Franchise Bits

Buying a Franchise is a risky business. Buying into an established franchise like McDonalds or Taco Bell can be risky enough, but being a pioneer, and buying into a new concept for a franchise can be even more treacherous. Let’s Talk Franchising has a great post about some individuals who invested in an iSoldIt franchise…a business built around selling items on eBay for people that either didn’t want to do it themselves, or lacked the technical knowledge to pull it off.

It did not go well.

For McGinn and Bowen, starting an iSold It was relatively inexpensive—about $150,000 to get a store up and running, compared with the $500,000 to $1 million price tag of the average McDonald’s. Plus, the pair says company executives told them in person and in conference calls that their stores would be profitable within three months of opening. ISold It Chief Executive Officer Ken Sully denies that any iSold It representative made earnings estimates.

The pair says it never turned a profit. “The problem is, the whole concept doesn’t work,” says McGinn. Having to auction off a wide variety of items on eBay made it hard to compete with sellers who specialized in one category, she says. To make matters worse, each new drop-off store that opened was a new source of competition, since most buyers shop online, not locally. Instead of earning money, the pair ended up spending $1,500 to $3,000 a month to keep the business going.

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