Franchise Advise - Is This Fair?

brothermalzone

I've been working for a small company for a few years, managing most of the operations, including sales, client calls, and conversions. I'm employed with a good salary and a bonus structure.

Now, there's an opportunity to branch out and open my own franchise nearby. Both the owner and I are confident that we can scale the business within 3–4 months. I’ll be investing £15,000 of my own money, taking on all the risk, but also keeping most of the returns. I’ll pay the owner a percentage monthly, but even after that, I’ll be earning more than I do in my current role.

Here’s the catch: for the first few months, I’ll need to focus on building the new franchise myself. The owner has said that I’ll either need to take a pay cut or reimburse him for hiring someone to cover my current role.

Is this a fair request, given that the new franchise will benefit both of us once it grows? This condition is the only thing holding me back, and I’d really appreciate some advice.

martindow

He has a point in that you are currently paid to do a job and if you take on the franchise you will only be free to partially do this. How substantial is the pay cut he's proposing?  It would seem fair that there is some recognition that you will only be working part time.  I'm rather surprised that he is happy with you setting up as a rival locally - maybe he is not as confident as you that your franchise will be a success and that his payments will be sufficient recompense for the situation.

Could you manage on pay for the three months that matches the hours you will be putting in and to propose reducing the percentage you would be paying long-term from the franchise?  He will need someone to cover your role in any case, so he could then pay someone part-time with a view to them becoming your full time replacement.

I suppose it's all up for negotiation. 

brothermalzone

It won't really be a rival business as its all based on location and clients I'll be attracting will be from a different area so its entirely another revenue stream for the business. I couldn't manage on reduced pay but we have a meeting later so can negotiate something sensible for us both perhaps. 

Bookworm105

brothermalzone said:

It won't really be a rival business as its all based on location and clients I'll be attracting will be from a different area so its entirely another revenue stream for the business. I couldn't manage on reduced pay but we have a meeting later so can negotiate something sensible for us both perhaps. 

why do you think losing you in your day job for a period should be a cost the owner should bear - will you pay him his lost revenue for that period ?
his (potential) earnings from a new venture have nothing to do with his costs in his current one.

cake and eat it springs to mind 

tacpot12

It seems like the owner is prepared to pay you a reduces salary for your work in his business for reduced hours from you. 

However you also need to be able to devote enough time to the new business to ensure it is a success.

Also, he will need someone to take over your role when your new business takes off, and will have more profit when it does, so it is in his interests to get someone trained and in position for the time when this happens.

The answer, therefore, would seem to be to agree an arrangement where you work in his business at reduced hours for reduced pay, both training someone to take over from you AND keeping new business coming into his business, but with an agreed point at you stop working in his business. I would try to agree a period of this part-time working when you can both be confident that the trainee can become productive OR you can see that this is not going to happen and agree to find a new trainee. Having some clear criteria agreed as to when you will stop working for him as an employee is only going to help his and your decision-making.

Good luck - hope the new business goes well. If it does, the next stage might be to develop a Franchise Manual so that you can bring other entrepreneurs into the franchise. 

DullGreyGuy

brothermalzone said:
Here’s the catch: for the first few months, I’ll need to focus on building the new franchise myself. The owner has said that I’ll either need to take a pay cut or reimburse him for hiring someone to cover my current role.

Is this a fair request, given that the new franchise will benefit both of us once it grows? This condition is the only thing holding me back, and I’d really appreciate some advice.

If you arent doing your job because you are busy setting up the franchise then you should get no pay at all, thats how it would work if you were franchising a different business that isn't currently your employer. If you become part time then you should get part time wages but that requires the business to agree to you becoming.

Or do you think you can do your current full time job and setup the franchise at the same time? 

brothermalzone

DullGreyGuy said:

brothermalzone said:
Here’s the catch: for the first few months, I’ll need to focus on building the new franchise myself. The owner has said that I’ll either need to take a pay cut or reimburse him for hiring someone to cover my current role.

Is this a fair request, given that the new franchise will benefit both of us once it grows? This condition is the only thing holding me back, and I’d really appreciate some advice.

If you arent doing your job because you are busy setting up the franchise then you should get no pay at all, thats how it would work if you were franchising a different business that isn't currently your employer. If you become part time then you should get part time wages but that requires the business to agree to you becoming.

Or do you think you can do your current full time job and setup the franchise at the same time? 

I'd have to work part time in my current role and grind at the Franchise for a few months until I can afford to hire another staff member. 

DullGreyGuy

brothermalzone said:

DullGreyGuy said:

brothermalzone said:
Here’s the catch: for the first few months, I’ll need to focus on building the new franchise myself. The owner has said that I’ll either need to take a pay cut or reimburse him for hiring someone to cover my current role.

Is this a fair request, given that the new franchise will benefit both of us once it grows? This condition is the only thing holding me back, and I’d really appreciate some advice.

If you arent doing your job because you are busy setting up the franchise then you should get no pay at all, thats how it would work if you were franchising a different business that isn't currently your employer. If you become part time then you should get part time wages but that requires the business to agree to you becoming.

Or do you think you can do your current full time job and setup the franchise at the same time? 

I'd have to work part time in my current role and grind at the Franchise for a few months until I can afford to hire another staff member. 

So it's absolutely fair that your salary drops to represent the part time. 

Mistral001

It depends on what you have already agreed with this "owner".  If an agreement was reached without this cut in pay, then this is an extra and if you concede it, it could leave you in a weak position in further dealings with this owner.  Can you go it alone? Or choose another franchise where you could go it alone.  

MattMattMattUK

Two main questions, are you sure you can scale up in a different area in only 2-3 months? I ask because most people are wildly overoptimistic about when they will begin to break even, let alone make a sustained profit. The second is do you need a franchise model, or could you just bite the bullet and go it alone?

Bookworm105

MattMattMattUK said:

 The second is do you need a franchise model, or could you just bite the bullet and go it alone?

indeed, in the absence of restrictions over intellectual property rights, trademarks or patents, it appears OP is doing nothing more than effectively expanding the current business into a new geographical location

for unknown reason the current business owner does not want to risk that themselves 

therefore what does OP get for this "franchise" in return for paying a monthly % fee?

OP is risking their own money but drawing on their own knowledge of the existing business. If they have that much faith in themselves then go it alone and set up as direct competitor