Have you ever considered buying a franchise? The idea of franchising is to buy into a proven business system that maximizes your chances for success.The downside is that the franchisor knows how much you can make and adjusts their costs and fees accordingly.
It’s interesting in that it usually comes out to you making about 5 times what the franchise costs per year after having run it well for 5 years.
I met a guy in an airport bar in Houston on my way back to Denver (I know, not quite the most authoritative source). However, the guy next to me at the bar watching the NFL playoffs, when I asked him what he did for a living, told me he owned 9 McDonald’s franchises here in Colorado.
I believed him because of the details he told me, and, if was making it up, he would probably would have said he owned one because they cost a couple million dollars each . . .
Here’s what I learned from him.
The typical Subway franchise costs $200K to get open and the typical McDonald’s costs 10 times that. The typical Subway owner makes $25K/year and the typical McDonald’s owner makes 10 times that . . .
Coincidence? I don’t think so.
The income is directly proportional to the investment. Just like in any market, supply and demand – and return – works itself out to be roughly equivalent over different business models.
But . . .
There are exceptions, and that’s where the money is made. When people find opportunities that return much better profits compared to money invested, they have the opportunity to make much more!
So, how do you find those?
Look outside the traditional franchise model into licenses.
(In the spirit of full disclosure, what follows is a license that I sell, so I am, of course, biased in it’s favor . . .)
One example is a business called Dine-In Delivery (DID). What they do is deliver food for restaurants that do not offer delivery themselves. A typical Dine-In Delivery operator may deliver meals for 30 or more restaurants including national chains like Subway, Chili’s, Outback, etc.
What make a business like this unique in comparison to a franchise are:
1. The cost to get started and get open is much less
in the restaurant meal delivery business, operators can open for as little as $12,500, where a franchise that does the same thing would cost 10 times that.
2. A franchisee usually pays a 10% royalty/ad fund fee
Licensees do not pay a royalty based on sales, only a small fixed annual fee for using the name. In the restaurant meal delivery business, that means a franchisee operates with a 20% gross profit, while a licensee makes 30% – essentially 50% more.
3. Franchises dictate operational details to their franchisees
This can end up being very expensive and not necessarily the best solution for a specific local market. Licensees are licensing the name to operate under, but are free to choose their operational policies to best fit their local market.
So, before buying a franchise, make sure to check into whether there is a license available in the same industry. You may find you can save a lot of money, get open cheaper, and get a higher gross profit.
In the restaurant meal delivery business we recommend Dine-In Delivery.
Go to the DID web site to see the details, but, if you want to buy a franchise, you would be well served to check out licenses before you make your final decision!
Call me anytime with questions at 720-890-8760.