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Maccas going cheap!

Discussion in 'Off Topic' started by Jacque, 17th Aug, 2005.

  1. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
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    1,885
    Location:
    Sydney
    Have been reading some really interesting business books lately and came across this gem:

    This business/franchise advisor set up his own home based business where he advised potential franchisees, franchisors and business buyers about the ins, outs, pitfalls etc. He had one Australian couple coming to him all excited about stopping their jobs to buy into a franchise. They had looked into it, they said, and decided on which one they would buy. When they told him they were putting their life savings on the line, all $15 000 of it (this was back in 1995) the advisor automatically began to shortlist, in his mind, all the current franchises that would have such a low start up cost. Imagine his surprise when they told him they wanted to run McDonalds!! Needless to say, the moral of his story here was to DO YOUR RESEARCH!! :eek:
     
  2. Here_To_Learn

    Here_To_Learn Well-Known Member

    Joined:
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    Location:
    Sydney
    I agree ... you have to DO YOUR RESEARCH !

    My wife and I recently evaluated the top 10 successful franchises in Sydney. We looked at numbers for so long that we had to stop and take a time out.

    We paid an accountant to simply have another set of eyes review the numbers. The 2 consultations saved us from a potential financial DISASTER.

    Net... net ... sometimes it's important to hire professionals to separate the emotional aspect of investing and keep us honest !!! :D
     
  3. JoannaK

    JoannaK Member

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    16th Aug, 2005
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    18
    Location:
    Sydney
    Hi,

    Out of curiosity, can I ask which franchises you were looking at? What sort of pitfalls did you find in the franchise models?

    We're currently looking at leasing some commercial space off the plan, and we're receiving alot of enquiries from franchise owners.

    Any general information would help.

    Thanks in advance.


     
  4. Here_To_Learn

    Here_To_Learn Well-Known Member

    Joined:
    15th Aug, 2005
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    Location:
    Sydney
    We looked at Baker's Delight, Gloria Jeans, Just Cuts, Subway, Pizza Hut, Quizno's, Muffin Break, John Brennan Hair, Pak 'n' Send & Contours Express very closely.

    Too many findings to post here. I could write for a few hours !

    The main lessons learnt for us were :

    #1) Make sure you are not buying yourself an expensive 7 day job.

    #2) Don't understimate your time involvement in a retail business.

    #3) Don't understimate start-up and shopping centre lease costs ( read the fine print )

    #4) Weigh up % return vs other investment. It may not be as good as you think.

    #5) Hire a professional to review your numbers !

    Good Luck !
     
  5. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
    10th Jun, 2005
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    Great points HTL!

    I'm sure we'd all appreciate any further pointers you have time to pass on.

    Out of interest did you end up proceeding with purchase of a franchise?
     
  6. Here_To_Learn

    Here_To_Learn Well-Known Member

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    Sydney
    After 6 months of research we never went ahead with the purchase.

    When my wife and I now think back we could not be happier ! I chose to keep my job and learn about 'structures', 'living off equity', 'rental reality' and 'lazy dollars'. :D :D :D
     
  7. Tzaki

    Tzaki Well-Known Member

    Joined:
    20th Sep, 2005
    Posts:
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    Location:
    Canberra
    Wish my accountant had done as good a job when he advised me on the business I purchased, a wholesale donut manufacturer. It was sold to me as a fully managed business, but turned into a 26hr a day 8 day a week nightmare, or more acccurately an adult daycare where you have to pay them to be there!! :eek: :D

    While he was good for a starting property investor, his advice on business, and especially the part of due dilligence that I relyed on him for (getting and checking figures, comparisons to industry norms etc.) were not up to par :( partly due to the fact that he was becomming semi-retired..

    In the end we sold out after I had to leave work to save it (all the staff left at the same time!) for what we paid for it, BUT we did not sell it as fully managed, and we sold to someone who had the ability to make it work, they had the delivery systems already in place and also had a built in customer base, so we only took a small bath on it (buying/selling costs, borrowing costs and small op loss - it NEVER produced the returns shown in the figures)

    The people who sold it to me also sold franchises in the coffee industry, several franchisees were horribly burnt by them and consequently sued and won for deception.

    Lesson: Get more than one opinion for due dilligence, make sure that your advisors are competent and motivated to advise in the area that you are investing, UNDERSTAND and research fully the industry into which you are buying, especially any recent market changes.

    We learnt a LOT about small business, particulaly that it is not for us, so we went back into property (our portfolio more than made up for any losses we had over the time that we owned the business - 18 months 2003/04).
     
  8. MrDarcy

    MrDarcy Well-Known Member

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    Location:
    Sydney
    Some "Golden Arches" franchise have to be cheaper than others... :D
     

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