DASM: Why Not Just Burn Your Money?

DASM: Why Not Just Burn Your Money?

A sandwich shop franchise is usually between $200,000 and $400,000. The sandwiches are probably about $7 on average, and with drinks and chips figure about $10. If salaries, taxes, benefits, rents, utilities, insurance, supplies and so forth cost another $300,000, let’s say that’s a $600,000 total investment the first year (the franchise fee has to be funded somehow, even if by loan).

That means you’d have to sell 60,000 sandwiches to pay that bill, or at least 30,000 to pay the annual expenses alone, ignoring the big franchise fee investment. That’s 600 to 1,200 sandwiches a week, assuming a seven-day operation. That’s about 50 to 200 sandwiches daily. Assuming you’re selling sandwiches from 11 am to 10 pm, that’s about 5 to 20 sandwiches an hour on average, though most of that would come at lunch and dinner. Twenty sandwiches an hour is a sandwich every three minutes.

But all of that is with zero profit. All of that just pays the bills. So if you wanted to earn a modest middle class salary to pay the mortgage, pay for school, have two cars, take a nice vacation, contribute to retirement, and have emergency funds—we’d have to add another $200,000, at least, or another 60 sandwiches a day, or 6 per hour. So now we need about 12 to 25 sandwiches an hour to pay the bills and make a decent profit. That upper level is a sandwich every two minutes.

I’m in one of these shops and there are only two other customers, one in line in front of me and one at a table. It’s 12:15, the height of lunch hour. An additional woman on the customer side of the counter is talking to two employees, loudly, and the store music is amped up ridiculously. Another employee, who seems to be in charge of the grill that’s not in use, is standing idly by. One woman, a fourth employee, is cutting the meats and garnishing the sandwiches.

The customer in front of me yells for the three people to lower their voices (it turns out the one on our side of the counter is the shift boss) and to lower the store music. She complains about the din. After her sandwich is made, the supervisor waives the fee. An unpaid sandwich, which doesn’t count in the numbers above and adds to costs. The one woman who has sliced my sandwich and garnished it, now hands it to another woman who merely wraps it and then to the next woman who takes my money. The supervisor simply stares at all this and the “cook” is leaning against the grill.

You have four employees and a supervisor, with only one woman actually working. There are no customers. When I departed, only the man at the table eating remained. There was no cordiality in the store, no sense of enthusiasm. And no customers. I’m figuring five sandwiches per hour at the height of lunch time.

Who’s to blame for this inevitable failure? Most franchisors just want the money, and they don’t prepare franchisees well. Most franchisees don’t have a clue about how to run a business or market it and don’t bother to invest in learning.

Recently I had the opportunity to see the original store of this franchise in another state. The lot was filled with cars. They make excellent sandwiches, which was their original, core business. But they don’t make excellent franchises, which is just a quick way for them to make money.