This transcript was generated from the episode audio and may contain minor errors.
[Music]
Should you buy an existing franchise? Should you go all out and buy a Subway or a McDonald's? That's what our caller is wondering about today. They're thinking of investing. Is this a $5 foot long idea?
Well, you know, this whole concept takes me back. I never wanted to own a Subway, but long, long ago I wanted to be a franchise owner. This was my 18 or 19 year old dream. I did not live to see that dream come true. I'm actually really glad.
In my case, I was looking for a mailboxes, et cetera, which is now known as a UPS store, I believe. And so why didn't I buy? Well, mostly because I didn't have the money. I actually did not have access to capital at that point in my life, more than like a couple hundred dollars these days. You know, I might be able to put up for one of those, but why wouldn't I?
Like, why wouldn't I buy a franchise now? What is best for our caller? What is best in general when you're trying to figure out what's an easy kind of turnkey business I can start in lots of ways it seems attractive. But I'll tell you exactly why. I'm not a big fan of it myself, along with my advice to our caller in this episode.
That question, my detailed answer coming right up. [Music]
Hey, Chris, this is Roger. I was thinking instead of trying to have a brilliant side hustle idea, I'd find a way to buy an existing franchise, everyone knows McDonald's or Subway, right? It feels much safer than taking a risk on an unproven process. But I also assume the startup costs are much higher because it was easier than everyone would do it, right?
What do you think? Looking forward to hearing your thoughts about this. [Music]
Yeah, those brilliant ideas are hard to come by. I understand. However, you know, startup costs are also hard to come by.
Startup costs can be much higher, much, much higher. Like our caller says, you know, startup costs are higher. They're much, much, much higher. On the cheapest end, you're looking at 50 to $100,000. Again, that is the low end.
That's for something like a Subway. Meanwhile, for McDonald's, you need more than a million dollars, somewhere between one and two million, in fact, you know? And so some of that cost can be financed, but not all of it. And when you don't pay upfront, you know, that means you have a pretty big debt to pay off. So it's gonna take a long time.
And yes, it is this turnkey business model. You're gonna get a rule book. But at the same time, you know, it's almost like the business model is you're buying a job. You know, you get a rule book. You do exactly what the rule book says.
You pay a good percentage of ongoing sales, you know, for the right, you know, to display the signage and to benefit from the, you know, national awareness of that brand and so on. You know, for some people, it's great, okay? But again, I think for a lot of people, you know, it's like buying a job. And if you're listening to this podcast, you're interested in doing something for yourself, you know, and you want the creativity of making something. You know, yourself, and maybe that seems intimidating, but I think, you know, raising hundreds of thousands of dollars, you know, all for the end goal of owning somebody else's, like not even actually owning somebody else's intellectual property, but licensing it, you know, to sell sandwiches.
I just don't think it's, you know, the ultimate be all end all. Also, just as a practical point, most people who do end up doing well with franchising, they own multiple locations. Like that's where the real money is. So obviously that takes even more capital and even more time. You know, it's like a 20 year plan.
Not to say it can't work, but do you want to spend 20 years, you know, on that kind of plan? So just a very different business model than most of what I try to teach here at Side Hustle School. And thanks, caller, for letting me make that differentiation. Listeners, if you have a question, sidehustleschool.com/questions, I'll do my best to guide you in the right direction. If I don't know the answer, I'll say that.
I'll also refer you to our extensive archives of more than 1,700, more than 1,800 now episodes of people going through all kinds of situations, detailed case studies, tips, action plans, and so on, all designed to help you create extra money without quitting your job. That's it for today, but I've got a new episode coming out tomorrow, new episode every day, in fact. My name is Chris Guillebeau, this is Side Hustle School. [Music]
From the Onward Project.
