A Franchisee Wanting to Break Free from the Contract.

[cebu.opportunities]

If ever you have decided to stop the business operation, you may write to the lessor whether they could waive or at least lower the fees upon "breach of contract". You may also look for another lessee to occupy your slot and in turn continue the remaining 6 months rent. In there, you won't breach the lease contract but instead a change of business line lang. So ang contract ky between the new tenant and yourself lang for the remaining 6 months while you and the lessor sa whole 12 months. At the end of the term, if the new tenant wanted to extend didto na siya sa lessor makig-coordinate.

Before making your final decision, please consider other aspects lang pud. Unsa mn gyud ang problem why hinay ang sales. Is it the food itself, its price and target market? The rent is just too high? Poor service sa franchisor?

[Kenshiro]

I negotiate lang sis na alkansi ka ani na location if this goes on ma close jud ka. tell them They should reconsider transfering to another location.

[mojojojo2010]

talk to them for options mintras dili pa kaayo dako alkanse, TS. Another six months of zero profit will hurt you financially and psychologically.

[Cisco1302013]

Just a hint. always remember these rules when starting up any food business.

First Rule: "BE YOUR FIRST CUSTOMER"

Always put yourself as your first customer. You need to know what people want to eat or is presentable to consume in that location or given traffic. Just like opening a Starbucks coffee kiosk in Carbon market or selling bagoong and vegetables in high end areas like Ayala or IT park, which is pretty ridiculous or out of place. Always note that there are primary obstacles for food startups and investors in this space:

1.If the Food offered has slow adoption rates

2.If barriers of entry for this space are low

3.If there is a lack of seasoned entrepreneurs in this segment of the industry

4.If food distribution channels and systems are entrenched

Second rule: DO NOT OVERCAPITALIZE TOO MUCH or even emphasize on the idea that the bigger money you put in it, the bigger paycheck you'll recieve. Overcapitalization at the start of their business drains you extensively. Many food companies don’t need that much money to start out and if they overcapitalize, they then have to generate bigger milestones and a clear exit.

Hi thanks this is quite helpful. Need more time to digest but gems all the same. Thanks!!

[Cisco1302013]

If ever you have decided to stop the business operation, you may write to the lessor whether they could waive or at least lower the fees upon "breach of contract". You may also look for another lessee to occupy your slot and in turn continue the remaining 6 months rent. In there, you won't breach the lease contract but instead a change of business line lang. So ang contract ky between the new tenant and yourself lang for the remaining 6 months while you and the lessor sa whole 12 months. At the end of the term, if the new tenant wanted to extend didto na siya sa lessor makig-coordinate.

Before making your final decision, please consider other aspects lang pud. Unsa mn gyud ang problem why hinay ang sales. Is it the food itself, its price and target market? The rent is just too high? Poor service sa franchisor?

Hi there, this is a pretty good idea. The location itself is the problem. Foot traffic's been dwindling. And the food I serve perhaps may start out as interesting but doesn't have that sticky factor on Cebuanos. It's street food but not the cebuano's usual street food. Sorry I don't want to give more details than necessary. And factor in my inexperience and lack of time since I'm an employee myself.

[qwertyqaz]

I'm only 6 months into my 5-year franchise agreement yet I am already contemplating on selling my franchise. I am sure my inexperience, naivete plus my poor location (most especially) are the huge factors for my disillusionment. Perhaps I should have sought mentorship prior to even getting into business. What do I know after all? I've been an employee all my life and a daughter to parents who have been an employee and a housewife all their lives. I know nothing about business.

I was too hasty. I was too aggressive. And now I am left with the dilemma of whether to build capital again and find another location or to just give up in another 6 months when my lease contract ends with my current location.

I am still hopeful. I am just unsure of where I am going to find capital to keep things going. I did read my contract over and over again and all options require me to pay fees. So I guess my best bet is to continue until I recoup my losses. But then again, will I ever? It's a gamble. I knew it was a gamble all along. Or maybe I, again due to my inexperience, was too optimistic that I lost sight of all of the possible worst-case scenarios and am now stuck in this hell hole.

Here are the options I've been toying with:
1. Sell the franchise and pay the fees up front. Problem is, will someone buy it? And if someone does, I will already have lost 50% of my initial capital. Won't ever get the chance to recoup losses. But I am tired of dealing with a Franchisor. I hate that it seems even in business I have a boss.
2. Find a new location. Need capital again! And what if I get burned over again? Still get a dead spot. Heck, I'm starting to doubt my decision-making capabilities.

Anyway, if anybody's got a good idea, please reply to this post. You can tell I am this desperate if I am posting anonymously and soliciting advice from strangers. But any advice is as good as any. At the end of they day, the call's mine anyway so go ahead. Hit me with your best shot. (Like that 80's song.)

Thanks.

TS, a franchise is ok if indeed it operates like a real franchise. There are many people who can help you but we don't need know the basic info except you mentioned that is a street food concept.

1) Is your franchise under the big and established franchise associations like PFA, FIFA, AFFI?
2) Do you have an expert and proven franchise consultants like Francorp, RK, GMB?
3) What is your franchise invenstment? P500k below? P1M below? P5M below? or P5M and up?
4) You hired a lawyer to discuss with you the FA (franchise agreement) before agreeing and signing it?
5) Is your location in a mall, stand alone or others?

[Cisco1302013]

Mojojojo yes I'll see about that. Moduol lang pud tingali kog lawyer just to be sure covered tanan. Sayangan ko actually coz I had high hopes pero unsaon ta man I had to learn it the hard way.

[Cisco1302013]

Thanks Kenshiro will keep this in mind.

[Cisco1302013]

Ho qwretyqaz, thanks for your interest. Here are my answers:

1) Is your franchise under the big and established franchise associations like PFA, FIFA, AFFI? >>>Yes.
2) Do you have an expert and proven franchise consultants like Francorp, RK, GMB? >>>>No. Not sure who they are. Am I a lost case?
3) What is your franchise invenstment? P500k below? P1M below? P5M below? or P5M and up? >>>> 500k
4) You hired a lawyer to discuss with you the FA (franchise agreement) before agreeing and signing it? >>> NO!!! I should've done this!!!!
5) Is your location in a mall, stand alone or others? >>> Uhm, I'm not sure I want to answer this. Is that okay? Basin ma figure out unya nnu ang actual na store.

[qwertyqaz]

Ho qwretyqaz, thanks for your interest. Here are my answers:

1) Is your franchise under the big and established franchise associations like PFA, FIFA, AFFI? >>>Yes.
2) Do you have an expert and proven franchise consultants like Francorp, RK, GMB? >>>>No. Not sure who they are. Am I a lost case?
3) What is your franchise invenstment? P500k below? P1M below? P5M below? or P5M and up? >>>> 500k
4) You hired a lawyer to discuss with you the FA (franchise agreement) before agreeing and signing it? >>> NO!!! I should've done this!!!!
5) Is your location in a mall, stand alone or others? >>> Uhm, I'm not sure I want to answer this. Is that okay? Basin ma figure out unya nnu ang actual na store.

Since your franchise is under the big associations, then the seal of housekeeping is there when it comes to franchising more if it is under PFA and FIFA. The franchise consultants generally works with the franchisor since they developed the franchise for them and paves the entry to the franchise associations.

If under the PFA, if you belong to this association, that means that the franchisor was able to established the ff:
1) at least 3 years in operations
2) at least 3 company owned stores
3) at least 3 franchise stores
this then makes the franchise more credibile and attractive to the would be franchisees to buy from the franchisor.

So, if you are not able to get a lawyer, now is a good time for you to get one since there is already friction between you and the franchisor. Ideally, you should have an accountant that will check the financial model of the business. Getting a lawyer and accountant on top of a franchise consultant prior to signing the FA is the ideal path if franchise investment is big. I think you attended a franchise seminar or franchise expo and signed up on the spot because of a "promo" of 20% or more discount if you get right away during the franchising event.

If the investment is around P500k, then at least that eliminates the pseudo franching especially those that operate P50k and below or for some P100k and below franchise. Then I'm sure you are operating in a mall, then there is a third party agreement like the lessor, lessee (franchisor and franchisee). If SM or Ayala Malls, then it is more strict.

Everything boils down to the franchise agreement. You cannot undo what is already signed and agreed upon you and the franchisor. Another headache will be the mall like the documentation. Check the section of the FA particularly the clauses regarding termination. Pls remember the FA was designed to be advantageous to the franchisor.