Great advice from Paul Steinberg in the forum:
March 20 ’06 issue of NRN cover story states that KFC franchisor-mandated remodels ($250-500K per unit) may force smaller franchisees to sell; www.nrn.com
When buying a franchise, remember to ask about any upcoming mandated capital improvements. Particularly in the hospitality industry, many franchisors have a schedule for upgrades/remodels; this is necessary to keep the brand image fresh.
What appears to be a “bargain” price from a selling franchisee may cost more than an “expensive” alternative outlet if the higher-priced outlet has the current decor and the cheaper outlet will be needing a facelift.
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
The Dairy Queen franchisees face a similar problem, but on a larger scale – some of their new build outs will cost $1 million. Nice work for Warren Buffett.
Seems similar to buying a condo and being forced by the condo association to cough up “one-time” assessments for extraordinary capital approvements. You often never see it coming without clever due diligence.