Hi Max,

Yes any cash business is subject to abuse when it comes to taxes and other perks. I might have been the only club owner that paid 100% of my actual taxes due. Including payroll and health insurance for our employees.

As far as the Fri/Sat night goes I had two clubs that were polar opposites. One a neighborhood bar with plenty of pool tables, video games and live music only on the weekends. The other was only open 3 nights a week, nothing but live music and plenty of booze. They both made about the same gross but the neighborhood club netted twice as much. More beer than liquor sold and much lower total costs for the local bands compared to the touring bands I booked in the other.

The number one reason to own a club is for the chicks, they all seem to love the guy in charge no matter how ugly.

Jimbo

Other people have already explained this, but I do have 1 more thing to add. Basically whenever a McD's goes up in an area every other Fast-food chain comes too. Thereby making the area a strong shopping area. This of course also makes the land much more valuable. Many Franchises purposefully built near a McD because they knew many people would come there. It is a rather rare site to see a McD by itself without other Fast food chains there competing with it. I know Subway purposefully built near McD's to have a healthy fast food option to steal away McD's large customer base. Subway also considers its number 1 competitor to be McD rather than Quizno's or the like because so much money is spent at McD's. ( McD is also a lot larger than any of our nearest Sub shop competition )

Having been intimately involved in Mcdonald's for the first two decades of my life, I can tell you some details.

Owner of 7 stores was netting around 300k/year, but much of his living costs were able to be put on a corporate card as business expenses and these were around 100k/year (note: requires creative accountant).

Problems mentioned before are all true, oversaturation, messing up the menu, etc. However, the main problem is Corporate. Mcdonald's corporate will try to rape you. The owner I spoke of had to involve himself in 3 separate lawsuits against Mcdonald's corporate in order to get out of the business without losing all his worth. Corporate will **** you in so many ways that you can't even begin to imagine, high royalty fees, paying for advertising for products not in your region, and the best one, the mandatory 'Remodel' which requires a very large capital influx into an older store. The only way to go against them is through lawsuits which is plain ridiculous.

One store this owner had was a complete money loser to the tune of about -$150k+/year, but it was purchased as a package deal with another store that was a real winner. However, Mcdonald's corporate though, gee if we just require a quarter million dollar remodel on that store than it should turn around no problem (completely ignoring that it was in how shall we say, a very poor very run down part of the city) So, this owner decided to sell that store, even at a loss, but corporate wouldn't have any of that, so he had to file a lawsuit in order to be able to sell it.

Long story short, he finally sold the store, to an entrepreneurial man who really wanted to get into Mcdonald's cause he thought it would be easy money (which by the way, Mcdonald's is mostly a lot of hard work and late nights, with basically 80-100hr work weeks for 5+ stores unless you are an absentee owner but then you won't make nearly as much) So this new owner is worked over by corporate and they deceive him into putting that big investment on remodelling this crappy store and not only that but making it a 24 hrs Mcdonald's.

6 months after the remodel, as the store is bleeding money, the new owner is found in his garage, having hanged himself. Still pisses me off to this day that corporate took this naive guy and finangled him into such a horrible deal that it ended up that way. If he had just spent some time running the store as it was, he could have turned into a small profit maker. Nevertheless, he knew what he was getting into when he bought the store.

Finally, also Yowzerrs is an idiot with his statement that opening a random store will do better than a McDonald's. Plenty of data is available to back it up. For one, I can point to the owner I mentioned before who created a specialty franchise after getting out of Mcdonald's and has been putting in almost just as much time into rolling these franchise stores out, 3 years later he is still losing money, and doesn't expect to see solid profits for another 1 or 2 years.

Mcdonald's was at one time a surefire path to a very good life, corporate used to treat owners very well fly them out to exotic locales, and just recognize their hard work and work fairly with them. Now, they treat you like **** and try to force you out if you go against them in any way. I really hope they run themselves into the ground one day.

$300k total or avg per store?

Are you nuts? Have you ever been to, say, Atlanta? Or Dallas? Or even Chicago?

I was recently in the Dallas airport. I feel like every third person who walked by was over 250 lbs.

Also I never said a random restaurant will do better then McDonalds. I said opening a McDonalds leads most often to mediocrity. Even if you scout an amazing location and are in the top 1% that earn a sig ROIC, you still are vulnerable to competition due to the ease of opening franchises. As someone else stated, fast food competitors will open around you, and if you are still doing well, a new McDonalds will likely surface in the same neighborhood.

Even living in NYC where there are thousands of restaurants, I find that less than 10% are unique and offer value. Its worse in small towns where basically every restaurant is either a steakhouse, pasta/pizza place, diner, or fast food.

I think the best model for a new restaurant is to base it around a specialty that has had proven success in one location and try to bring it to another where access to suppliers is still affordable. Obv this is a riskier proposition and not for everyone. If you are happy with a reasonable wage and arent trying to hit a home run, then McDonalds or another franchise is a good model. Notice that the McDonalds model is exactly what I'm suggesting someone to do, just substitute the BigMac for something that hasnt completely oversaturated the market.

maybe i'm missing something yowzers, but isn't there going to be competition no matter what you do? if you opened up some hot new NYC restaurant (good luck) and started printing money, you'd be dealing with copycats/other competitors just the same as if you opened a mcdonalds in a new suburb and a bunch of BK's/Wendy's eventually showed up.

if i had any intentions of getting into the restaurant business, i'd probably start with a franchise just to learn a bit more about the industry and see how much I really like it. worst case scenario, i hate it and i can likely sell it in a couple of years. best case scenario, i love it, learn, and have new ideas for starting a more risky venture that has a bit more upside. i just think it's naive to think it's as simple as taking a successful concept from one place and taking it to another place, which is (maybe unintentionally) how you are making it sound.

tc

$300k total net, as in after tax profit. Taxes and capital costs take a lot out of your gross. Granted this was in a southern state, which is going to mean a lower net.

Of course, if all you are interested in is pure greedy profit, then there was one famous owner operator who had a few dozen stores, and he would spend his days going around to each store and taking money out of the registers before it was counted (back before tax reporting was quite so stringent, but still...) He would net multi-millions a year.

Im not clear on your first point. Think about the barriers to entry for franchises vs the model I'm discussing. Opening some franchises is as simple as finding a location, hiring the best people who are still dumb enough to work for minimum wage, and signing some paperwork. Compare that to say for example opening a Chicago style deep-dish pizzeria in Kenosha Wisconsin. To open such a place one would have to do a ton of research into demographics, food preparation and suppliers. I dont think I need to spell it all out for one to understand how much more exponentially difficult this model would to replicate for a new competitor. I'm not saying it couldnt be done but even if it was you still have the first mover advantage. For example, the first Thai restaurant in my hometown, not NYC, is still the most popular in town although new competitors have since emerged. I'm sure its similar in your hometowns as well if you really think about it.

Regardig your second point, I hear what you are saying there. I am definitely more risk-tolerant than most people. Thats prob because my ROIC from trading stocks in any given month is more than most McDonalds will earn in a year. To another point, I think you are also underestimating the emotional investment in a business. Most ppl after having put thousands of hours into their first business are not simply going to be inclined to sell it after just a few years unless its unprofitable or the profit isnt on par with the amount of time spent working. Further, after having gone through all the pains of start-up in terms of finding a location, hiring, and advertising, who is going to ready to do it again after just a few years.

My point is that with any new business the keys to giving the best chance of a sig ROIC are: 1) unique model 2) value proposition which is charging less than ppl are willing to pay.

Also my deep dish idea is just being thrown out for an example. There may be a deep-dish place on every corner of Kenosha for all I know.

Like you said earlier, very very few nightclub owners will show you or even keep real books, and there are tons and tons of suckers out there that have too much money that will way over pay for the chance to own a nightclub. Look at most clubs, 90% of them go out of business quickly and fizzle out, 10% make the owner tons and tons of money, 90% of owners are in it for the lifestyle 10% are in it for the money.


as far as the restaurant discussion goes, a ****ty food resataurant (applebees), that is run correctly, will be much more profitable than a restaurant that has the best ingredients in the world, but isnt run correctly, and in most cases restaurants are either one or the other for some reason.

Generally, 1 packed night will let you eek by, 2 packed nights will give you a modest profit, 3 gives you a nice living, 4 or more and you are making serious bank.

all i know if there was the possibility of investing in an in-and-out burger franchise or stock AND they decided to expand beyond what i think is only west coast, id be in on that in a sec.

i have never seen that place not packed. i mean so packed they normally have employees taking orders for drive thru on the street for the cars not even in the parking lot! plus the burgers are pretty damn tasty.

This is what I mean. There are so many great local franchises that have the capacity to go national and have not yet for some reason.

Please tell me the business you can net your start up investment in the first year.

I have my checkbook open.

A 20 year payback on initial investment is not out of line for traditional investments into businesses like this. Obviously you want to see returns faster than that, but I would not blink at that ratio. Which would be 50k on 1 million.

I would not personally get into the fast food franchise business unless I was going to be doing multiple units. You get one unit and you can end up tying yourself to it to maximize profits, and is not a good use of your own time. Multiple units allows you to hire people to over see the day to operations and still maximize revenue.

Mandor,

Does Subway still not guarantee you territory rights? I know a long time ago that was a major issue as Subway essentially would sell to franchises almost next-door to each other. Most franchises usually give you some amount of area exclusive. I wondered if this has changed with Subway or not.

Impossible to open a new McDonalds for one million including the real estate. Closer to 2 million + I would guess. 3 or so acres, zoned commercial, plus endless construction costs, permit delays depending on how socialist and achievement hating your local municipality is. I've done no research on this but common sense tells me a new location is going to be 1.5+ to build out.

I would hope you could earn at least 5% without working in the business but I wouldn't think you could make 10% and like someone else said and the price of the land should more or less increase with the cost of inflation, which is pretty damn high these days.

Do you have any idea how big an acre is? It's ~44K sq. ft. I bet most McDonald's aren't even a half acre including parking lots.

Since you must pay rent to McDonalds for the land and building the size of the property doesn't really matter too much. The Corp will charge whatever the market will bear.

Jimbo

wtf country are you from

No responses on this?

Kenosha has a population of 90,000 with 35 pizza parlors, I suggest a diffferent market.


Jimbo

I didn't realize McDonalds owns the land and the building, yet it still can cost up to 1.5 million according to the McDonalds website to open a location. It sounds like the nuts for McDonalds.

If the franchisee had to buy the land, etc then I guess 2 million is conservative. I'll also take over .5 an acre for the max.

Didn't want to start a new thread for this -- figured it was close enough to these topics. When starting a business, franchise or not, what are some metrics used to value location? I assume that if you're on a major street, you might get a few days' data of # cars passing by or something. In a mall, you could measure foot traffic. Are there standard "If X people pass by, I'll get Y people in the store, of which Z will make a purchase" type numbers? I'm thinking of a restaurant, for instance. Does the fact that it's close (or not close) to other stores and restaurants make a difference, or is that all accounted for by the increased traffic due to the neighbors. Even a pointer to a reference here would be great. Thanks.

There are professional business appraisers that use this kind of information in determining prices for existing businesses. You might want to contact one and ask about the metrics they use. I'm sure there is plenty of appraisal info available on google that will help you measure the value of a new location.

Im interested in buying a food franchise buy I have no experience what so ever from the food industry will it be possible.
Is it still possible/a good idea, to start a franchise?
Is the training you get enough or will they even let me start with my experience?