Saturday, January 5, 2008

Going out for Pizza... or Cosmetics?

Pizza Franchise vs. MK franchise

Comparisons have been made by some between Mary Kay and other franchise opportunities.

While there are many similarities, and in many ways, Mary Kay is a much better option, there are some things that should be considered.

The primary comparison between the two is the very obvious difference in start-up cost.

One pizza franchise near where I live costs about $200,000 to get started.

Mary Kay costs about $117. (tax and shipping)

The pizza franchise offer includes training, rent, equipment, initial inventory and a good deal of other things needed to get started.

Mary Kay offers “free training” and technically you can get started selling your product as soon as (if not before) you receive that starter kit…

The problem that I see and I believe is the primary complaint amongst detractors is the hidden cost of Mary Kay. While I can not speak authoritatively about the pizza franchise opportunity, it seems safe to assume that with $200K you will have everything you need to open up shop and start earning a profit.

It would not be difficult for an intelligent, well put together individual to walk into a bank with a decent business model, decent credit and a decent understanding of interest rates and walk away with a loan for the $200,000 needed.

Assuming this individual did their homework first, had a plan in mind and opened in a neighborhood that liked pizza, in a couple of years he/she would probably be in a position of “making a profit”.

The complex decisions of whether to pay off the loan quickly at the expense of immediate cash flow and goals like owning the location, growing the size of the location, etc. aside, it seems likely that at $200,000 dollars, there is little “hidden” costs and as soon as those pizzas start walking out the door, you will start making money.

On the other hand, while $117 is all you “need” with Mary Kay, most people have discovered that there are more expenses that hit you before you even get the starter kit in the mail! Some of those expenses are; initial inventory, office supplies, new clothes, a personal website, samples, brochures, added gasoline for your vehicle, added minutes to your cell phone plan, etc.

For some people, these things were considered before signing and are really a small addition to the initial investment. For others, these expenses amount to a doubling, tripling or worse of their anticipated investment. And, because this is not coming from a bank, but from their pockets it may totally change the equation for them.

Additionally, in both equations, there is a very significant problem that some people simply don’t have the foresight to predict. Just because you have a viable business, offering a viable product in a viable area, you are NOT guaranteed to attract a “real” customer!!

This is where MKHonesty points out that advertising is a very important part of the expense calculation. If you hope to do well in ANY business venture, you absolutely must find away to let the people who may be interested in your product/service know that you are offering it.

Not knowing all of the specifics of what the pizza franchise opportunity offers with their $200,000 package, it would be difficult to reasonably compare the two side-by-side. Additionally, because of the myriad different methods available for running a Mary Kay business, it is difficult to say for certain how YOUR individual experience will go.

Suffice to say, some people accurately point out the frustration experienced when $100 turns into $600, $1800, or even more. It should be noted however, that most directors/recruiters offer options based on what a new consultant has available to them. If you intend to operate a fully functional, fulltime business, and have the means to purchase $3,600 (retail) inventory it is hard to think of a reason not to. If you want to make $2,000/month, this size purchase should not last you more than a month. One surefire way of motivating yourself to keep working and pushing until you meet your goals is to invest up front and not stop until you have sold it all and need more!

This naturally does not work for everyone, but is not a “bad” idea just because it is not the best thing for everyone.

In conclusion, Mary Kay is NOT the same thing as a fast food franchise opportunity. There are similarities, and there are considerable differences as well! Is it the right opportunity for you? That is something YOU will have to answer!


  1. Thanks Dave, it's nice seeing the comparison in black :)

    I would like to point out yet another difference (which shouldn't exist, but it does thanks to the MK plan):

    You would not be encouraged, or even allowed, to start up a franchise pizzeria in an area that already has too many pizzerias, especially the same company. Before letting someone open a new pizzeria, the head company will first try to detrmine whether there's an actual demand.

    This can not be said for Mary Kay. OK, I feel that I need to put the following in a separate comment, to not mess up my pizza comment...hold on... ;)

  2. I would have to think that the reason they don't tell someone signing an agreement that there are already too many consultants in the area is because consultants are mobile and pizza parlors are stationary. There are no territories in MK and a consultant can always branch out to other areas if she is not gaining success in her immediate vicinity. Also, a consultant can meet customers while traveling and service them from afar if she chooses.

  3. The reason there are not too many franchises is because of agreements and zoning!!! Im no rocket scientist but when you think of the number of people in the world there are not too many MK consultants and directors that are selling so much that there will be no customers.

  4. Yes, when you purchase a pizza franchise, part of the contract is that the corporate office will not sell another franchise within X miles of your store. That said, I have read plenty of complaints about that "territory" being infringed upon, with the Corporate office using the fine print in the contract to claim that the original territory has now become more populous and can support more stores. (these complaints were filed by people owning a certain hamburger franchise.)

    I have no way of knowing what the $200K really buys,and I'm not going to pay for the franchise disclosure.

    I do know that if a person owns a storefront business, that business has to have open hours that are when customers want to purchase. In the case of a pizza shop, I would say 10 AM to at least midnight, and in some places 1 or 2 am. Why 10 am? Because some people want to be able to buy pizzas for birthday or football parties, or for picnics. I think the late night hours are self-explanatory. That is a minimum 14 hr day, not including pre-opening and clean-up hours. That's almost certainly 7 days a week, except maybe Christmas and Thanksgiving. Forget about attending a New Years Eve party.

    Unless the owner (and maybe some of his family) wants to be there all the time, then he will have to hire employees, including at least one trusted employee who can handle cash. (Remember the line from a Glenn Fry song, "the lure of easy money ..." It was about drug runners but the concept is the same. Employee theft is a huge problem.)

    I'm absoultely sure that the $200K does not include a slush fund for payroll until the business is turning a daily or weekly profit. Hiring employees is not fun, and neither is having to work late because one of them called in sick or just plain quit. As a manager for a major food service contractor, I had to do both. My bosses made it very clear to me that closing early or not fulfilling the contract was not an option.

  5. I'll continue on the open hours and employees thread. I bought an electronic keyboard from a music shop in our local (enclosed) mall. (Not for me. Playing a musical instr in my case would be a comic act.) A few months later I noticed a "Store moving" sign at the music store. I asked the owner, and he said that they were moving to a storefront on a nearby street, because they wanted to control their own work hours. The mall had requirements that the tenants must be open from X to X, and opening late or closing early resulted in fines. The husband and wife owners could not even take days off to go visit their relatives, because of the mall rules.

  6. I do not see how anyone could compare these two businesses. One starts out with hundreds of $ and the other hundreds of thousands of $. Can you really compare the two? Shouldn't you compare MK to another MLM/Duel Marketing company that starts off with the same numbers? Like those jewlery companies or Pampered Chef. Some kind of company that also relies on home parties to make their money.

  7. Judi,

    In this case, I am comparing the MLM model to another franchise type model.

    There are a lot of differences (which is kind of the point of the post) but there are many similarities.

    You could replace Mary Kay in this example with any MLM. Most MLM's have relatively low buy in costs.

    I was not trying to compare Mary Kay to another MLM for this particular example. That is also a worthwhile comparison to consider. Maybe sometime soon!

    Hope that helps clear things up!

  8. I think the point about comparing MK to a franchise type business is to question the assertation that MK is a high expense, low profit "money sink" with lots of hidden, unmentioned expenses, while regular businesses are not.

    My posts try to highlight the additional expenses that a franchise business will have, in addition to the high start-up costs. A lot of people considering their own business will look at a franchise because of some of the same features attributed to MK: a known product, available training, pre-produced literature, etc.

  9. One big question that I have about the $200K pizza start-up franchse fee is: Does this include leasing a property and converting it to a pizza shop? I can't imagine that it does. It certainly doesn't include buying land and a stand-alone building.

    Another issue is whether the Corporate Office has to approve you to be a franchisee, even if you have the money. A couple of years ago, when Krispy Kreme donuts were the latest fad and expanding all over the country, a magazine (I think Forbes Small Business) had an article on what it took to buy a Krispy Kreme franchise. Krispy Kreme looks like a very simple business. The machinery is all designed, the building is a cookie cutter standard design, and the different types of coffe & donuts is low.

    In addition to the $1.5 Million fee, the Corp Office had to approve your application. One of the requirements were 20+ years experience in the restaurant / food service, because Corp expected the new franchisee not to just run his store but get contracts to supply donuts to the supermarkets, convenience stores, etc in area.

  10. Colleen--your logic works like my logic! :) In the U.S. there are approx. 700,000 MK Consultants. The total U.S. population is approx. 250,000,000. I see your point. ;)

  11. Judi -

    What kind of comparison do you want?

    I can offer some stats on the DS company I am with now (cannot
    mention the name on this site because of the Internet Policies, but it is a gourmet food company and I can email the name to you if you want. No biggie. :D)

    Startup: almost $200

    No inventory - just some products to display.

    # of consultants: approx. 25,000 in the US

    Even in this company, you have people who only join for the discount - personal use. You also have people who do maybe 3 or 4 parties a year. You have others that do hundreds of parties a year.

    What kind of comparison do you want?

  12. Shades Im glad you agree!!! Not only that half of those numbers are working or maybe less when it comes to consultants!!! MK Honesty Im not a numbers person but I think you are basically trying to tell Judi that when it comes to a business opportunity that most people have to spend at least in the thousands to start a business and 3-5 years to see a profit. In MK you can see a profit in 30-60 days if you work hard if you get an 1800.00 dollar loan. If you just get 600.00 you can pay as you go and keep the profit if you have customers who dont mind waiting. Its up to the consultant.

  13. In Mary Kay, if you find the business doesn't work for you (of course it is a year's window) you can sell the product back to the Company for 90% of what you paid. So you can "recoup" your inventory investment. (Others can say what they want but I also think it is absolutely wonderful that MK doesn't restrict this buyback to "you must decide at the end of the first year." Many don't get out of the starting gate fast when joining and might be forced to make a decision too soon if it was do or die in a year, now this option can be used anytime during their business. I actually think this is unbelievable that they give all consultants the option to sell back product no matter how long they have been with the Company.

    Any other type of franchise (at least none that I know) -of are willing to give you 90% of what you paid if you decide that the business isn't right for you or that you aren't making any money.

    Can you imagine the devastion and debt you would have incurred if you had to close a franchise. And we know it takes several years to actually count on taking a Profit from most small business in the first several years of business.

    And after almost 13 years of being a director, I have found that the most common reason consultants I have had leave the company was because of poor time management or poor money management, it wasn't from not being able to make money or from not working or from not working 60 hours a week.


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This Week On Pink Truth - Click Here
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First Post - Why I Started This Blog
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