Comment by tonymet
2 years ago
Well thankfully restaurant & AI startup aren't the only two industries worthy of investing in.
Jokes aside, I get mom & pops. But I'm dubious on the "growth" chains like a Shake Shack or Chick Fil A.
My current theory is that they are effectively MLMs with different structures: private equity MLM, owner-operator (franchisee) MLM.
See Subway for the end result
Chick fil A is privately held and their franchise operator model doesn’t require a large infusion of cash from the franchisee. Only 10k cash, so it’s more like a manager job with profit sharing and I don’t see how it could be a MLM.
Because you have to pay for the job
"MLM" is a sanitized name for "Pyramid Scheme" where the only way for a member to make profit is to bring in new people who pay up into the organization. Franchises aren't pyramid schemes.
I don't know why you'd be skeptical, franchising has been very successful for the last century (McDonalds, 7-Eleven, Ace Hardware, etc) and gives steady returns to investors. And the reason why the food business always has opportunity is because people always need to eat, and are willing to spend disposable income on food. When consumer spending goes up so does the restaurant biz, and that's not going to change. And franchises are just one efficient way to create an international restaurant business. It was actually pretty surprising when Starbucks came along and didn't franchise.
But just because the model is efficient doesn't mean you can't screw it up, like Quiznos. That's just short term thinking run amok.