This transcript was generated from the episode audio and may contain minor errors.
Here is a story that I don't believe I've ever told before. I'm pretty sure I've never told it on the podcast and maybe nowhere else either. When I was 17, one of my entrepreneurial dreams was to open a mailboxes, etc. franchise. If you haven't heard of mailboxes, etc., I think these days they're called a UPS store. There's a few other variations of these places
where you can get a private post office box, mail stuff out, etc. And for whatever reason, I was enamored with mailboxes, etc. So I wanted to get some information on how it actually works, like what's the behind the scenes. So at the time, I was using America Online, shout out to AOL, you know, and I surveyed the owners, I found like this online list of mailboxes, etc. franchise owners. And I wrote to all of them, I surveyed these owners,
and I asked them all kinds of cheeky questions, like how much money did they make from their franchise, which is really funny, right? Because, you know, 17 I was that's more than 20 years ago, gosh, it's almost 25. That's crazy. You know, but funny how things come full circle, because here we are 20 to 25 years later. And I'm out there talking with you know, small business owners, and I always ask them really specific questions, you know, including how much money they make, because that's what makes the show impactful. It provides real
detailed information to people. Anyway, back to the future. As I recall, when I did that survey, about a third of them actually wrote me back. And you know, then I grew up and did other things, realizing, first of all, that I didn't have the capital, also known as money to buy my own mailboxes, etc. license, and more on that in a bit. But I also found
something that was better. Okay, so franchises these days are everywhere, might there be a good reason to buy into one? As you'll hear, there might be, but I think there's also some pretty good reasons not to. That's what we're going to talk about in today's listener question. Hi, this is Jim, and I'm from Los Angeles, California. I'm a longtime listener of the
show. I'm looking for something that is proven and established. I'm wondering if I should consider opening a franchise store. There's a Subway sandwich shop on every corner in a Coldstone Creamery in every shopping center. This just feels safer than trying to start my own thing. But maybe I'm missing something. What are the advantages and disadvantages
of going this route? I look forward to hearing from you and thank you for taking my question. Jim, what's up? Thank you so much for the question. This is very helpful because I've heard this question before. And it's only natural that a lot of people would wonder
about it. You know, as you said, there is a Subway sandwich shop everywhere. We see these franchise businesses all the time. So might it be a good idea? Is this a good side hustle for someone to pursue? Well, like anything, it could be a good idea. But let's really
look at the costs. Now, this is key because especially when it comes to the community that side hustle school is for, I'm trying to reach people who are really busy, have day jobs, responsibilities, and they don't typically have a lot of capital to invest in a business. And even if they are better off, I don't always think it's a good idea to do that, as you may know, if you've heard other episodes. So to look at the costs here, you know, Subway is one of the cheapest major fast food restaurants to franchise. But their fee for becoming a franchisee is $15,000 plus startup costs, which include construction and equipment leasing expenses. And according to the company, which I did some research
here ranges from $105,000 to $390,000. All right. And again, you know, they are one of the more affordable ones. How much does a Cold Stone Creamery franchise cost? The total investment there can be low depending on the location and such, but an average I saw was about $400,000. Okay. Now McDonald's, which everybody knows McDonald's, I mean, they're
on even more corners in Subway, I think, but McDonald's estimates that the average total startup investment ranges from $1 million, $1 million, $13,000 to be precise, to a bit over $2 million, $2,185,000. Now the franchise fee is just one initial cost of many. Because the way this whole business model works is you also have to pay ongoing fees, usually in the form of a percentage of sales to the franchise overlords. And that's how they make money. And then you're required to operate this business in a very, very specific way.
Usually with hundreds of pages of documentation that you have to follow, like you're required to follow this documentation to remain in compliance. And if you go out of compliance, they can actually come and take your business back from you. Now, if that's not enough to be concerned about, one thing I remember hearing way back when I did my unconventional 17 year old AOL email survey of mailboxes, et cetera, franchise owners, is that several people said, and I've heard this to this day with other franchises, that you don't really start making money until you have multiple locations, which obviously requires years of experience and also more capital. So obviously some people are able to be very successful with that. Some people who own 10 McDonald's are doing extremely well. But again, you always have
to consider what are the costs and what do you have access to now? And also what are you trying to do? So that's why I think unless you have a really good reason why opening that subway shop or that Cold Stone Creamery is compelling, you can probably do better elsewhere. Finally, just to pile on here, you know, because why not? One of the other objections I hear from time to time is someone says, well, I like, you know, choosing the franchise model because I'm not very creative. I don't have any ideas about what I would do. And I really
object to that objection because everyone is creative. People are creative in different ways. This is a skill you can develop. And if nothing else, there are more than a thousand ideas in this podcast archives. Okay, so more than a thousand episodes with different ideas.
Go steal one of those and save your $40,000 franchise fee or your million dollar startup costs, whatever it is. Listeners, if you have a question, come to sidehustleschool.com/questions. We'll be featuring them throughout the year, along with updates from other listeners as they launch their projects. Maybe we'll hear from someone who opens a Cold Stone Creamery. Who knows? I
suppose anything is possible. Thank you so much for listening. My name is Chris Guillebeau. This is Side Hustle School. From the Onward Project.
