All Forum Posts by: Phillip Richardson

Originally posted by @Max T.:

I have a friend who owns/manages his restaurant and it is very hands on and time consuming. You may find it easier just to purchase and set up the commercial space and then just rent it out to someone else and let them deal with running the business.

I totally agree. It may be easier to rent out the space and collect a rent check, but I would like to optimize my return and increase my property value as much as possible. I'm thinking that if I open up a franchise myself it may a way to do that, and begin setting up an additional passive income source with multiple locations.

I certainly appreciate the feedback. Is your friend's restaurant a franchise? Does he own multiple locations, or just the one restaurant? 

Originally posted by @Account Closed:

I think it is a no brainier you already own the building if you can get a pizza franchise off the ground then opening multiple locations would be a easy next step. You can also sell the business take back paper and collect rent if it does not work out .Creating a viable business in your commercial space really increases the property value . 

Exactly!

Originally posted by @Max T.:

@Josh Caldwellmakes a good point. With that being said @Phillip Richardsoncan make this plan work if he is prepared to train managers to run these businesses.

 That is the idea. To find and train managers who can effectively and efficiently run the locations. 

Originally posted by @John Hyatt:

Hi Phillip,

I have no experience in operating a pizza franchise, but I do have a couple of stories about pizza franchises:

Story #1: my dad’s friend opened a pizza franchise and worked well over 80 hours a week for several years to barely make it. After struggling for several years he ended up selling the property and made more profit from the sale of the building then he did from all the years of working 80 hour plus weeks combined. As you can imagine this is what got him involved in real estate.

Story #2: my dad owned a commercial building and was looking to buy a subway or dominoes franchise since he could essentially get the land for free (minus opportunity cost and taxes). The commercial real estate agent advised my dad against it, he advised that he had seen several people attempt the same thing over the years and it almost always fails because the franchise in itself is a full time job unless you can afford to hire a manager to care for the operations.

9 out of 10 restaurants fail in their first year, 9 out of 10 of those fail in their second year, and so on.

I am not trying to discourage you from running a pizza franchise, I am only bringing this up to see is this really what you want to do? Are you passionate about food and will you do anything to make the pizza franchise work? Or are you just doing it for real estate purposes and because it’s a cool idea? If you aren’t passionate and if this pizza franchise isn’t your calling then I would recommend against it. However, if its been a dream of yours and you are willing to do anything to make it successful (including working 80 + hours) then I say go for it!

-John

 John:

Thanks for sharing-I wouldn't say I'm particularly passionate about pizza, but I am passionate about running successful businesses. I would say my thought process is very similar to your Dad's. I'm thinking about purchasing a commercial building that is currently vacant-while thinking about possible tenants, the idea of opening a franchise myself came into the thought process. I thought it may be a way to earn an even better return on my investment, rather than just the proceeds from rental income. 

The idea is to avoid a scenario where I'm spending 80+ hours making pizza. It is to apply an already successful business model and managing a business, ideally with multiple locations. If it's one location, it's a job. If it's multiple locations it's a business. 

The blueprint for success already exists-it becomes a matter using the platform and properly managing employees and costs.

I'm not looking at this as a 40+ hour a week job, I'm looking at this as an opportunity to get my foot in the door to open and own multiple franchise locations by leveraging the first location. I am not looking to buy and operate one franchise, that's a job; I'm looking to buy and grow a business with the goal of multiple locations. I would find and hire a manager and staff to run the store. Similar to my real estate operation, I would be putting a team together to manage and operate the business.

Originally posted by @Karen Bickford:

@Phillip Richardson  I think the concept of owning a franchise to build income to enable you to purchase more investment property  in the future is sound.  

Have you always wanted a pizza store or is this something that just looks like it will work for the location? Personally I am not a fan of franchises as there are so many caveats and you are for the most part buying into a job that you have very little control over. 

I am sure you are doing your due diligence on the franchise end just be sure to read all the fine print.  Keep us posted!

 Karen: 

It is something I have begun researching recently while looking into purchasing a commercial property. I haven't always wanted a pizza franchise, but along with real estate, it looks like it might make for a great secondary source of income. 

Real estate is my main business, but my personal investment philosophy is to stay away from stocks and bonds and own the actual business. The best way to protect your assets is to manage them yourself.

It looks like this deal might work because of the location and the initial start-up cost being so low. Otherwise it may not be something I would be investigating, which is why I wanted to reach out to the community and see if there are other members that have successfully launched franchise locations as a supplement to their real estate business. 

If I own one location that's being a "pizza guy", if I own multiple location that's being a "real estate" guy; I am, an want to continue to remain the latter, but the concept will start with the initial location.

The idea is to use the building to parlay into owning a businesses franchise.  Currently, this particular franchise is waiving the initial franchise fee, and installing the pizza ovens at no-cost. 

It is my understanding that this is not typical, and usually the start up cost would be much much higher to purchase a franchise. With the incentives in my market and the location, the start-up cost would be extremely low. 

I personally think that aside from owning real estate, owning multiple business franchises would make for a great avenue to  increase my monthly cash-flow and grow my net worth. 

Hello everyone:

I am a recently new member to BP, and wanted to reach out to the Bigger Pockets community and seek advice regarding Franchises. 

I am looking at acquiring a commercial property on a heavily trafficked location-the building was recently rehabbed, but is currently vacant. If I can get the property for the right #, my thought is to use one of the units to open a pizza franchise and rent out the second unit.

Any of those in the community have experience opening and operating franchise locations? 

@Kim Handelman I own a few units in Middletown and know the market very well. I am getting $900 per month for 1 bedroom/1 bath units, and $1100 per month for a 1 bedroom loft unit. Downtown near the college, rents are even higher, a $1200 a month rent is certainly market rent.

There is a lot of inventory that has been updated which is able to fetch higher rents ($1100-$1400 per month) and older inventory that needs updating, but is still able to charge $750-$850 per month.

@Brandon Turner I have helped broker several 1031 exchange deals here in the Northeast involving multi-family and apartment buildings. 

In fact, nearly all of the commercial sales I have been a part of have involved a 1031 exchange in one capacity or another. Deferring capital gains tax is one of the top issues when working with sellers in my market.