I Can’t Make Ends Meet After Buying A Franchise

Summary

Podcast Summary: The Ramsey Show Highlights Episode: I Can’t Make Ends Meet After Buying A Franchise
Release Date: January 23, 2025
Host/Author: Ramsey Network

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Introduction

In this episode of The Ramsey Show Highlights, hosted by the Ramsey Network, a distressed caller reaches out for advice regarding financial struggles after investing in a franchise business. Dave Ramsey, alongside co-host Jade, delves into the caller's predicament, offering insights and actionable strategies to navigate the complexities of balancing personal finances with entrepreneurial ventures.

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Caller’s Situation

Caller Profile:

• Age: 26
• Marital Status: Married
• Children: Two
• Business: Recently opened a cookie store franchise in June
• Additional Income: Works as a realtor and engages in side hustles (DoorDash, Uber Eats, Walmart deliveries)

Primary Concerns:

• Insufficient income from the franchise
• High stress over managing bills and personal finances
• Struggling to balance business operations with personal financial responsibilities

Relevant Transcript Excerpts:

• [00:04] Caller: "Ramsey so I'm 26, I'm married with two kids, and I own a business that we just opened back in June. It's really taking a lot of time from us... we're not making much money yet."
• [01:05] Caller: "So it's a franchise that a friend of mine and I bought into, and it's a cookie store."

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Analysis of the Problem

Financial Breakdown:

• Total Loan: $250,000
• Caller’s Share: 70% ($175,000)
• Current Financial Status:
  • Business is barely breaking even
  • Personal income supplemented by side hustles with minimal earnings
  • Debt pressure is ongoing with limited cash flow

Operational Challenges:

• Seasonal Sales Fluctuations: Strong sales during summer taper off in winter, especially due to harsh Missouri winters impacting foot traffic.
• Expense Management: Initial oversights in managing expenses led to financial strain despite reduced costs.
• Marketing Deficits: Insufficient marketing budget resulted in decreased sales, exacerbating financial instability.

Relevant Transcript Excerpts:

• [02:07] Caller: "It's a quarter million. ... I owe 70% of it."
• [02:39] Caller: "Our sales were really, really good when we opened in the summer... but our marketing was suffering."
• [03:07] Caller: "We think we do. So we... we're just barely making it."

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Expert Advice and Insights

Dave Ramsey’s Guidance:

1. Prioritize Family Financial Stability:

   • Emphasizes the importance of ensuring that the family's basic needs are met before focusing on the struggling business.
   • Quote [05:00]: "You gotta go out and get business... you and your wife have got to be spending time actually making real money taking care of the family."

2. Evaluate Business Viability:

   • Suggests assessing whether the franchise has a sustainable future or if it's time to consider cutting losses.
   • Quote [05:00]: "I'm not worried about the cookie business... one of them has got a full time, decent paying job that will at least take care of the family."

3. Debt Management:

   • Recommends taking responsibility for the debt and exploring options to repay it to prevent further financial strain.
   • Quote [07:59]: "I'm going to take my 70% of that. I'm going to pay it back. I'm going to learn something."

Jade’s Recommendations:

1. Increase Revenue Streams:

   • Advises exploring additional avenues to boost sales, such as catering for events, targeting weddings, and engaging local companies.
   • Quote [04:33]: "Host every party, every wedding... find out if competitors are making money."

2. Focus on Core Business Activities:

   • Encourages dedicating time to activities that directly generate income rather than spreading efforts thin across multiple side hustles.
   • Quote [06:26]: "One of you needs to be working full time and find a full time job instead of doing all these odds and ends."

3. Assess Personal Contributions:

   • Highlights the strain of both partners working extensive hours and suggests evaluating personal involvement to optimize business operations.
   • Quote [06:26]: "You guys are burning the candle at both ends in many different ways."

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Strategic Recommendations

1. Securing Stable Income:

   • Full-Time Employment: One partner should prioritize obtaining a stable, full-time job to ensure consistent income, reducing reliance on unreliable side hustles.
   • Actionable Step: Cease side gigs like DoorDash and Uber Eats to focus on more reliable income sources.

2. Business Assessment:

   • Reevaluate Franchise Viability: Conduct a thorough analysis of the franchise’s performance, market position, and potential for growth.
   • Actionable Step: If projections remain bleak, consider negotiating with the silent capital partner or exploring exit strategies to mitigate debt.

3. Expense Control and Debt Repayment:

   • Budget Refinement: Further streamline business expenses to enhance profitability without compromising essential operations.
   • Debt Strategy: Develop a structured plan to repay the $175,000 owed, potentially leveraging the successful realtor income to accelerate repayment.

4. Marketing and Sales Enhancement:

   • Targeted Marketing Initiatives: Reinvest in marketing strategies during peak seasons to capitalize on higher foot traffic and mitigate seasonal downturns.
   • Diversified Revenue Streams: Expand service offerings, such as catering and corporate partnerships, to stabilize income throughout the year.

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Conclusion

The caller's predicament underscores the critical balance between entrepreneurial ambition and financial prudence. Dave Ramsey and Jade collectively emphasize the necessity of securing personal financial stability as a foundation before investing further in a struggling business. By reassessing income sources, rigorously managing expenses, and strategically enhancing business operations, the caller can navigate out of financial stress and work towards a more secure and prosperous future.

Final Notable Quote:

• Dave Ramsey [07:59]: "This is the Ramsey show. Why refi Refinances delinquent private student loans for struggling borrowers. Learn more at Yrefi.com Ramsey."

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Key Takeaways

• Prioritize Family Stability: Ensure that personal financial obligations are met before committing additional resources to a business.
• Evaluate Business Viability: Regularly assess whether the business is sustainable and make tough decisions if necessary.
• Optimize Income Streams: Focus on reliable income sources and strategic business activities that directly contribute to profitability.
• Manage Debt Strategically: Develop a clear plan to address and repay debts to alleviate financial pressure.

By adhering to these principles, individuals facing similar challenges can work towards achieving financial stability and business success.

Transcript

[Dave Ramsey]

Brought to you by Y Refi.

[Caller (Ramsey)]

Refinance your defaulted private student loans [e-mail] Ramsey so I'm 26, I'm married with two kids, and I own a business that we just opened back in June. It's really taking a lot of time from us. My wife and I are both working at it full time, and we're not making much money yet. And so we're just kind of stressed about bills and stuff. We're kind of wondering how we can organize our lives better to be able to make more money and move forward.

[Jade]

Okay, what kind of business is it?

[Caller (Ramsey)]

So it's a. It's a franchise that a friend of mine and I bought into, and it's a cookie store.

[Dave Ramsey]

And it sounds like we got a myriad of issues. So I heard we got to organize, but then we've got to figure out if this franchise can actually work. So which is the bigger problem? Spending or budgeting the money? The little bit money you're making, Are you making. Making any money at all? What's the bigger problem here? Because I heard several things, so I.

[Caller (Ramsey)]

Guess to get more specific. So we have that business. I'm also a realtor on the side, and so any extra time I have, I'm spending on that, trying to sell houses and stuff. I knew at that too, just a few months ago. So I'm just barely starting to make money. The business itself, the cookie short, the cookie shop, isn't making really anything. We're just barely breaking even. And then we're just doing all kinds of little side hustles where we can doordash and Uber eats and delivering for Walmart and stuff like that. So.

[Dave Ramsey]

So let me ask this. Who is. Yeah, I got an idea. Now, what we're talking about. So is it you, your buddy that you mentioned? They are the.

[Caller (Ramsey)]

You.

[Dave Ramsey]

The two partners, and your wife is also helping out just because you can't afford to pay anybody. Give us just a little bit more clarity on that.

[Caller (Ramsey)]

Yeah, so we. We did stuff the stupid way because we hadn't found Dave Ramsey yet. And so a friend of mine, he. He's just a silent capital partner. He put in money up front and helped us get into it. We have a big loan on it.

[Jade]

How much?

[Caller (Ramsey)]

It's a quarter million.

[Jade]

Oh, mama.

[Dave Ramsey]

And you owe 125 of that?

[Caller (Ramsey)]

Yeah. So I owe. Yeah. 70% of it? Yeah.

[Dave Ramsey]

Oh, no. Well, that ain't 125 last time I did. Okay, so you owe 70% of it.

[Jade]

And the rest you owe to your.

[Caller (Ramsey)]

I'm the 70% partner.

[Dave Ramsey]

O. And you guys aren't making anything. You barely making it, keeping the business going. It's just barely made.

[Jade]

Do you know why? Do you know the problem? Have you figured out what the problem is?

[Caller (Ramsey)]

Well, kind of. We think we do. So we, our sales were really, really good when we opened in the summer and we would have made money, but we didn't have our expenses under control. Once we got our expenses under control, we cut payroll costs really down. We got control of our inventory costs, stuff like that. We're doing a lot better on the expenses side, but our sales went down and we hit the winter part of that is because our marketing budget was kind of gone. So we weren't making as much because we just, our marketing was suffering.

[Jade]

Did you expect that, did you expect that, that it would get slower during the winter considering, you know, it's the winter and folks aren't just out?

[Caller (Ramsey)]

Yeah. And in Missouri, the winters are pretty brutal and cold, so. Yeah.

[Jade]

Okay, so you, you expected this, but it was too early to have had any reserves. Kind of piled up is what you're saying, right?

[Caller (Ramsey)]

Yeah. So we're, yeah, we're just barely making it, but yeah, my capital partner, he's out in a different state. My wife and I are here and we're operating the business.

[Dave Ramsey]

And when. How many hours are you working, the two of you, on this cooking?

[Caller (Ramsey)]

We've been able to bring our sales up just a little bit, so we've been able to hire one more part time person. But my wife and I are both are each putting in about 25 to 30 hours a week.

[Dave Ramsey]

All right, so what I'm trying to figure out, Jade, is they gotta make money.

[Jade]

You gotta go out and get business. You're a cookie maker. I'm trying. If I'm you, and this is just me, I'm brainstorming ways they can make money. If I'm you, I'm trying to host every party, every wedding, every. I want to cater every event with dessert. I'm going to companies and saying what can I do? Because you've got to make money, otherwise this is not going to do well for you. And I want to know if my competitors are making money. Because if they're making money and I'm not, then I do know that I'm doing something, not only doing something wrong, but I'm not taking advantage of every opportunity that's out there for my business.

[Caller (Ramsey)]

Yeah, well, and I guess there's kind of another part and that that's just. I'M really worried because I totally get what you're saying. And that's where my head is too. It's like I need to. We need to get our sales up. We need to get our sales up. That's all we talk about with the business. And so I'm trying to reach out and get catering orders and stuff. Well, then we're worried because the more time we dedicate to that and it's not a sure thing that money will, you know, the sales will go up. That takes away time where we're doing like doordashing and stuff and we're trying to pay the bills on the personal side. And so that's kind of where we're stressed.

[Dave Ramsey]

Yeah, that's where I'm coming in. I don't know. I'm gonna tell you something if I'm gonna do what we always do here, and I'm gonna answer this the way Go Kin style. So I don't know what you're gonna say and I'm anxious to see what my partner says here on this. But if I were you, I gotta take care of my family first. I'm not worried about the cookie business. I'm really not because I hear it in his voice and I think there's a greater reality here and I'm going to try to keep the cookie thing afloat with other part time people. This is already a slow season. You and your wife have got to be spending time actually making real money taking care of the family. And I'm not sure that there's a future on this cookie deal. And I'm the kind of guy that go, I don't want to prolong misery. I want to cut bait at some point. I'm not saying it's now. I'm not willing to say that because I don't know enough. We have limited time, Jade. But I do think the most important thing is is that one of them has got a full time, decent paying job that will at least take care of the family. So again, this is ideal. What would I do? I'd go either either Ken or Stacy has got a full time job that takes care of our expenses so that our family doesn't go below water. And then we fight to keep the cookie thing alive until we can apply some lessons and hopefully get more foot traffic. What do you think?

[Jade]

I 100% agree. One of you needs to be working full time and, and, and find a full time job instead of doing all these odds and ends. I think that's also part of the equation here. Is you guys are burning the candle at both ends in many different ways. Yeah. I'm curious to know. I know you told us the actual debt. I'm curious to know what you're burning every single month. Like, what are you losing? What are you losing every month? Because you said you're not making money.

[Caller (Ramsey)]

So we were losing money. We've gotten to a point where we're either just breaking even or making about a thousand dollars or less.

[Jade]

And when you say break even, does that include you guys paying yourself or that's just you keeping things on and keeping things going? Okay. Yeah. And then my next question before the next question I'd have before making this decision is, have you ever run a successful business before or is this your first go around being an entrepreneur?

[Caller (Ramsey)]

So. So as a brick and mortar business, this is my first attempt at all. I've done other, like, side hustles and stuff, like helped with marketing for other businesses. Helped with.

[Jade]

Yeah.

[Caller (Ramsey)]

Bookkeeping for other businesses.

[Jade]

Yeah. I think this is going to be different for you, and I think for me there's going to be a moment, like Ken said, where you're going to have to cut ties with this because if you're not making money, you're losing money.

[Dave Ramsey]

Yeah. I'd give it a run, but one of you's got to go make a really good living and not all this door dashing and scrapping. Let's get. Let's get some comfort, see if we can give this thing a run. Or is it worth it at this point? Just go, all right, I'm going to take my 70% of that. I o. I'm going to pay it back. I'm going to learn something. This is the Ramsey show. Why refi Refinances delinquent private student loans for struggling borrowers.

[Caller (Ramsey)]

Learn more at Y r e f y.com Ramsey.