Pizza franchise sold on internet for $181 NZ

Q: How much is a used “high quality” franchise worth these days in New Zealand?

A: $181.00

Franchisees operate their businesses thinking that they will recoup their investment when they sell. Many operators accumulate big losses in the hope of hitting the jackpot when they sell.

1. It almost always never happens.
2. Your money is sunk in the business and you will never get it back
3. Every franchise should pay it’s way and then some or be exited, immediately.

Case in point: $181 restaurant bill? I’ll take the works. Ms. Theresa Cowan placed an internet bid and won:

…an online auction for a 60-seater former Spagalimis pizza restaurant in Christchurch’s Northlands Shopping Centre for a bid of $181.

1. But surely the franchisor is concerned about the value of his businesses being worth almost nothing? Well:… not that you’d notice.

Spagalimis director Andrew Cooper said that despite the mall branch having a $400,000 fit-out four years ago, he was happy with the $181. “We would have given it away really,” he said.

Mr. Cooper is just happy the franchisor is off the hook for the lease obligations as a franchisee subleases from the franchisor. No word about the bank’s security on the equipment or leasehold improvements: probably not able to squeeze any more cash from the exiting franchisee, anyway.

• But still: assets worth $400,000 dropping to $0 in 4 years? What kind of bozos did the lending valuations? HINT: Close friends of the lender and franchisor.

2. Spagalimis Italian Pizzeria proudly lists themselves as:

• a member of the Franchise Association of New Zealand, FANZ,
• having a total of 5 NZ outlets (5 worldwide),
• and requiring investments “from $250,000″.

They even have a section called: Franchisee Comments that quotes Jerome Britt, Colombo Street Spagalimis as saying: ‘ Great brand, fantastic systems’

3. FANZ says this on their website:

Franchising is a respectable and highly successful business format, both internationally and here in New Zealand. Franchising is the safest way to buy a business.

I wonder what the former franchisee that got $0 for his $400,000 investment thinks about franchising in New Zealand? Or Mr. Britt when he sees the market for the sale of his business drive to zero.