Fast food places have been in decline for some time. Could this be the first big one to go:
2 Likes
Subway has problems but this sounds as if it is a franchisee.
1 Like
Subway has problems but this sounds as if it is a franchisee.
Ayup. One Wendyās franchise in my area closed two of itās four stores, that I know of. They still canāt staff the one that I use. I was in for lunch yesterday. Again, they had no-one to staff the counter, so had to use the kiosk. As I was eating my salad, I heard a rhubarb break out at the counter: guy complaining he had been waiting a half hour, and demanding his money back so he could go somewhere else. An employee said she was doing the best she could but everyone had left. When I had finished eating, got back in my car I noticed, as I left, the two areas employees usually park were completely empty. I had seen one or two leave around 1:30 or 2, so that was probably the morning shift, and no-one showed for the afternoon-evening shift.
As you said, sounds like a franchise problem, as BK and Arbyās are always well staffed.
Steve
3 Likes
Labor is a well known problem these days. It seems people just donāt want to make a living $4.58/hr (<- this is a hyperbolistic joke. Please donāt trip over it).
I noticed that an eatery quick service concept that I visited has full menu prices for itās food. But the protein is $3-5 extra. Thatās a slick menu device to extract more from customers.
Menu | Fresh grains, greens & smoothies | Currito
The food was fine, but my bill for 2 was a dime shy of $45 and I didnāt order any drinks!
If the employees arenāt getting it, where oā where is all of that cash going?
I will not be returning.
2 Likes
Recall the āreformā of a few years ago. The āJCā can pool the serverās tips, and use it to cover part of the pay of the back-room staff, rather than the āJCā dip into his own pockets to fully pay everyoneās wages. I wonder if there is a linkage between the āJCā taking part of the tips the servers earn, and the proposals to make tips tax free?
While we are at it, speaking of the proposal to make Social Security benefits tax exempt at the Federal level. SS is already tax exempt, if you income is low. Only higher income people would benefit if SS was exempt for everyone. (enter Gomer Pyle mode āsurprise, surprise, surpriseā)
One year, I did not take a distribution from my IRA. My divi and SS income was something like $40K. I owed zero Federal tax that year. $40K in cash income, with no tax? I worked it out, by hand, three times. Thatās the way it came out.
$40K is more cash than I ever grossed at the day job, but the day job income was taxed, a lot.
Steve
4 Likes
It is a mistake to work for a living.
Butā¦we have all those deserving āJCsā to support. It takes the sweat of a lot of Proles to provide all the comforts $30M/year can provide for a āJCā.
Steve
2 Likes
One issue with the franchisee model is that it shields that actual value of the business until it is too late. The parent can look like things are great overall as they continue to pull a percentage off the top line while the franchisee can be losing money. I had a storage business with a partner for a number of years that was a franchisee. Our location did quite well, but we were one of the few. The majority were losing money but still had to pay based on the top line revenue. Eventually the parent company gave a buy out offer to each franchisee so they could sell the entire business.
Similar to what happened with Krispy Kream or Boston Chicken (Market) at some point in their history
1 Like
Iāve always wondered; how does a storage facility lose money?
JimA
Donāt maintain at least 90% occupancy
2 Likes
That is a problem with the tax code, that it literally disincentivizes working.
And it will not change since the non-workers are the ones with the vast majority of wealth and investment income and, consequently, political clout.
Pete
Really? Where are the costs beyond property taxes and a person or two? I suppose there are some fancy storage facilities (Iām looking at you āBlue Bird Storageā); but I see some places with land and a fence. Of course being a franchise can be problematic.
JimA
There are all sorts of costs I can think of, and thatās from me, never having been in the business at all (other than running a really quick amateur analysis a few years ago to see if it was worth providing financing to one of them, we declined in the end).
The main cost, of course, is financing the property, you might have taken a 3-year loan in 2021 at 5% and now you need to refinance into an 8% or higher loan. There are property taxes which go up over time. There is insurance. There is maintenance, if youāve ever been to one of those self-storage places, you will see that they have all sorts of things that require regular maintenance. For example, the electric front gate (that opens via entered code), those break all the time, and the maintenance contract is not inexpensive, especially if you want 3-hour response time. There is other general expenses like electricity to keep the lights going, and good lights are critical because otherwise you will have break ins and your insurance will shoot way up (sometimes you canāt even get insurance without adequate lights, and they send drones out to see if the lights are working properly). There are cleaning expenses, when folks move stuff in and out, they leave all sorts of debris, and when it is blowing around your fenced area, it looks terrible and people wonāt use your facility, so you need to clean the area regularly. People are also slobs and spill all sorts of stuff in the inside corridors as well. And then, the latest rising cost is technology costs. When it was all ledger on paper, and keys in a lockbox, it was pretty cheap. But now you need a whole system to keep track of access and payments. That costs a LOT per month to keep running. Certain areas require regular donations to police organizations so they will do drive bys on a random basis. This reduces the cost of replacing shot out lights and avoids some other types of vandalism/theft.
As far as employees go, itās a relatively low-level kind of job, but it is VERY boring. And bored low-level employees sometimes screw up and cause all sorts of trouble. Mobile phones with unlimited data plans have really helped in this regard because it gives bored low-level employees something to do other than making trouble.
The biggest cost is usually the financing cost, but all the others add up, and a small shift in occupancy/payments can change it from profitable to unprofitable. Itās not as easy a business as one would think, and it also requires more time than one would think.
3 Likes
I live in Singapore, which is a small, congested place with limited space. In the franchise model, you are basically renting out a floor or two in a building and converting them to storage lockers. So you have rent and utilities to pay as well as the fee to the parent company. They then providing the branding, marketing and leads/referrals.
The other approach would be to purchase the entire property where the focus may actually be on property appreciation but use the storage business to help pay the loans.
But basically rent was the largest expense followed by the top line to the franchise expense. It only took one person to man the desk which was hard to staff as they often were bored.
1 Like
I did some consulting on a brand new, four story mini-storage facility. The construction loan alone was $10 million. That didnāt include the land, and there were some environmental issues. I donāt know what the final tab was, but they spent a ton of money on that project.
1 Like