known that every tax office closes down in mid-March and begins taking customers by appointment only. I have been researching your claims and have found absolutely no support at all. Could you please provide me with a link or some type of evidence to back up your accusations. Take your time, I will wait..............

ITS Reponse to False and Defamatory Statements

ITS Financial, LLC d/b/a Instant Tax Service (“ITS”) would like to issue the following statement in response to the false and defamatory post listed by Joyce Good Samaritan (“Joyce”) in Phoenix, Arizona:

ITS is a franchised company with nearly 1,200 locations nationwide. While ITS vigorously denies the false and defamatory statements made by Joyce against ITS, it is very important to understand the difference between corporate stores, which are wholly owned by TCA Financial LLC (“TCA”), and our franchised stores, which are run by franchisees through separate business entities that have been granted a franchise by ITS. Neither ITS or TCA owned or operated any corporate stores in Arizona during this past tax season. Therefore, the allegations contained herein concern franchised locations. Having said that, in defense of any franchised locations in Arizona, I encourage any prospective franchisee or consumer who may have concerns to consider the following facts:

Joyce claims to be a “retired California attorney.” To the best of our knowledge, that is false. An ITS representative recently visited www.calbar.ca.gov in order to conduct an attorney search on Joyce, as the company is in possession of her full name. According to the California state bar records, Joyce was never an active member of the bar association. ITS is hesitant to release Joyce’s full name here due to potential privacy issues. However, if Joyce has nothing to hide, then ITS would certainly welcome a rebuttal from Joyce, which lists her full name, bar number, and prior areas of legal practice.

Next, Joyce suggests that “I filed complaint for fraud, tax violations, labor extortion wihh the Attorney General of Arizona Terry Goddard...all Instant Tax Offices in Arizona were closed down by mid March in Arizona". While Joyce may have filed a complaint, to the best of our knowledge, these false accusations were never investigated and no Instant Tax Service offices were shut down by the AG’s office. Once again, please feel free to contact the Arizona AG’s office at (800) 352-8431 to make your own personal inquiry.

Furthermore, Joyce falsely alleges fraud and tax violations on behalf of ITS, yet none of these allegations can be legally supported. ITS is apparently doing something well because, according to the February 2008 issue of Entrepreneur Magazine, ITS was ranked the top new franchise in America. If you are interested in reading that article, it can be found at www.entrepreneur.com/franchises/topnew/index.html

Perhaps, the true reason for Joyce’s post along with the other false and defamatory statements that she has made through various email communications to ITS and various internet forums, has to do with the fact that she is trying to solicit money from ITS. In an email from Joyce sent to ITS on February 11, 2008, she wrote, “…I spent the whole weekend in ASU legal library tightening up my RICO argument --- or I shut up for $100,000.00 deposited into my checking account and not until then…”.

We believe that this final statement speaks for itself.

INSTANT TAX SERVICE - Todd Kirby

In response to INSTANT TAX SERVICE -- Todd Kirby ... Count your blessings ... I owned a Liberty Tax in Ohio, not only did I not get my money back at all, they charged me $5,000 to put it up for sale .... I have never heard of any Franchise giving you your money back!

Instant Tax Service- "Todd Kirby"

I cannot believe there is even a franchise out there that offers any type of buyback. I have a Instant Tax Service franchise, and I love it...

Instant Tax Service

I am also thinking of opening an, Instant Tax Service; and yes I have found many bad comments about them online. What I have noticed is that every tax franchise has had franchisees that conducted rude practices and made head lines. Instant Tax Services, is no different but if you look further you will see once the main offices were contacted they took care of everything from paying the IRS to repaying the client, in the end everything was taking care of the customer was happy.

With this being said can anyone tell me a tax franchise that has done no wrong?

Instant Tax Service

I know who that "guest" is and let me tell you...he is a loser! He's one of those guys that will always lose because he expects everybody to do everything for him. I have 2 stores in the same general area as him. He was LAZY. Owning a business is hard work, and I will not defend Todd Kirby. I will however defend the nations #1 Fastest Growing New Franchise. So don't let some loser who lives in his parents basement, STILL, deter you from owning your own business. That is unless you are a trouble making loser as well. In that case, take his advice.

Weight Loss Industry

Anyone have experience franchising in the weight loss center industry. Not fitness like Curves, but pure nutritional counseling and accountability? I am looking to expand with a weight loss center that has been in operation for over 35 years. My other locations have been profitable, just wonder if there is any downside to the industry after seeing chains like LA Weight Loss close up shop?

Thanks!

Go for it!

If you have been successful with past endeavors with the company--I say go for it! Just make sure you are capitalized for expansion. A business can always work with profitability and good service.

book recommendation on franchising

If you could recommend one book to read on franchising which will help me investigate franchising with my eyes wide open, what would that book be?

One book....

Franchise Fraud by Robert Purvin

michael webster's picture

Purvin's Franchise Fraud

I agree and a new edition will be available shortly.

I will be running a contest soon here and plan, over time, to give away 12 -15 copies.  So stay tuned. 

Michael Webster PhD LLB
Franchise News

RichardSolomon's picture

Hopefully they will be printed on

soft two-ply paper and be on a roll that fits the roll mount assembly in your average loo.--

Richard Solomon, FranchiseRemedies.com,  has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

I've called a number of franchise companies

and they won't talk with me because I don't have enough money. I think that this is rude of them to not want my business.

Bob Frankman's picture

Thanks for Rude Franchisors

These franchisors just saved you the embarrasment of going bankrupt. You know the scenario. Within days you find you have no money to fund your start-up business so you have to file for bankruptcy. Your wife and children leave you because they think you are a loser who can't even support the family. And then you find yourself alone in deep, dark despair.

You should thank such rude franchise companies and your lucky stars that these companies turned you away so quickly.

Work hard as an employee to save money a little at a time. In business, there is nothing more persuasive than money. Once you have it, franchise companies will flock to you to get you to invest.

In the end, the rule of "no money, no talk" in starting a business is the kindest.

Barbara Jorgensen's picture

I wish our zor

was rude and let us go. As far as the guest comment, consider yourself very fortunate.

My franchisor won't let me increase my volume!

I have an opportunity to add menu items to my fast casual restaurant that in my area i know my customers would buy, but the franchise people say no that it does not fit their program. I also want to do catering and fairs to earn more sales. I am far from the corporate people and i may do this with out the permissioin.

My franchisor won't let me increase my volume!

I have an opportunity to add menu items to my fast casual restaurant that in my area i know my customers would buy, but the franchise people say no that it does not fit their program. I also want to do catering and fairs to earn more sales. I am far from the corporate people and i may do this with out the permissioin.

christinegalli's picture

Accounting training for new franchisees

I wonder if you can tell me what is the best way of contacting franchisors and franchisees to find out more about the success of their new business training, specifically, how to track their accounting. I know some have proprietary programs for sales, but not a complete ledger program. We are heavily involved in new business training in the area of accounting for a major pizza chain and we feel its a blessing for franchisees.

 Please advise and thank you in advance! 

Christine M Galli, M.Ed.

www.acctres.com

minority franchises

This comment has been moved here.

Red Robin Experience/ Due Diligence

This comment has been moved here.

Frankman, Solomon, Webster and Quiznos Question

What are your takes on a franchisor that mandates purchases of food, supplies, and equipment through their vendors at ridiculously inflated prices? At what point does the UFOC not carry any weight as to what they can legally get away with?

Part of owning a franchise is to take advantage of the buying power of a large number of stores. If a franchisor decides to jack up the prices at the franchisees expense, it's easy to see that they can make a lot of money. The bottom line question is this: Why wouldn't a franchisor charge franchisees 50% above market prices for their food? What's to prevent a franchisor from charging $100 a pound for turkey?

If there isn't any recourse from this predatory practice, at what point does the courts or government step into to protect the little guy? We are talking about a loop-hole in a system that opens the door for greed and corruption.

Where can I get help valuing an existing franchise?

I am buying a franchise that was successful uner the first franchisee, failed under the second franchisee, and is now owned and operated by the franchisor.

I need to make an offer, then negotiate. I want to perform a solid value analysis. The offer will be made on the basis of that analysis. Subsequent negotiations will be guided by that analysis.

But I need help. How do I get in touch with a few consultants who might give me that help for a reasonable fee?

Franchise contract termination

I am looking to sell a profitable unit of what has become a struggling franchise company. I am concerned that potential buyers for the business may be turned off by the franchisor problems. One strategy I have considered is to attempt to extricate myself from the franchise agreement, rebrand the store, and sell it as an independent business.

The business is in California and I believe that franchise laws work to my benefit here. I also feel that I have a number of solid claims I can make against the franchisor, so I am optimistic. Finally, the franchisor has allowed their franchise registration to lapse in the state of California, although they say they will be re-registered in 60 days, and I don't know whether or not that may help my case.

If anyone has any experience in this area and can share some advice it would be greatly appreciated.

franchisor practices

I am wondering if the franchisor I am under is doing something illegal. The franchisor is requiring all franchisees to exclusively purchase a P.O.S system exclusively thru the company and offering no options to shop it nor provide spec requirements. Second, franchisor is requiring ea franchisee to pay a monthly Technical Support fee (auto debit) in the amt of $100.00 a month . The company providing this service is partially owned by the franchisor and in many cases, it is the franchisor or one of the company employees answering. The technical support is lousy, the software was created by this secondary co partailly owned by the franchisor and it is poor quality. Does this merit legal action? If I were to see a suit , I am worried the franchisor will retaliate.

How Can I Handle an Unreasonable Sub Development Agent?

Dear Franny,

Have you heard of anyone having unreasonable dealings with a Subway Development Agent? I am a zee and am having a hard time with mine and am finding that others who have had similar problems just choose to quiet down and go away...In a nutshell, she is preventing me from purchasing another location and won't give me a legitimate reason why.

I run a tight ship, my own sales were up 26% last yr over the previous owner, I attained 100% financing in 72 hours, and I submitted every piece of paperwork she asked for in record time. I envision her as someone with a life size chess board on her desk and we, the little guys, are the pawns. I am fearful that if I don't handle this correctly, my store will be targeted by her field reps and make my life miserable.

I did contact an attorney this week, but at the same time, I don't want my current location to be a "victim" if I get her even more stirred up. Help! Direction?

"Sad-Sub-Owner"

Website Shutdown- 'The future of free speech'

I’m an ex-franchisee of the Australian franchise Bakers Delight (BD) and author of the website www.bakersdelightlies.com. I have created the website highlighting the long list of wrong doings by the BD franchisor. Recently and not surprisingly due to the popularity of the website I have received a complaint filed with World Intellectual Property Organization (WIPO) by BD. BD has requested that I transfer ownership of the domain name to them or shutdown the website.

The website is one of the few resources that highlights the potential pitfalls of purchasing a BD franchise and for that reasons the silencing attempt. I have researched past cases similar to mine and found that a lot of weight is placed on free speech for non commercial cases like mine. Any input or comment on this subject would be greatly appreciated.
Andrew

Question re: selling my franchise store.

Franny-
first of all thank you for offering free advice by way of this forum.

I have a sub sandwich franchise that i have owned for 2 years and 9 months now. Last October, despite my repeated pleas previously not to do so, a new franchise store opened up within blocks (5 blocks to be precise) of my protected delivery territory (we offer a delivery service). As i had anticipated, the new store opening effectively killed my sales sending my sales growth rate week over week from between 5% and 30% (an average of 17% week over week growth from 2006 to 2005) to between -10% and -17% practically overnight. The immediate loss of sales put me from being moderately profitable to unprofitable. It is now August 2007 and i'm still running at a rate of approx -10% to -15% negative sales growth week over week from the previous year. My franchisor assured me that my sales would IMPROVE with a new store in the area driving up brand awareness - not.

As i saw the direction this was heading i notified the franchisor back in february 2007 to consider my store for sale. The new franchisee who moved in within blocks of my protected territory (normally you'd want to stick a store in the approx EPICENTER of a territory - instead the franchisor let him stick one in the far northwest corner of his territory, very close to my own store) has signed an area development agreement and has to open three new stores in the next 36 months. They have expressed an interest in purchasing my store. I'm reluctant to sell to them as:

1) they know that i'm now unprofitable and what their store opening did to my sales/earnings so i'm sure they'll lowball me with an offer.
2) i'm not particularly inclined to help out their situation seeing that they are partly responsible (with the franchisor) for putting me in my situation.

The franchisor has told me that there are other parties interested in owning a franchise store in my area. I've asked him to please forward me their information so i may contact them to notify them of my store's availability for purchase. The franchisor refuses to do so, stating that these prospective franchisees are mulling other systems and once they choose our system he will gladly provide that contact information. I countered that it is indeed counter-intuitive to withold this information from a prospective franchisee seeing that the opportunity to purchase a store at a fraction of the price of a new build-out could help persuade them to invest in our system vs. that of a competitor. When i press the franchisor on this point they refuse to attempt to even refute my point, just saying that it is their policy to do so.

Of course, we all know what is going on here -- the franchisor knows damn well that a new franchisee in my store will have to deal with the same encroachment issues that i have had to endure. If the existing franchisee that encroached upon me buys the store, problem solved. Thus, the franchisor's interests trump my interests in their mind and if that causes me to lose more money in the sale (and possibly lose my house, file for BK, etc...) well that's just the way things must be.

Do you know if there is any franchise law that requires franchisors to disclose existing units for sale to prospective franchisees? I found nothing in my franchise agreement that addresses this and i'm just not sure where to go from here.

I dream of figuring out a way to close my store and screw the franchisor in the worst possible way (if i'm going down in flames then i'm taking them down with me) but my dreams alas yield no practical tactic for doing so other than taking my story to the local media after this nightmare is over. Bottom line is i must sell my store and i feel that they, if not contractually/legally then at least ethically, should provide prospective franchisees so that i may get the largest possible return on my investment at this point.

Any ideas on my question? thanks in advance.

Unreasonable sub development agent

Did you ever think that maybe this DA does NOT make a commission on a resale? Only commissions paid on new openings. The salesperson probably gets the commission on the franchise signup whether you buy a new or resale.

Subway development agent

If you are still around reading, I have great insights into this brand its behaviour, and can help with this probelm and similar Subway related issues

22 years with Subway-I think I know a little more than I should....

mrfranchiseman.com 800-401-6424

Franchisor Purchase Requirement

Did you ever get an answer here? I posted the same question a month or so ago and got no response.

Franchisor Purchase Requirement

Nobody responded to me. I am getting raked over the coals!!

Paul Steinberg's picture

Zor obligation

As a starting point, I would suggest that you speak with an attorney experienced in representing franchisees; there may be state laws and contract-specific matters which are relevant to your particular situation.

In general, the zor does not owe the zee any fiduciary duties. Indeed, the zor often directly competes with the zee.

You raise 2 common situations: encroachment, and pushing out one zee in favor of another zee. There may be issues relating to the implied covenant of good faith, but those issues would require knowledge of applicable state law and your contract.

You state that you have a contractually-granted territory. If so, the franchisor's actions may be actionable. The siting of the competing store just 5 blocks away and the resultant sales decline suggest that there may be a deliberate attempt to prevent you from obtaining the fruits of the contract, and perhaps an outright violation of your territory rights. But again, this is a very fact-specific inquiry which you should take up with an attorney.

As you suggest, the franchisor's rationale for not providing you with prospective purchaser contact info is absurd; the real purpose is to force you to sell the store to their favored choice. The question is whether you have legal recourse, and that is not entirely clear on the limited facts provided. I know that's not the definitive answer you seek, but it is the best I can offer.

Your situation is a common one in franchising, and highlights the divergent interests of not simply zor and zee, but the ability of the zor to play-off one zee against another zee.

RichardSolomon's picture

ENCROACHMENT REMEDY

I'm sure I know who your franchisor is without you having to say so. If I'm correct, their attitude is that you were stealing from them by skimming the territory and not aggressively going after the business that you have to dig out. According to that attitude, the new store near you is a teaching event in which you learn how to do some real work for a change.

What can you count on in this situation?

They won't do anything to change what has been decided.

You can sell at their price or somehow work to get the performance up in hope of getting a higher price later. What with other new sandwich shops coming on line for franchisee suckers almost every month, I would'nt give much for your chance of improvement.

You can stay in business for spite, but you will only be spiting yourself. Would you rather bleed out slowly for a few years or cut your losses?

You can cut your losses in two ways - sell out to them now (lose less money over the long run) or you can go into bankruptcy. As you have guaranteed the performance of the franchise agreement, your premises lease and your SBA loan (in all likelihood), you will have to declare bankruptcy personally as well as corporately in order to get the job done.

It aint pretty, but there it is. There is no duty of good faith that will do you one bit of good. You can't afford to arbitrate and deal with the results of the arbitration - you will just end up in bankruptcy after enduring more agony. Do it now and end the pain quickly. 

Richard Solomon
www.FranchiseRemedies.com

Jim Coen's picture

Some Observations and Suggestions

I hear your pain and understand your frustration.

I offer you some observations and suggestions:

Doing things to spite anyone, is always a waste of energy. Do what serves your best interests and the interests of your business.

You make some assumptions about the selling price someone may offer you. Why don't you hear what they have to offer before making any assumptions.

The franchisor assured that your sales would improve. Why don't you try and get them (and the other franchisee) to back up their assurances, with increased advertising, local shop marketing, direct mail support, etc to help build sales.

Have you tried to co-op ads with the new franchisee?

There is one thing that is self evident in business: brand awareness is crucial to building sales. What have you done to take advantage of the improved brand awareness the new location has brought to the area?

Rather than just doing what you did before the encroachment, I encourage you to adopt new strategies to try and take advantage of your current situation.

Keep your ears and eyes open to opportunties to help you build sales.

Selling your business is always an option, keep an open mind to all offers.

Jim Coen

Email: Jim@franchiseperfection.com
Blog: Lets Talk Franchising

Jim Coen's picture

Some Observations and Suggestions

I hear your anger and understand your frustration.

Doing something to spite someone is always a waste of energy.

Here are some observations and suggestions:

  • Be careful not to  make assumptions on what someone may offer you for the business, the truth of the matter is most buyers of a business will try and low ball anyway. Keep an open mind to any and all offers.
  • Try and hold the franchisor accountable for their assurances that sales will come back. Ask for advertising marketing support or promotions to help build sales. Look to them to help solve the challenge. Put it in writing.
  • Look at your situation differently. Take a fresh look at things. The ballgame has changed for you. You need to adopt new strategies to take advantage of the reality of the encroachment. What can you do to build sales? Can you co-op (share advertising) with the new franchisee? Try a cross promotion or joint effort to build sales and brand awareness. Enhanced brand awareness offers opportunities, are you taking full advantage of them? 

Before you were alone in the marketplace now you have someone sharing your brand nearby, I suggest you change your mindset and look for ways to take advantage of the situation.

Jim Coen

Email: Jim@franchiseperfection.com
Blog: Lets Talk Franchising

Franchisees can only use Assets on Behalf of Franchisor

Of course you do but your franchisor only wants you to provide royalties for him in the use of your assets and unless you get his permission and provide royalties from these new products, they will probably take you to court or terminate you and try to steal your business. You are branded and don't forget it, and don't let them steal your business for damaging that brand name.

That business of your own that you bought is just a myth. They own you lock, stock and signage! but you pay for the lock, the stock and the signage.

Face it! The franchisor is just smarter than the franchisee. When you can get someone to build a store for you and equip it and work in it and pay you to use the brand name and pay you to advertise the brand name and give the store to you when he/she fails, this is smart, and what does that make you? Franchising is for dummies!

Adding Menu Items!

Well of course you know Franny could never advise you to go against the terms of your Franchise Agreement.  So, the first thing to do is to pull out your Franchise Agreement and LOOK to see if and how it restricts you from adding menu items, as well as from pursuing other distribution channels (i.e. catering & fairs).  I've learned over the years that some FSM's (Franchise System Managers) say "No, that's not how we do it here", without really knowing - why not.

Assuming that your agreement does prevent you from pursuing some of these additional avenues, don't do it without permission.  Don't violate the terms of your agreement.  Don't think you'll hide it, because to hide it you're not going to report royalties on the revenue.  Your purchases and 'reported' sales are not going to add up, and if you get audited you could be jeopardizing your entire operation.

For now I'd suggest that you look at ways to increase your average ticket, and bring in more 'core' business.  Simultaneously, prepare a 1 or 2 page proposal to present to your franchisor.   Show what you think you can add to your sales ... and additional royalties which would be paid.  Ask that they let you test it for 6-months, and if it goes as you suspect they can roll it out to other stores with similiar demographics to yours.  You might recount how it was a FRANCHISEE who got McDonalds into selling Fish Sandwiches.  Present a clear and compelling argument, show them what's in it for them, don't take "NO" for an answer ... but don't do it until you get the O'Kay from your franchisor!

Frantastic Franchising,
Franny

Paul Steinberg's picture

___sucks.com

I would analogize your case to the www.[brandname]sucks.com cases.

In those cases the courts here in the US have found it to be protected free speech. Our pal Mr. Dozier might disagree , but people like him win out of court by intimidating those who lack the financial resources to fight.

Website Shutdown ---Free Speech on the Internet

I'm sorry Andrew that they are going after you to silence you and I hope that you can get some help from your free Press there in Australia.

Maybe you could change the name of the website to BakersUndelightfulLies.com. or something.
Do you think that there is anything meaningful happeneing in Australia right now that is going to mean that franchisors will not be able to cheat and exploit franchisees with immunity and impunity under the laws?

FranSynergy's picture

Accounting 4 Franchisees!

Christine:

I'll respond to your question via Bluemaumau e-Mail, due to the nature of the question,  and my answer. 

FranTastic Franchising,
Franny

michael webster's picture

Mr. Tactics Response

I think that I have said all that can be usefully said in a public forum when discussing Mr. Tactics advice on a previous thread.

In my opinion, that poster had some very interesting thoughts. And no, I don't know who the poster is.

Perhaps you can try to contact him/her directly?

Michael

Michael Webster PhD LLB
Franchise News

Les Stewart's picture

This is an excellent valuation question

But unfortunately, I am unable to do this calculation.

In my experience, it is impossible to quantify for proposed franchise investment purposes (discounted cash flow, total gross margin, etc.), cash spent in Year 1 when in Years 2 to 10, that margin can become a negative value via franchisor opportunism.

In other words, I lack the ability to gauge your business risk of this present or future franchisor of appropriating your personal and business capital without compensating you for doing so. Franchisor overreaching is the material risk franchisees' face and it is wholly uncontrollable.

Killer due diligence is only an imperfect historical tool at best. It does nothing to predict what will happen nor act as a defence if it were to materialize.

But this is just me. I'm keen to see the mathematics from others that hold a contrary opinion, though. Gentlemen?

Les Stewart MBA
Understanding Franchising

Strategic Self-Term?

What you're proposing has been done before, the best strategy will depend on a number of factors, let me ask you a few questions.  Answer them the best you can without giving away your identity, your business or your franchisor.  If you need to provide identifying info and do not wish to make it public please email via BMM mail. 

After I've had a chance to review your answers, I'll provide you with a better and more strategic response.

  1. What type of franchise: (i.e. Fast Food, Automotive, Lodging, etc...)?
  2. Who is your target market?
  3. Is the size of your target market growing, declining, stable?
  4. How long have you owned the franchise?
  5. When is the current term up?
  6. What are the terms of renewal?
  7. What led you to get into this type of business?
  8. Why are you selling the business?
  9. How would you describe the current state of the business?
  10. What is approximate annual sales volume?
  11. What is the average dollar sale?
  12. How many FT/PT Employees?
  13. How long has the longest term employee been with you?
  14. General location (i.e. Northern, Central, Southern)?
  15. Do you own the Real Estate?
    1. If so Lot size?
      1. Bldg Size?
      2. Bldg Age?
    2. If not, time remaining on lease?
    3. Approximate monthly lease?
    4. Triple Net?
  16. Corporate Structure (SP, Prtnshp, LLC, Corp)?
  17. Have you retained a broker?
  18. Is your financial statement up to date?
  19. Estimated value of inventory?
  20. Would you consider staying on as an employe for 12 months?
  21. Do you intend to remain in the same industry?

FranTastic Franchising,

Franny

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About Franny

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Franny is a columnist for Blue MauMau who answers questions about running and owning a franchised business establishment. Those who have questions can post them under the Ask Franny forum. Readers may comment on the questions there. If the post is answered by Franny, it will be featured on the frontpage of Blue MauMau under the "Ask Franny" column. Franny sometimes invites Subject Matter Experts to answer. Please do not mention your franchisor, vendor or your own firm's name in your question.