Profiling U.S. Immigrants Who Invest in Franchise Opportunities – Part 1 of a 4-Part Series
The Napkin that Changed My Life
Anoune Mbengue’s franchise investment career began when he picked up a paper napkin.
Branded napkins are not unique to American fast food franchises. Mbengue, however, was from Senegal. Like many immigrants, Mbengue was fed up with the status quo. He left Senegal in 2000 during a faculty strike at the law school he attended in Senegal because, a year into the strike, he was tired of living a life on hold.He continued to examine the paper napkin in his hand.“Each Subway Restaurant is franchisee owned and operated,” it read, in all caps. The statement piqued his curiosity.
On the rare occasions that he wasn’t preparing sandwiches for customers, Mbengue was attending Subway-sponsored workshops and seminars for prospective investors.
Keeping his entrepreneurial ambitions to himself, Mbengue arranged to transfer to a busier and more prominently located franchise, where he worked his way up to manager. By the time he was ready to purchase his own franchise, he understood the business inside and out.
Once an affordable Subway franchise became available, Mbengue solicited help from friends and family. $15,000 down enabled him to purchase a $45,000 Dykeman & 207th street Subway franchise.
It wasn’t an ideal location. Mbengue was determined, though. He dedicated days and nights to driving up revenue and his efforts soon paid off. Prior to his ownership, the franchise brought in a $3,000 weekly gross. Under Mbengue’s ownership, the weekly gross soon increased to $7,000.
What Mbengue now refers to as his “biggest mistake” meant a $175,000 investment. He obtained the capital by selling his now highly profitable Dykeman Street franchise and by partnering with an inexperienced American co- investor.
Eager to obtain the prime Lenox and 139th location, Mbengue -- who had completed three years of law school in Senegal before moving to New York -- neglected to officiate his new business partnership with a contract.
Against Mbengue’s wishes, the American co-owner staffed the franchise with her inexperienced family members. Shortly after, Mbengue’s co-owner -- with her chorus of family members serving as reinforcement-- filed a police report accusing Mbengue of stealing money from the cash register. He was arrested immediately.
After spending the night in jail, Mbengue headed straight for the franchise. Having personally facilitated the security camera installation, he knew exactly what to do.
“If you didn’t get this recording, you’d be in jail now,” Mbengue’s attorney told him, after the video footage evidence he presented proved his innocence.
The judge, now livid that Mbengue’s co-owner would have the audacity to victimize an innocent, hard-working immigrant, forced Mbengue’s co-owner to return Mbengue’s investment capital and released him from the bank loan as well as from all affiliations with his former co-owner.
He had lost the Harlem Subway franchise on Lenox street but had gotten his investment money back and was no longer beholden to a bank loan. Most importantly, Mbengue remained determined to succeed.
He spent six months looking and watching and waiting. None of the available and affordable locations satisfied him, though. Rather than jump into another problematic partnership, Mbengue continued to wait.
After six months of looking and watching and waiting, Mbengue resumed his relationship with Subway...this time, like once before, as an employee.
Not wanting friends, neighbors and former employees in Harlem to see him thrown back to square one, Mbengue took a store-front food preparation position at a Lower Manhattan franchise. The grueling subway (as in public transportation) commute from Harlem was exhausting, but he wanted to maintain anonymity while he planned his next move.
After two years of waiting for the right opportunity, Mbengue saw his chance: the St. Nicholas Ave & 125th Subway franchise became available and Mbengue bought it (this time, without a partner). Mbengue’sperseverancehas paid off, as his St. Nicholas and 125th street Subway franchise recently received a letter from Subway headquarters commending him for achieving record-breaking sales at his location.
"I'm a location kind of guy," he responded when asked why he allowed two years to elapsed between his second and third franchise investment. Being a location kind of guy clearly did not serve him well the second time around and taught him it is sometimes necessary to hold out for the better opportunity. The fact that he practiced the self restraint necessary to avoid another potentially toxic business partnership is the true testament to his determination to succeed.
Mbengue began his journey toward the American Dream as a typical employee: working hard to earn a paycheck, but only managing to make someone else wealthy. A chance encounter with a Subway napkin, however, combined with a strong work ethic and a desire to control his own destiny led him to discover franchising, where he twice achieved success and independence as the owner of his own business.
As a journalist, Susanna Speier has published over 100 articles for print and online publications. She holds a BA from Hampshire College, an MFA from Brooklyn College, C.U.N.Y. and a post graduate screenwriting certificate from Boston University. You can follow Susanna on Twitter @SusannaSpeier or visit her at her website http://www.susannaspeier.com.
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Negotiating the Franchise Agreement
Now that we’ve discussed the franchisor’s point of view and arguments towards negotiating the franchise agreement, here are a couple of tips for not wasting time on trying to negotiate items which franchisors do not alter and concentrating on the change-able clauses in the Franchise Agreement.
"Buying" A Franchise
Here at FranchiseHelp we’re constantly asked about the opportunity to buy a franchise. Unfortunately I’m going to have to tell you something that might disappoint you. You can’t “buy” a franchise. In reality you are engaging in a “leasing” transaction rather than a “purchasing” transaction. Why is it a lease? In any franchise deal, the franchisee receives the assets up front, but only for a period of time - the term of the franchise agreement. The term of the agreement may run for five to ten years, or in some cases it may run for as little as a year or two. At the end of the day the renewals of these agreements are at the option of the franchisor, and the reasons for not renewing an agreement should be completely spelled out in the Franchise Disclosure Document (FDD) and franchise agreement.
Why Franchisors Don’t Like Negotiating
The first impression that the franchisee gets from reading the franchise agreement is total incomprehension, unless they are well versed in legal terminologies and phrasing. The FDD is required to be in plain English but the franchise agreement has no such requirement. Typically, the franchisor’s legal department works extremely hard to secure the franchisor’s position through the Agreement and makes it impenetrable for someone who is not a lawyer to understand. The uniform nature of the agreement for all franchisees makes it assumed that the franchisee must sign the agreement so that all the franchisees follow the same terms. Even though that is partially true, the franchisee can plead their case and negotiate terms where they believe that they are offering something unique to the franchisor.