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  • mkbonline
    Participant
    @mkbonline
    Join Date: 2012
    Post Count: 17

    Hello boarders,

    Sorry for posting a not so relevant queries.. Thought this is one way to build passive income.

    Anyone got experience in running Easyway franchise in sydney or rest of the country?

    I recently came across an opportunity of a new Easyway franchise. I have never done franchising or any other business before. i am MBA and work in IT consulting. Both wife and myself have 6 figure salary. Franchisor are promising good profit of around 13k per month

    Is it good idea for one of us to leave job and take up Easyway franchise?

    Cheers,

    mKB

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    $13k per month profit sounds high.

    What is a franchise worth?

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    mkbonline
    Participant
    @mkbonline
    Join Date: 2012
    Post Count: 17

    Says around  300k in there website.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    Wonder what you get for that?

    Still, that is only about a 50% return on your capital per year. For the risk involved businesses need to generate you high returns, although these can be lower for major franchise because there can be more certainty of sales.

    There would be considerable risk involved, leasing the shop etc – probably licence agreement with a sub company of their's., but personal guarantees required.

    Who is the target market? Mainly people of asian extraction. Maybe good in the cities and around the universities but not in other areas. City is also saturated with these types of stores – Sydney is, especially around Chinatown and Town Hall – I have one the other day.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hi MKB Online,

    Terry has mentioned some really good points, Here is my view based on owning a franchise in Melbourne, We own a TATTS Franchise by the way.

    • We use our business as a third income, My wife and I work some where else as well, why? Some times in business it can get very quiet, At the end of the day if it is quiet you will still need to pay bills at home and also you need constant cash coming in if you want to invest.
    • When we started the business, My wife and I both quit our jobs to work in the business, after 6 months my wife wanted to kill me, can you honestly spend 24/7 with your partner?
    • Are you able to work 7 days a week? If you get sick are you able to afford to hire some one else to work for you?
    • RISKS: We live in very interesting times and as Terry mentioned RISK is really big for small business.
    • Also they try and sell you the idea that you are your own boss, but in reality your landlord, customers and banks become your boss.

    For me personally having a business has been great, its been one of the best education tools of my life. 

    But i would never risk the both of us working in a bussiness.

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of AlasdairAlasdair
    Participant
    @alasdair
    Join Date: 2005
    Post Count: 34
    Jpcashflow wrote:

    • Are you able to work 7 days a week? If you get sick are you able to afford to hire some one else to work for you?
    • RISKS: We live in very interesting times and as Terry mentioned RISK is really big for small business.
    • Also they try and sell you the idea that you are your own boss, but in reality your landlord, customers and banks become your boss.

    So true, especially the last point about the landlord, customers and banks becoming your new boss.

    Most of the franchisees that I've met seem to work ridiculously long hours and at best earn an average wage. Whilst some manage to lose a small fortune …

    I know of one guy who about six years ago chucked-in his teaching job, so he could start a new chapter in his life and "be his own boss".

    It cost him $330k to get into a franchise selling ice cream, coffee, cakes. Cost included fitting out a shop in one of Perth's major shopping centers.

    He is now working about 10-11 hours a day, 7 days a week …

    After paying a share of the spoils to the franchisor, the remainder goes on his lease, rates, staff wages, insurance etc. at best he is working for a minimum wage.

    I was told that on top of the initial $330K, he ended up borrowing a further $80K from the bank to cover some of his running costs and new machinery.

    He has been trying to sell the "business" in the last 18 months, but has had only one offer of $150K.

    I wonder how many people ruin themselves financially with these failed franchises?

    Profile photo of AlasdairAlasdair
    Participant
    @alasdair
    Join Date: 2005
    Post Count: 34

    Anyway why would you need a franchise to sell coffee, tea or sandwiches?

    I was told that typically the net margin in these types of businesses is about 5% to 10%, once you deduct the franchise fees from revenue and pay the inflated prices for supplies from your franchisor, the profits are slim.

    An example – here in Perth we have a cafe strip in Oxford St. Leederville, here the smaller privately owned cafes started up without the usual $250K to $300K franchise fees … yet they are all thriving.

    Whilst on the same strip, two of the franchise cafes 'Gloria Jean's Coffee' and 'Cino To Go' closed their doors after a few years of operation.

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    It's true S, yes some people may loose money  but like anything you can loose money from shares or property as well.

    But it's how you set up your structure, some times you can carry a loss forward .

    We spent 500k on ours an on it's second years it's providing a good return 

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

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