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rated:
Hello!

I may have received an opportunity of a lifetime and I want to make sure it's exactly that.

Before I get started I do have a non-disclosure agreement, however, the business model isn't my concern, it's the paperwork that I will have in the next month+.

I'm a personal trainer and was approached by a client of mine about a franchise opportunity, he wants me to head it. The pay he's offering is negotiable depending on my paystubs, so that's not a problem. 
The biggest thing he's enticing me with is a vested interest in the company. The models for the other franchises and their profits are solid, and my client knows the area extremely well. He's not only extremely successful but he's probably one of the most powerful and influential people in my major metropolitan area.

The question I have is mainly the vested interest portion. He is offering me 5% of the business annually, with a cap after 5 years of 25%. I can only take my share after 3 years (15%).

I'm extremely unfamiliar with stock options/franchises, really all of this except the management/fitness/marketing. 

How can I make sure he doesn't fire me after 3 years to save himself potentially $250k

How much would I be able to pocket after 5 years assuming the profits are between $200-450k annually?

One more thing. He's getting me in touch with another person he's offered the same business plan for so that I may ask how it's like to be a partner with him. However, said person has only been on for 2 years, and I'm uncertain they are any more knowledgeable on this aspect of business than myself. 

Much appreciated!

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If you DO hire an attorney then make sure its not one in the same "network" as the guy you are dealing with.  Pick one i... (more)

RedWolfe01 (Oct. 24, 2016 @ 11:16a) |

Aha, got it.  I had been focusing on the "extremely unique," not the "unique franchise."  You're right, Oxymoron Police ... (more)

cestmoi123 (Oct. 24, 2016 @ 3:53p) |

Technically this isn't a franchise anyway, if I understand the OP -- its a CONCEPT for a franchise.  So no fees or costs... (more)

RedWolfe01 (Oct. 24, 2016 @ 11:22p) |

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rated:
what is the franchise?

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fmauricea said:   The pay he's offering is negotiable depending on my paystubs, so that's not a problem. 

The question I have is mainly the vested interest portion. He is offering me 5% of the business annually, with a cap after 5 years of 25%. I can only take my share after 3 years (15%).

How can I make sure he doesn't fire me after 3 years to save himself potentially $250k

How much would I be able to pocket after 5 years assuming the profits are between $200-450k annually?
 

  
What do you mean with the pay depends on your paystubs thing?  

How much it's worth is dependent on how the business functions.  Go ahead and assume the business will lose money, or at least not be profitable, for the first three years.  Even if you get 'fired', you'd still own 15% of the business.  And I'm not sure that 'firing' you would preclude you from getting the next 10% over the following two years.  Depends on the contract with the owner.  

So after 3 or 5 years, you'd own a certain % of the company.  At that time, you could sell your portion, and assuming you can find a buyer, you'd get whatever the buyer is willing to pay you for your portion of the company.  That buyer might be the owner of the other portion of the company, assuming there's only the two of you involved.  Or, depending on the business model, if there are profits that are distributed back to the owners, you'd get that % for however long you owner your portion of the company.  Similarly, money that goes back into the company, capital investments, etc, would come from your % as well.  Additionally, bringing in other outside investors could dilute your share of the company with new money.  

 

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This is the type of situation that Attorneys are used for. Reviewing contracts.

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You are the trainer of Mr. Madoff?

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In order for 15% to be 250k, the entire franchise would have to be worth 1.6 million, give or take. Is it currently worth that much?

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Infinion said:   
fmauricea said:   The pay he's offering is negotiable depending on my paystubs, so that's not a problem. 

The question I have is mainly the vested interest portion. He is offering me 5% of the business annually, with a cap after 5 years of 25%. I can only take my share after 3 years (15%).

How can I make sure he doesn't fire me after 3 years to save himself potentially $250k

How much would I be able to pocket after 5 years assuming the profits are between $200-450k annually?

  
What do you mean with the pay depends on your paystubs thing?  

How much it's worth is dependent on how the business functions.  Go ahead and assume the business will lose money, or at least not be profitable, for the first three years.  Even if you get 'fired', you'd still own 15% of the business.  And I'm not sure that 'firing' you would preclude you from getting the next 10% over the following two years.  Depends on the contract with the owner.  

So after 3 or 5 years, you'd own a certain % of the company.  At that time, you could sell your portion, and assuming you can find a buyer, you'd get whatever the buyer is willing to pay you for your portion of the company.  That buyer might be the owner of the other portion of the company, assuming there's only the two of you involved.  Or, depending on the business model, if there are profits that are distributed back to the owners, you'd get that % for however long you owner your portion of the company.  Similarly, money that goes back into the company, capital investments, etc, would come from your % as well.  Additionally, bringing in other outside investors could dilute your share of the company with new money.  

 

Talk to an attorney, but make sure you have specific terms around valuation and whether the majority owner is obligated to purchase your shares if you leave for any reason. You should also consider whether there may be dilution and whether you're protected against your shares being diluted.

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you know what they say about things that sound too good too be true... especially when the person is handing out opportunities of a lifetime


 

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I know a lot of 'influential people in my major metro area' (btw who the heck says 'major metropolitan area').
I also know a lot of 'scammers so bad you shouldn't ever eat lunch of them'.

It seems that most of the people on List #1 are on List #2.
Must be coincidence.

And he had you get on with another 'partner'?  Did you vet that partner? For all you know the 'partner' is his friend who lives on his couch.

rated:
bassmanben said:   This is the type of situation that Attorneys are used for. Reviewing contracts.
And please, heed the attorney's advice, as well as the advice of other neutral professionals. It sounds like you may have already made up your mind about jumping on this. That may, dangerously, lead you to think you know better than the experts.

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Why you? What do you bring to the table for him? Does he need you for your time, money, experience, good looks, backstory, etc.? Why can't he use his success, money, and considerable influence to fulfill this plan?

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fmauricea said:   I'm a personal trainer and was approached by a client of mine about a franchise opportunity, he wants me to head it. 
  McDonalds, KFC or BK?

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forbin4040 said:   (btw who the heck says 'major metropolitan area')Someone who the moderators should boot.

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Quikboy4 said:   Why you? What do you bring to the table for him?A male escort franchise for males.

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The Oxymoron Police would like to discuss your "extremely unique franchise"

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probably amway..

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OP will have to make a "small" investment to have skin in the game. And will be on the stump when this venture goes belly-up.

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fmauricea said:   Hello!

I may have received an opportunity of a lifetime and I want to make sure it's exactly that.

Before I get started I do have a non-disclosure agreement, however, the business model isn't my concern, it's the paperwork that I will have in the next month+.

I'm a personal trainer and was approached by a client of mine about a franchise opportunity, he wants me to head it. The pay he's offering is negotiable depending on my paystubs, so that's not a problem. 
The biggest thing he's enticing me with is a vested interest in the company. The models for the other franchises and their profits are solid, and my client knows the area extremely well. He's not only extremely successful but he's probably one of the most powerful and influential people in my major metropolitan area.

The question I have is mainly the vested interest portion. He is offering me 5% of the business annually, with a cap after 5 years of 25%. I can only take my share after 3 years (15%).

I'm extremely unfamiliar with stock options/franchises, really all of this except the management/fitness/marketing. 

How can I make sure he doesn't fire me after 3 years to save himself potentially $250k

How much would I be able to pocket after 5 years assuming the profits are between $200-450k annually?

One more thing. He's getting me in touch with another person he's offered the same business plan for so that I may ask how it's like to be a partner with him. However, said person has only been on for 2 years, and I'm uncertain they are any more knowledgeable on this aspect of business than myself. 

Much appreciated!

What's the income tax returns like for the previous years?
What's the financials look like for the current year?
Are you taking salary along with equity?
Do you have any voting power?
What if the business goes negative for current and next years?

rated:
If it's too good to be true, it usually is.

Why would this guy want to make you a partner when he could just hire you as an employee with no equity?

rated:
1. Ok, so if I understand your situation correctly, you're being offered a job managing a new franchise location this guy plans to open. Apparently he isn't new to this since he has at least one other location, and that location has been open for at least two years based on how long that manager's been working for him. So, it would appear that his cash flow or capital has been adequate to make payroll for at least the last two years.  

2. Is the salary you're being offered commensurate with or better than your current position?  Are benefits comparable?

3. Does your current position offer you the opportunity to earn an ownership stake in the business?

4. Assuming you leave your current position with proper notice and in good standing, would you be able to get a job back if this new one didn't work out?

5. If the salary and benefits you're being offered are equitable, and you also have the opportunity to have a stake in the success you achieve in the business, then what do you have to lose by trying?

6. Consult a business attorney to review the contract if you have any doubts or questions you need help with.

rated:
Infinion said:   
fmauricea said:   The pay he's offering is negotiable depending on my paystubs, so that's not a problem. 

The question I have is mainly the vested interest portion. He is offering me 5% of the business annually, with a cap after 5 years of 25%. I can only take my share after 3 years (15%).

How can I make sure he doesn't fire me after 3 years to save himself potentially $250k

How much would I be able to pocket after 5 years assuming the profits are between $200-450k annually?

  
What do you mean with the pay depends on your paystubs thing?  

How much it's worth is dependent on how the business functions.  Go ahead and assume the business will lose money, or at least not be profitable, for the first three years.  Even if you get 'fired', you'd still own 15% of the business.  And I'm not sure that 'firing' you would preclude you from getting the next 10% over the following two years.  Depends on the contract with the owner.  

So after 3 or 5 years, you'd own a certain % of the company.  At that time, you could sell your portion, and assuming you can find a buyer, you'd get whatever the buyer is willing to pay you for your portion of the company.  That buyer might be the owner of the other portion of the company, assuming there's only the two of you involved.  Or, depending on the business model, if there are profits that are distributed back to the owners, you'd get that % for however long you owner your portion of the company.  Similarly, money that goes back into the company, capital investments, etc, would come from your % as well.  Additionally, bringing in other outside investors could dilute your share of the company with new money.  

 

  
He would take my current pay and base my salary on that. 

Fair points on those. He's looking to spend $750-$1mm to break ground and get it running. Annual profits are $200-450k, but a few locations (that he's not a part of) have turned a profit the first year. I assume they had a much smaller build-out. 

Very helpful information on the last paragraph. Thank you  

rated:
bassmanben said:   This is the type of situation that Attorneys are used for. Reviewing contracts.
  This is my conclusion. I wanted to get some information before contracts were presented. 

rated:
treasurebeacon said:   you know what they say about things that sound too good too be true... especially when the person is handing out opportunities of a lifetime


 

  agreed

rated:
Aurianne said:   1. Ok, so if I understand your situation correctly, you're being offered a job managing a new franchise location this guy plans to open. Apparently he isn't new to this since he has at least one other location, and that location has been open for at least two years based on how long that manager's been working for him. So, it would appear that his cash flow or capital has been adequate to make payroll for at least the last two years.  

2. Is the salary you're being offered commensurate with or better than your current position?  Are benefits comparable?

3. Does your current position offer you the opportunity to earn an ownership stake in the business?

4. Assuming you leave your current position with proper notice and in good standing, would you be able to get a job back if this new one didn't work out?

5. If the salary and benefits you're being offered are equitable, and you also have the opportunity to have a stake in the success you achieve in the business, then what do you have to lose by trying?

6. Consult a business attorney to review the contract if you have any doubts or questions you need help with.

  
1. The previous franchise is a completely different company and is of much smaller scale. 

2. The same or better. 

3. My current job does not allow for such a thing. 

4. A lot of factors go into that, I would have good alternatives that I would be happy with. I imagine no, but it depends on the timing, as the position my boss is in is high turnover. 

5. Excellent question. With personal training your business becomes better with time.

6. This is a must at this point I think. I'm none-the-wiser and I don't plan to get screwed. 

Thanks

rated:
Chargum85 said:   If it's too good to be true, it usually is.

Why would this guy want to make you a partner when he could just hire you as an employee with no equity?

  My guess is that he wants to save money up front? 

What he says is that it will motivate the person. 

What are your thoughts on that? Wants to share burden if the company is a loss?

rated:
BrianGa said:   
bassmanben said:   This is the type of situation that Attorneys are used for. Reviewing contracts.
And please, heed the attorney's advice, as well as the advice of other neutral professionals. It sounds like you may have already made up your mind about jumping on this. That may, dangerously, lead you to think you know better than the experts.

  Absolutely not, I'm terrified to go into something like this without having any more knowledge. Since I don't I'm getting "worst case" via internet and then pay an attorney. However, I posted in case there were some major negatives to the idea I hadn't thought of. I'm still very much on the fence about this, it seems like for good reason. 

rated:
fmauricea said:   
Chargum85 said:   If it's too good to be true, it usually is.

Why would this guy want to make you a partner when he could just hire you as an employee with no equity?

  My guess is that he wants to save money up front? 

What he says is that it will motivate the person. 

What are your thoughts on that? Wants to share burden if the company is a loss?

1)  What up front money is he saving if he is paying you a salary?
2) It will 'motivate' you to work 24hrs a day and he doesn't have to worry about that.
3) If the company is a loss, he will most likely ensure to clear out the bank accounts before you even blink and you find out that EVERYTHING that is collectable is in your name, and that you are going bankrupt to get away from the creditors.

Let me add  (These happened to me but not directly, I was part of a group of people this was happened to but not the person who lost their shirt)

How long have you known this person?
usually these 'deal' guys offer you a deal after knowing you for LESS than 30 days.

Did this person give you a story about their life, something remarkable like 'Running for President'.
I vetted the 'story' of a scammer and found out it was attributed to another famous person.  With no mention of it happening to the scammer.

You mentioned he is putting in 1 million.
Is he really putting in that much or just telling you that.

You should always be wary of the 'get rich quick scheme'  because the only person who gets rich quick is the scammer, not the scammee.

rated:
ganda said:   The Oxymoron Police would like to discuss your "extremely unique franchise"
  
Wouldn't it be more in the jurisdiction of the Redundancy Police?  

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fmauricea said:   
  
He would take my current pay and base my salary on that. 

Fair points on those. He's looking to spend $750-$1mm to break ground and get it running. Annual profits are $200-450k, but a few locations (that he's not a part of) have turned a profit the first year. I assume they had a much smaller build-out. 

Very helpful information on the last paragraph. Thank you  


45% ROI in first year. Does he carry a wand, a magic wand that is.

rated:
fmauricea said:   
Chargum85 said:   If it's too good to be true, it usually is.

Why would this guy want to make you a partner when he could just hire you as an employee with no equity?

  My guess is that he wants to save money up front? 

What he says is that it will motivate the person. 

What are your thoughts on that? Wants to share burden if the company is a loss?

  Why is there a question mark after the 1st statement? Motivate the person is BS & makes this a 100% scam. If you're on the hook for loses then it's a SCAM.

rated:
no

rated:
fmauricea said:   
Chargum85 said:   If it's too good to be true, it usually is.

Why would this guy want to make you a partner when he could just hire you as an employee with no equity?

  My guess is that he wants to save money up front? 

What he says is that it will motivate the person. 

What are your thoughts on that? Wants to share burden if the company is a loss?

  

and if you believe that, he has found the right sucker.

This whole "opportunity" sounds fishy, at least from the info provided.  Sounds like a run away from this one as quickly as possible deal to me.

 

rated:
dup deleted

rated:
so whats the franchise??

rated:
rufflesinc said:   so whats the franchise??
It's ... Extremely unique.  

rated:
cestmoi123 said:   
ganda said:   The Oxymoron Police would like to discuss your "extremely unique franchise"
  
Wouldn't it be more in the jurisdiction of the Redundancy Police?  

  No. Oxymoron, meaning...franchises are relatively (if not exactly) the same, location to location. How can a an opportunity to open a location of a franchised brand be unique? It's the same thing as all of the other ones.

rated:
Chargum85 said:   If it's too good to be true, it usually is.

Why would this guy want to make you a partner when he could just hire you as an employee with no equity?

  
This!! 

Very successful guy, rich guy, influential guy but needs you and some of your investment for a stake in the company  

Unless he is trying that as a bait to have you give your 200% effort and dedication to this company, I am not seeing what is there in it for him, when he can just keep you on payroll and be done. 

rated:
There's clearly something missing in the information you have OP. There's no reason an investor would pay you a salary, and give you equity, without an investment from you directly. Both your wording "Extremely unique franchise opportunity" And your investor friend's words "it will motivate the person" sounds scarily similar to MLM scams and the like.

If he asks for a money order, or for you to pay $299 for your starter kit, you'll know what's going on. On the face of it, there's nothing here but a scam of some sort. The fun is going to be figuring out what's happening.

rated:
gruntwork said:   
fmauricea said:   He would take my current pay and base my salary on that. 
... spend $750-$1mm ... Annual profits are $200-450k,
 


45% ROI in first year. ...

  
Yeah, that ROI is unbelievable.  As in...actually NOT believable.  If this guy really has done this before, first, he probably can't do it again, and second, he's probably lying.  

Skipping 7 Messages...
rated:
cestmoi123 said:   
jaytrader said:   
cestmoi123 said:   
ganda said:   The Oxymoron Police would like to discuss your "extremely unique franchise"
  
Wouldn't it be more in the jurisdiction of the Redundancy Police?  

  No. Oxymoron, meaning...franchises are relatively (if not exactly) the same, location to location. How can a an opportunity to open a location of a franchised brand be unique? It's the same thing as all of the other ones.

  Aha, got it.  I had been focusing on the "extremely unique," not the "unique franchise."  You're right, Oxymoron Police do have jurisdiction.  

  
Technically this isn't a franchise anyway, if I understand the OP -- its a CONCEPT for a franchise.  So no fees or costs involved for franchising - just the facility and brand development to try to MAKE it one.

For every franchise there are tons of one offs that were trying to become one.  You can usually tell by the quality of the signage and level of gloss applied if they are trying to "sell" it to others.  (not even counting the major franchisers who do one-off testing concepts -- I know of several in Dallas as well as several that failed -- or at least only had very limited success)   

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