I turned down buying 15 existing units of a QSR franchise earlier this month.
They were doing $12M in revenue but only $600k in profit
$800k sales per store is 20-30% below the system average.
A pathetic 5% net margin (should be 12-15%).
It should be a great turnaround opportunity…..
So I call my friend who owns 40+ units of this brand.
His advice was to run away.
Fast.
He wouldn’t even take them for free!
In QSR (quick-serve restaurant), success is 80% determined by the location. Pick the right one, and you’re golden. Pick the wrong one, and you’re screwed no matter how good of an operator.
The seller has 100+ locations across the country.
They’ve decided to abandon this market. It’s not worth the time or money to them.
Many other large franchisees own stores in the same market.
Why aren’t those guys all over this package?
They don’t want them either!
Franchisees love to sell to other franchisees. It’s a tight-knit group of friends operating the same business.
The best deals never hit the open market.
Many public resales (like this one) are bottom-of-the-barrel.
It would be naive to think I could buy them, not be all-in on the business, and turn them around with zero QSR experience.
Is it possible? Yes
Is it worth it? No
It’s a terrible idea for first-time franchisees to buy failing re-sales.
Learn the business and become a good operator before taking on the turnarounds.
That’s how I grew my Midas portfolio to 30+ locations in 8 years.
I had four stores before I bought a failing one.
Cheers!
Brian
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