Busy Does Not Equal Profitable

My parents used to have a favorite watering hole and feed bag that served the best barbecue in the south along with beer brewed on the premises. What can I say? My pop likes his beer and 'cue.

Imagine my parents dismay when they approached the place one Saturday evening to find the doors shuttered and the lights off. "I don't understand it," my mother bemused, "the place was always so busy, how could they go out of business?"

She was partly right. The place was typically hopping on weekends, and on the occasions me and my misses accompanied them we had to wait a spell for a table. But, busy does not equal profitable. All busy means is that an establishment has a popular product that was effectively marketed to the surrounding area. That doesn't mean they are doing the most basic of economic functions -- buying low and selling high.

When purchasing a franchise, there's a good amount of research you should do before betting away your retirement and plunking down the balance of your 401K. One of the simplest things to do is visit a few of the franchise locations within driving distance and see how busy they are. It seems logical. But all this will tell you is how popular the product is, not how profitable you will be.

You still have to look into distribution agreements, leases, labor costs, franchise fees, etc. You know, the meat and potatoes of running a business. Otherwise you may end up like these guys. One of whom fell victim to the old "place is jumping" research.

And don't worry about my dad, he's already found a new place to gas up on the weekends. Instead of barbecue it's crab legs, and the microbrewery on the premises puts the other one to shame. He's a resilient man, my dad.

Franchise "Creature Feature" Writer

I’m All About Leaps of Logic

Well, gas prices have hit a record high. Again. Is it just me, or should we wait until they drop back down a little before we start claiming records? It seems kind of silly to lead the nightly news every night with “record high gas prices.” I mean, when a long jumper sets a new record we don’t record every inch he or she passes over the record, just the final distance.

Until sanity returns to the record keepers of America, there is a lesson to be had from these super high gas prices. That lesson is that the prices for groceries are creeping up as well. It’s just logical. Food gets to the stores on trucks. Trucks take gas. So you could say that the price of gas and food are locked in a demented dance.

It’s wise to remember these times when negotiating a franchise agreement. If you’re purchasing a franchise that in any way requires supplies, then gas prices will become an issue.

Many restaurant franchises have exclusive supplier deals that have caused no end of heartaches for the owners. Prices have soared for food when store traffic has dropped, putting profits in jeopardy.

Negotiating the ability to choose suppliers is very important for a franchisee. Besides alleviating some of the corporate control that parent companies want to exert, it also gives the franchisee better footing to negotiate prices with the supplier. A supplier who knows you have the option to take your business elsewhere will be more willing to negotiate than one who knows he’s your only source.

This is an issue that the franchisor will fight you on. It’s a guaranteed revenue stream for them as it is common for them to own the supply line or get percentages of profits from the supplier. That’s why you have to be prepared to walk away from the table over this issue. If they want to go to the mat over the supply line, and not allow you the option to run your business profitably, then you seriously need to reconsider whether you want to be a franchise of this operation or not.

Franchise “Creature Feature” Writer