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.
- It almost always never happens.
- Your money is sunk in the business and you will never get it back
- 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.