Why Would Someone Buy A Franchise?

'Bloomberg' published a interesting article entitled "The Frustrating Life of the McDonald’s Franchisee"


After reading this it reinforced my questioning why anyone in their right mind would ever buy into a franchise.




Nearly all require very large upfront costs (sometimes profiting from the loans themselves). They get to tell owners what they must sell, how much they can charge after buying ingredients and supplies from whomever they franchise with. What hours they must operate. A untold number of other gotchas like constant upgrades in equipment, buildings, display requirements, surprise inspections, where a franchise can be located and just about anything else that tickles their fancy.

A few years ago a relative of ours tried to sell us on a coffee cart. The cart would cost us around $8,000. Another $1,000 in equipment. The coffee itself at $3 a pound. Plus we'd have to pay someone wherever we set up the cart in a mall or in the case of the city permits/licenses in limited locations. We'd have to sell one hellva lot of coffee!

A relative of ours bought into a sticky bun shop inside a mall in Bucks County. He and his wife put in over 98 hours a week each (profits margins were too slim to hire additional help). Indeed the buns were fantastic and business was good but they ended up taking home less then $1,000 a week after taxes, rent and other expenses between the two of them. He & her sold it and he went back into working at QVC where he made the same amount of money on his salary alone w/o any of the risks or customers bullshit. His kid on the other hand set up a car washing business on his own which later turned into a full fledged auto detailing operation making twice as much.

Seems to me the franchise owners make all the money without taking any of the risks. Why would anyone wishing to become a independent business owner succumb to the slavery of working for a large corporation who can dictate every aspect of their business?

Those who lease out franchises are more concerned about their own bottom line then those who paid exorbitant amounts to slap a name on their door. Look how these started out in the first place. Each and everyone began with someone who had a better idea of what people were willing to pay for. Check out the history of McDonalds, Wendy's, Subway or countless others. Each started out with one single guy who wasn't a franchise owner. These became wealthy after suckers others gave them money so they could hang these guy's signs on their own front doors.

I have no doubt some made out well. Those are the ones we hear about. For far few others I doubt they met the same success.