PDA

View Full Version : What's the best way to finance a franchise?



Invisible Sun
04-25-2007, 01:47 PM
OK, so I've found a franchise that I'd like to purchase and start in AZ. Has anybody had any experience with SBA? It looks like I'll have about $25K of my own to start with. Anybody have an extra $100,000 laying around?:eek:

Daddy_G
04-25-2007, 04:46 PM
IMHO I offer the same advice I gave riverracerx back in March:
>>Here's the straight poop-scoop...
I own two very different businesses (One in So Cal, One in Phoenix).
Prior to moving (from So Cal to Scottsdale) I looked into many many franchise and private business ops for more than a year.
Here's my consensus - Franchises are great... For the Franchiser.
If you are a true entrepreneur, the rules, regs and fees will eventually drive you out just like 90% of the others that tried it.
Otherwise, you're just buying yourself a (usually low paying) job.
Having said that - here's a couple of great resources for your research:
http://www.franchise-chat.com/
http://www.franchisegator.com/
Keep your eyes wide open and scrutinize everything!
Remember, Franchisers are in the business of selling MORE FRANCHISES!
Best of luck to ya! <<
Having said that, the only thing more ill-advised than buying one is financing one. Sorry to rain on ya, bro! :(

Invisible Sun
04-25-2007, 07:46 PM
Thanks Daddy G, I can really feel the dissapointment from some of the folks on the discussion board at franchise chat. It sure has made me re-think the whole situation. I've been giong back and forth with myself for the past year now about this franchise. I guess my gut told me to hold off for a reason.
S

Boozer
04-25-2007, 08:03 PM
If you've got A paper credit and want to make some SERIOUS money let me know. I can show you something noone else has but will soon be lining up to get. I've got leasing companies, banks, etc. set up ALL you need is good credit and a little capitol.

ChumpChange
04-26-2007, 08:00 AM
Take out a Home Equity line of credit if you own a home. That is the easiest way. The second best way is going through the franchise if they have a bank set up.
I finance a lot of Subways but if it's a franchise I've never done before....sorry to say but no thanks, it's not worth a lenders time.
Just trying to be honest for you.

hava life
04-26-2007, 08:30 AM
We opened a trademark store last year and it is tough. We get good discounts on the supplies and being it is a trademark and not a franchise we deal directly with the owner. It will take a another year to see any money on our store so remember that you will have to pay the franchise fee along with monthly expenses like lease, advertising, supplies, and restocking. We have not been able to take a penny out of the store yet but we did not do a loan to start either. Be carefull about what franchise you go and do because there will be a lot of expenses that you may not be thinking of read all the fine print. Luckily we do not have to have employees at this point. Good luck it is a big investment to do but you want to be sure that you will be able to last for at least 2 years before you might be able to get money back. A friend just opened a franchise and did not read or plan properly and he is having second thoughts now.

cdog
04-26-2007, 09:28 AM
Anyone here have a Baskin Robbins /31 flavors? We're going to a franchise meeting on monday in Phoenix. Also looking into women/minority owned biz loans. Any info?

Trailer Park Casanova
04-26-2007, 09:44 AM
Anyone here have a Baskin Robbins /31 flavors? We're going to a franchise meeting on monday in Phoenix. Also looking into women/minority owned biz loans. Any info?
My dad looked very, very seriously into it.
Did all his homework, really examed it under the microscope.
Labor intensive with a big turnover in help, and a lot of hands on work and long hours for the owner was his take.
Many are prepaired for that, so maybe not so bad for some.
He also figured how many scoops had to be moved each month before ya made your first buck past your monthly nut and it was a big number.
The company is modernizing, and could have a good future.
The only ice cream chain of dozens to ever really make it in the long run in the West except Ben & Jerrys.
So go in with your eyes wide open. Could be a good thing.
Bank of America has always been good with loans to women since their inception, but like with anyone, they want to see some reasonable experience and that you have a "head for" what you are investing in.
He suggests working at any franchise for a spell as a pee-on before ya invest.

cdog
04-26-2007, 09:57 AM
My wife is a U of A grad. Marketing degree. She's a new product/ marketing mgr. now. My first job was at Baskin Robbins when I was 16. We would like to get her into a biz that's fun and something she can do herself. (cake decore and what not). We're moving to AZ after our kid is born in september and would like to get something like this going. She's first born in US on her dads side of the family so women minority loans are avaliable and from what I here they are 1/2 the standard intrest rate. We both have stellar credit. They are asking for $300k in assets.
My tax guy recomends buying an existing franchise over starting a new one.

cdog
04-26-2007, 10:02 AM
IMHO I offer the same advice I gave riverracerx back in March:
>>Here's the straight poop-scoop...
I own two very different businesses (One in So Cal, One in Phoenix).
Prior to moving (from So Cal to Scottsdale) I looked into many many franchise and private business ops for more than a year.
Here's my consensus - Franchises are great... For the Franchiser.
If you are a true entrepreneur, the rules, regs and fees will eventually drive you out just like 90% of the others that tried it.
Otherwise, you're just buying yourself a (usually low paying) job.
Having said that - here's a couple of great resources for your research:
http://www.franchise-chat.com/
http://www.franchisegator.com/
Keep your eyes wide open and scrutinize everything!
Remember, Franchisers are in the business of selling MORE FRANCHISES!
Best of luck to ya! <<
Having said that, the only thing more ill-advised than buying one is financing one. Sorry to rain on ya, bro! :(
Daddy G. What kind of biz did you open in AZ?

hava life
04-26-2007, 10:12 AM
She's first born in US on her dads side of the family so women minority loans are avaliable and from what I here they are 1/2 the standard intrest rate
My wife is first born to an american heritage same with me can we get 1/2 the intrest rate since we both come from tax paying families that have lived in the US some 150 years?
I'm not trying to start sh#t but we just started our business last year and loans we were looking at were not that appealing so we used our savings.

cjordan
04-26-2007, 10:20 AM
GE Capital used to do quite a bit of franchise financing...might be a start.

cdog
04-26-2007, 10:23 AM
My wife is first born to an american heritage same with me can we get 1/2 the intrest rate since we both come from tax paying families that have lived in the US some 150 years?
I'm not trying to start sh#t but we just started our business last year and loans we were looking at were not that appealing so we used our savings.
Well they are out there and as a woman your wife qualifies for some of them. My wife's father is from Chile. Therefore she meets the qualifications for minority loans. Might as well use the system a little. Hell I've been paying for it for 15 years now.
Look around you in Socal and ask yourself how in the hell are so many small business owned by minorities coming form 3rd world countries. Like it or not, you’d be a fool to not take advantage of them if they are available.

ChumpChange
04-26-2007, 10:26 AM
My tax guy recomends buying an existing franchise over starting a new one.
So will any lender! :D

cdog
04-26-2007, 10:28 AM
So will any lender! :D
Cool! Looks like I'm talking to the right people.:D

Opinionated
04-26-2007, 10:42 AM
If you've got A paper credit and want to make some SERIOUS money let me know. I can show you something noone else has but will soon be lining up to get. I've got leasing companies, banks, etc. set up ALL you need is good credit and a little capitol.
Please elaborate:idea:

Invisible Sun
04-26-2007, 11:07 AM
Anyone here have a Baskin Robbins /31 flavors? We're going to a franchise meeting on monday in Phoenix. Also looking into women/minority owned biz loans. Any info?
We have some friends that bought the one here in San Juan. There is a lot of long days involved for a very small income. Luckily they don't have too many bills otherwise they wouldn't be able to do it.
There are benifits though. Last year they brought out a half a tub of Daquari Ice with them to blend up for adult beverages on the lake:D . We kept it on dry ice for the weekend and it worked great! Thank god Advantage boats come with a built in blender!
Oh Yeah, be careful there are a lot of the BR stores for sale because they have mandated a remodel. All the stores need to be remodeled by '08 I think. My friends did their remodel themselves which saved big $$$. If you have to pay to have it done, you're looking at $20-30K

cdog
04-26-2007, 11:13 AM
We have some friends that bought the one here in San Juan. There is a lot of long days involved for a very small income. Luckily they don't have too many bills otherwise they wouldn't be able to do it.
There are benifits though. Last year they brought out a half a tub of Daquari Ice with them to blend up for adult beverages on the lake:D . We kept it on dry ice for the weekend and it worked great! Thank god Advantage boats come with a built in blender!
Oh Yeah, be careful there are a lot of the BR stores for sale because they have mandated a remodel. All the stores need to be remodeled by '08 I think. My friends did their remodel themselves which saved big $$$. If you have to pay to have it done, you're looking at $20-30K
Good points. Thanks. We figure if she could make 70k a year and run it she'd be doing well. Is that unrealistic?

Invisible Sun
04-26-2007, 11:23 AM
They're both running the store and they're lucky to take home 40K. She goes in at 4 am to make the cake orders while he's at home taking care of the kid. They switch off at around 3 in the afternoon. I guess it's great if you don't like your spouse of family.

OCMerrill
04-26-2007, 11:26 AM
Well maybe not a franchise but I did start my own Contracting business about 6 years ago with very little money.
I had good credit, paid to develop a business plan, went bank shopping for an SBA loan. I was in a bit of a hurry sense I had no other income at the time. I just could not take any more of the Bank Games.
What a joke that was. Ended up borrowing (actually re-financing my Condo and took cash out) money on my property. This was the best for me.
SBA loans are real tough to get especially if the business is new and in most cases you don't just get a lump sum check. Its like a line of credit you can draw from with the bank having a say so all along the way.
Now once your business is going along OK getting an SBA loan to help it grow is much easier because you can prove to them your already successful.
my .02 (worth actually less)
So if you can't self fund maybe think of a business you can.
Also my neighbors owned two Subways. Busy stores, lots of people problems but they did make enough to sell them both 5 years after and retire so, franchises are possible $$ makers.

OCMerrill
04-26-2007, 11:34 AM
They're both running the store and they're lucky to take home 40K. She goes in at 4 am to make the cake orders while he's at home taking care of the kid. They switch off at around 3 in the afternoon. I guess it's great if you don't like your spouse of family.
Yes I don't make bank either but my business owns allot of things including autos and the like. There are advantages.
YES - LONG HOURS is a big disadvantage. We also have a bit of that going on right now:mad: and it will keep us from the river this next month. That is the downside. That and waiting for the check:)

cdog
04-26-2007, 11:49 AM
They're both running the store and they're lucky to take home 40K. She goes in at 4 am to make the cake orders while he's at home taking care of the kid. They switch off at around 3 in the afternoon. I guess it's great if you don't like your spouse of family.
EEK! 40k! How they hell do they do that? I'm in real estate so I don't want to run the place. It's more or less my wife's deal. 40k each? Recommend a book to them called the E myth. Great read for small biz owners. Is it possible they over paid to get in the door or have expenses out of wack?

Invisible Sun
04-26-2007, 12:26 PM
EEK! 40k! How they hell do they do that? I'm in real estate so I don't want to run the place. It's more or less my wife's deal. 40k each? Recommend a book to them called the E myth. Great read for small biz owners. Is it possible they over paid to get in the door or have expenses out of wack?
40K for both. They bought their house in '95 and have only pulled money out to buy the BR in '05. Both of their cars are paid for and they keep to a very tight budget.
We'd go to the lake together at least 6 times a year. Now we see them about once a year. It kind of sucks

2Driver
04-26-2007, 12:38 PM
Anyone here have a Baskin Robbins /31 flavors? We're going to a franchise meeting on monday in Phoenix. Also looking into women/minority owned biz loans. Any info?
We looked at them in 1990 after leaving Havasu. For the right person they are ok, simple inventory and product if you watch the heavy scoopers high school kids who you have to manage:D . When we looked they ran about 170K to make about $45K a year, no big whoop there for all the work and hassle.
Bottom line is you are buying a job as said earlier and you need multiple locations to make a decent living or to get a rai$e. Not real scalable.

Daddy_G
04-26-2007, 03:22 PM
Daddy G. What kind of biz did you open in AZ?
When I moved here from Riverside 2 years ago, I purchased an existing business from an old dude who retired.
It's called A-I-R Filter Service.
All we do is change air filters in commercial buildings through the "Valley" (that's what they call the entire Phoenix/Scottsdale area).
The first year was a bitch trying to get the labor & systems up and running (old dude ran it with paper and pen and his 2 sons).
But once I got things ironed out this baby sings!
I see from your profile you're a Realtor...
I still am the owner/broker for VR Services in Riverside (residential real estate, lending and escrow).
So as you know after one helluva nice run, that industry has been taking it on the chin for awhile now and will continue to do so for the foreseeable future.:confused:

Daddy_G
04-26-2007, 03:31 PM
Thanks Daddy G, I can really feel the dissapointment from some of the folks on the discussion board at franchise chat. It sure has made me re-think the whole situation. I've been giong back and forth with myself for the past year now about this franchise. I guess my gut told me to hold off for a reason.
S
Yer welcome.
If you really want to run a business of your own and don't want to start from scratch try searching various business-for-sale sites.
I found my AZ business on: www.bizbuysell.com
You can also search: www.bizquest.com and in the Phoenix Valley try: www.vbbb.org (stands for valley business brokers).
Or you can buy a franchise and have someone tell you when you can take your next poop! :D
Best of luck to ya!

Daddy_G
04-26-2007, 03:33 PM
If you've got A paper credit and want to make some SERIOUS money let me know. I can show you something noone else has but will soon be lining up to get. I've got leasing companies, banks, etc. set up ALL you need is good credit and a little capitol.
Okay, I'll bite -my scores are in the 800s (really) and I always have a bit of capital looking for a venture.
PM me the details, thanks.

Daddy_G
04-26-2007, 03:44 PM
40K for both. They bought their house in '95 and have only pulled money out to buy the BR in '05. Both of their cars are paid for and they keep to a very tight budget.
We'd go to the lake together at least 6 times a year. Now we see them about once a year. It kind of sucks
Kind of sucks!?!?!?! :sqeyes:
That, my HB buds is the definition of sucking!
Everything boils down to this:
How much do you want to make an hour?
And how many hours do your really want to put into your employment (self employed or otherwise)?
Everything else must remain a means to those ends.
Remember no one's headstone ever read "I wish I would have worked more and made less". ;)

DCBob
04-26-2007, 03:50 PM
Okay, I'll bite -my scores are in the 800s (really) and I always have a bit of capital looking for a venture.
PM me the details, thanks.
What he said!!!!!!!!

Boozer
04-26-2007, 04:13 PM
I've got about 8,000 different avenues you can go down if you want to make a boat load of money and not have to deal with everything that comes along with a franchise.
If you want to make some SERIOUS money you should look into commercial truck washes. The industry is doing busines today with the same equipment and same technology they were doing it 25 years ago with. I designed, built, tested, and put to work an automatic machine that washes trucks in under 8 minutes. It also does RV's. The machine is completely automatic and can run 24 hours a day 7 days a week unattended.
Right now I'm estimating this machine to be able to make 1.3+ million a year in Revenue. 50% of that goes back to operating and ownership costs. I'm trying to get a few things together with chemicals and what not to reduce the operating costs and increase profit margins.
As of today if you want to wash your semi you can expect to sit in line for 2 hours or so and then wait 30-45 minutes for the truck to be washed. My machine does it in 8 minutes. I'm also getting ready to incorporate a fast pass system into it so that fleet customers can come in pull up get their RF id tag read, pull in, get washed and pull out.
Lots of guys claim to have automatic truck washes. I have seen them all, done my homework, and every single one I have seen to date is a POS that ends up being a 250K+ rinse system. My machine works and I have a machine in service today that proves it.
I can also get you automatic car washes, self serve car washes, tunnel washes, ice machines, etc. that can make you lots of loot. Just depends on your budget.

Invisible Sun
04-26-2007, 04:30 PM
My wife and I had thought about a car and boat washing business (hand wash) in the Northwest Phoenix area. Something along the likes of most of the handwash locations here in So Cal. My biggest concern is staffing an outdoor venue in Phoenix. I know that I could find people to work it. I'm just not sure I'd hire those that where willing. I am interested in an automated systems, but I don't think that there is enough traffic in my area (AZ). We need to talk.
S
I've got about 8,000 different avenues you can go down if you want to make a boat load of money and not have to deal with everything that comes along with a franchise.
If you want to make some SERIOUS money you should look into commercial truck washes. The industry is doing busines today with the same equipment and same technology they were doing it 25 years ago with. I designed, built, tested, and put to work an automatic machine that washes trucks in under 8 minutes. It also does RV's. The machine is completely automatic and can run 24 hours a day 7 days a week unattended.
Right now I'm estimating this machine to be able to make 1.3+ million a year in Revenue. 50% of that goes back to operating and ownership costs. I'm trying to get a few things together with chemicals and what not to reduce the operating costs and increase profit margins.
As of today if you want to wash your semi you can expect to sit in line for 2 hours or so and then wait 30-45 minutes for the truck to be washed. My machine does it in 8 minutes. I'm also getting ready to incorporate a fast pass system into it so that fleet customers can come in pull up get their RF id tag read, pull in, get washed and pull out.
Lots of guys claim to have automatic truck washes. I have seen them all, done my homework, and every single one I have seen to date is a POS that ends up being a 250K+ rinse system. My machine works and I have a machine in service today that proves it.
I can also get you automatic car washes, self serve car washes, tunnel washes, ice machines, etc. that can make you lots of loot. Just depends on your budget.

Invisible Sun
04-26-2007, 08:08 PM
If you've got A paper credit and want to make some SERIOUS money let me know. I can show you something noone else has but will soon be lining up to get. I've got leasing companies, banks, etc. set up ALL you need is good credit and a little capitol.
This may be a dumb question, but what is considered the threshold for "A list" credit? I mean I've got good credit, but not 800+
S

OCMerrill
04-26-2007, 08:17 PM
This may be a dumb question, but what is considered the threshold for "A list" credit? I mean I've got good credit, but not 800+
S
I am sure I will be corrected if wrong but if I remember when I started my business a while back it was like 725 and up.
800+ Score....WOW. I call...lets see your hand? j/k One has to really work for that kind of score.

Boozer
04-27-2007, 11:09 AM
720 or better puts you at an A paper score. However, there is certain criteria the bank looks at that goes beyond just the score. The banks are going to look at current credit lines, the size they are and how much of the available limit you are using. Banks also looks to see if you've had loans of 20,000+ that have been paid off.
I have several friends with credit scores of 720+ but the largest line of credit they have ever had is $3,000 so a bank would be very hesitant to issue a very large line of credit to someone like that. Although, there are banks that will.

Trailer Park Casanova
04-27-2007, 12:00 PM
The SBA once posted that most franchise holders are willing to sell their business, and most of them will even carry the loan.
Don't know if that's good or bad.