We've had a few customers ask us about franchising in the past, and put simply, we never steer anyone in this direction. On the outset of opening a karting facility there's quite a few uncertainties, you as a business owner are looking at a large investment without truly knowing what kind of return on that investment you are going to get. The karting industry has seen a pretty good return over the past year and a half, but it still has a way to go to be back in it's glory days. The future is brighter than ever right now for entertainment facilities, but you have to be careful and make sure you put the right foot forward, every step you take.
With that said, we can see the juicy carrot that franchisors can hang in front of you. The things they usually offer seem like they would make opening a kart track easier, and in some ways that is definitely true. However; be wary of what you are truly giving up to get these few conveniences in the beginning.
Forbes.com has a great list of the reasons not to buy a franchise in general. You can read the full article here:
Here's a synopsis:
1. Questionable Profitability - "Usually franchisers give only average sales figures and profits before expenses are deducted, numbers that arenâ€™t very helpful..."
2. High Startup costs - It can easily take years to recoup the franchisers initial startup fees.
3. Encroachment - Franchisers usually reserve the right to operate anywhere...even in your backyard.
4. Lack of legal recourse - Most franchisers will have you sign your soul away, making any sort of legal recourse prohibitive and usually in a far off state.
5. Limited independence - most franchisers impose price, appearance and design standards on franchisees, limiting the ways you can operate the franchise.
6. Royalty payments - Franchisees are generally required to make continuing royalty payments...eating into your bottom line.
7. Inflated pricing on supplies - In many cases, the franchiser can designate your franchisees supplier of goods and services. Franchisers argue that this is done to maintain quality control, but almost all franchisers receive kickbacks from the vendors.
8. Restrictions on post-term competition - Think you can run this business better? Too bad, you signed a non-compete agreement.
9. Advertising fees - Just know this...the franchiser has no fiduciary duty to its franchisees...ouch.
10. Unfair termination. Even the slightest impropriety on your part, such as being late on a royalty payment or violating the franchiseâ€™s standard operating procedure, can be cause for the franchiser to terminate your agreement
That's not a quick read, but this isn't something you should choose lightly. Building an entertainment facility from the ground up can be a daunting task, and might look a little overwhelming at first. But it's not impossible, there are literally 1,000's of tracks around the world where 1 person or a couple of people hunkered down and got it done with great success. Don't sell yourself short.
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