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.

#franchise #entrepreneur #restaurantfranchise #franchisee #franchiseebusiness #entrepreneurship #owningafranchise

[Awsom]

This should be titled "how I lost $300k thinking I was smarter then my lawyer"

[EightiesMetalMania]

Used to be a franchisee in the auto repair industry. I gotta say the franchise did an excellent job with their sales pitch, but the moment they got my money that all changed instantly. They literally promised a turn key operation and it turned into me working there seven days a week "upholding the good name of the franchise and representing the brand". All while people within the franchise were working against me by trying to steal my customers, employees, commercial accounts, etc. After losing 300k I called it quits. The franchise responded by suing despite being the one responsible for the failure of this location.
Whenever someone asks me getting into one, I tell them to run away or just hand me the money instead. Franchise is the real "F-Word"...

[MichaelS-of]

I am in a similar position i liked and subscribed i would love to be your friend and learn more about your stoy

[TariqJohnson]

That’s a crazy story. It’s so key to be with a Franchisor that actually cares about its franchisees. That’s one thing I can say about the 2 franchises I have- the franchisor has not been perfect, but they are incredibly supportive and they do the right thing. Great story. Cheers.

[kennedytabitha]

I don’t think it’s the franchise that caused this to fail but the fact that you didn’t listen to your lawyer. Thank you for your transparency. Moral of this story is trust the wise council in your life. Corporate was evil for what they did.

[bryanho]

Man... thank you so much for sharing your story. Its takes alot for someone to share about a loss like that. This has helped me tremendously.

[MrHamlet]

I think the lesson here is to turn off your emotions, LISTEN to the experts you hired to be on your side such as the lawyer. To give into blanket statements that defy reason and logic e.g. "finish the dance you started". Be data driven.

[markogusic]

Way to bounce back! Love your hustle and inspiration, keep it coming!

[wunfoe]

I had a similar experience with purchasing a Quiznos in 2005. My CPA thankfully talked me out of it during the due diligence process. I would have lost my shirt.

[michaelcruz]

I’m a franchise owner and I love my franchise. They help me so much and are always there when I need them. You need to shout this franchise out and prevent future people from suffering this same tragedy. They screwed you bruh.

[gonewiththewind]

Just love your video. You are so sincere and kind enough to share your painful experience with others. You will be very successful.

[bugsywolfe]

Franchisors make their money from their franchisees but often carry little risk. Hence the lengthy legally binding contracts. And the bad Corporate Franchisors out there will often charge their franchisees more and more continually raising their prices. ( because you have to buy everything from them. ) to a pointe where you are really just a manager carrying all the risk working only for Corporate and their balance sheets. Start your own business. !

[seanwauchope]

I was going to buy a connaholic location and my lawyer advised it wasn't a good deal after reviewing the FDD so I didn't buy it. I'm still looking for an investment opportunity but I don't want to rush into anything.

[jfkst]

I can't understand how someone would pay a lot for a lawyer, then ignore said lawyer.

[aaronhoward]

Learn from your failure and you will be closer to success!

[IvansBikesBmws]

Omg this is just insane. Corrado I remember you telling me about this business. From what I remember, it was a hype about pita back in the day. I am not sure if these pita stores are still around st all. BTW I am Dragos' friend. He introduced me
randomly when you were promoting night clubs with Eddie . Omg I am so pumped for finding your channel. Take care! I subscribed!

[ALCRAN]

Don't look down at this guy for it listening to his attorney, he was only trying to live up to his dad's advice. A noble effort none the less.

[bertlarsen]

Thanks for the video, I just franchise my company and the relationship between the franchisee and the franchisor is the most important growth for both. So this just encourages me to go over and beyond to help my franchisees to be successful.

[mohammedabufardeh]

this is the first time in my life to press "like" and comment on Youtube. You are so honest and every word is honorable and valuable. I was thinking about this Franchising concept as win-win, but I need to think more and consult a lawyer before I regret. Thanks again Corrado !

[americandream]

Unfortunately I had to give a thumbs up. I’ve failed at two franchises and succeeded in two of my own businesses (non franchises). I have no problem sharing my story and who i franchised with. His story about selling pitas directly to the school is very common. A LOT of franchises only want you to tap into the areas that are not lucrative enough for their corporate structure and basically make you a “soldier on the ground” or to put “boots in the ground”. It doesn’t pay to have marketing or a large corporate presence in that area so they franchise that area out, take a percentage of your sales and hard work, all while still making money in selling you the products in order to run your store. I will gladly help anyone looking to start a business or franchise at no cost. I want people to learn from my mistakes.