Franchise Stories: The Good, the Bad and the Ugly

June 04, 2025

by a professional from University of Pennsylvania - The Wharton School in Austin, TX, USA

I joined SearchFunder back in the fall to learn more about this space to develop revenue based data/analytics tools to help with searchers trying to find the best business for them. But as I've been learning more about this overall space, I've found that the overlapping area of Franchises seems to be one in more desperate need of solutions. Lots of stories so far from franchisees or prospective franchisees feeling misled on the financial viability of their new business. Despite Item 19 requiring various financial disclosures, that information is either (a) too little (b) questionably accurate. So wanted to reach out to the community to gather more stories about your experiences in this space, the good, the bad and especially the ugly. My hope is I can refine my current offering to better tackle exactly the challenges new franchisees or franchise purchasers face.

Reply by a searcher
from University of Pennsylvania in Palo Alto, CA, USA

Just bought my first franchise as part of ETA. In process of expanding to more locations. I've generally had a positive experience. Some things to consider that I had shared on another post: Reasons not to buy a franchise: -often don’t have contractual recurring revenues -capped same store growth / growth linked to CPI. More growth is often capital intensive (via new stores or acquisition) -Gating mechanism for growth by franchisor -Barriers to entry — it’s like joining a club -Sometimes limited buyer opps when you choose to exit —> potentially suppressed multiples at times -Labor intensive (labor management / turnover issues) -not talked about/taught as much in MBA programs Reasons to buy: -reason you are in ETA is to buy a going concern with predictable success. Franchise takes that one degree further. Buying proven processes and playbooks, which can decrease risk of execution. Stable and predictable cash flows despite not having recurring revenues. Same store sales are relatively consistent YoY. -systems tend to be fragmented (lots of owners that own few units). Great opps for programmatic systems. -given same systems/processes across locations, easier to quickly consolidate locations -franchise fee as way to license national brand, reduce CAC and get those processes — opportunity to get great bang for buck on those fees -built in system of peers (co owners) from whom you can learn best practices -interesting real estate opps (sale leaseback) -franchise systems not overrun with talented MBA types (unlike home services). Historically more targeted toward mid career folks who want to buy a job. Who don’t have desire or abilities to take it bigger than that (eg programmatic acquisition) -post MBA students will likely be attractive to franchisors, may get preferential treatment

Reply by a searcher
in Denver, CO, USA

Hey Christopher - I have reviewed a ton of FDD's at this point. Happy to connect and share my experiences if it's valuable - feel free to DM!

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