How I Lost $300k Owning A Franchise

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Being a Nightclub promoter for many years worried my parents because of all of the shootings taking place at nightclubs, so they encouraged me to explore other business ventures. At that time my goal was to buy my own nightclub but that wasn’t feasible because it didn’t mitigate any of the risk of crime. I was online everyday trying to find a business to buy or start and that’s when I came across a pita franchise. I was ecstatic because buying into a franchise that’s already successful could never go wrong… until it did.

I was 18 years old when I went in for a meeting with the owner of the franchise along with my father and I remember them saying that they were opening up a brand new location and they were looking or the right person to take on the challenge. It was the perfect opportunity because it had a great location (high school across the street, sports centre with indoor soccer fields, outdoor soccer fields, hockey rinks, and lots of growth in the area). Instantly I was sold!

Throughout this process I had a contract from the franchise which I hired a lawyer that specializes with franchises to review for me before I agreed to everything. It wasn’t a cost I was thrilled to incur but I spent the extra money to make sure I knew what I was getting myself into. The lawyer told me DON’T DO THIS, but I didn’t listen to him, I went with my gut.

I remember giving $40,000 without doing much due diligence. Prior to signing the agreement I did visit some of the other Locations and speaking to the owners, but they weren’t very helpful because I continued to get the same answer, (everything’s going well).

Preparing and waiting in anticipation to open my doors and serve the first customer felt like it was taking forever as a result of the delays in construction. A couple months before opening my location, the franchise was training us. During the training process I remember meeting the owners of the entire franchise. I got a really bad vibe and I recall telling my father these guys are scammers I don’t want to do this anymore. At that point I remember owing them another $40,000 and I was able to walk away but my dad encouraged me and said “When you’re in the dance you gotta finish the dance.”

So I paid the $40,000, opened my doors April 2008 and in October of 2010 I closed my doors. I literally left everything in there and closed the doors. Head office would not assist with royalty fees, they were taking their royalty fees every month so whatever sales I made they were taking their percentage. Even if I was in the negative they would still take their money and then I remember when I first opened up the store I would always take care of the students because I wanted them to come consistently and promote it by word of mouth. Being a student when I was in high school I remember going to this burger joint where the owner would always go out of his way to make sure we had a pleasant experience by joking around giving free good and this incentivized us to choose his place for lunch over McDonalds. I wanted to run and what type of service I wanted to provide to the students.

6-8 months later students weren’t coming anymore. This is when I found out from a student that the high school was having pita day and I wasn’t selling the pitas so something wasn’t adding up. I asked the student where have you been and he’s like I support Pita day every Tuesday don’t you run that and I remember saying “WHAT are you talking about?” I asked him can you please take a picture and show me the sign and the setup, so he came back the week after with pictures and I saw they had a sign with my franchise name above the cashier and they even had the same wrapping paper on the pitas. I thought that maybe the school was just copying me at first but then I remember going across the street to the school and speaking to the principle and they made a deal directly with head office, I remember she said told me that head office would send them the pitas directly to the school.

Learn from my nightmare as I have. This experience allowed me to realize buying into a franchise wasn’t the right thing for me especially because of all of the restrictions and it taught me the importance of due diligence. I needed this beating to teach me because I was young and it’s better that I lost it at that time rather than later in life when I had a lot more to lose.

The whole message behind this video, especially toward the younger generation. You need to do your due diligence when starting a business. You need to understand the risks that you are exposing yourself to and you have to be willing to lose everything you have to your name. If you don’t recognize and understand these risks, then you aren’t ready to start a business yet.

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