What Should You Know About Running a Restaurant Franchise?
Running a franchise business is a big step to take. Before you decide whether it’s right for you, there are some things you need to know. There are several types of restaurants you can choose from to franchise. There are many advantages, but they can have some downsides as well.
This is what you should know about running a restaurant franchise.
What Is a Franchise?
A franchise is when owners grant third-party operators rights to a business name. There are fees and advertising standards in exchange for this. Each franchise offers the same goods and services the restaurant is known for. This includes the same menus, advertisements, and branding. Depending on the establishment, startup costs can be up to a million dollars and include monthly fees.
You have to keep in mind market placement, which is where the franchise will operate. Your company’s space needs to be in an area that can be successful. Considering whether there is good clientele and no similar restaurants will help with success.
Franchises can connect with suppliers for products they need for the restaurant. The parent company can give guidelines for how to get operations to run smoothly. There are ways to lease equipment required in new franchises.
Who Is Compatible?
Consider your personal characteristics to determine whether a franchise business is right for you. Analyzing your unique traits can prepare you for the job and decide whether you would be a good fit for this career path.
Veterans are often a successful group of people who possess the traits to be great at running a franchise. While veterans make up just 7% of the population, they play an outsized role in franchise ownership because they’re uniquely qualified to be franchise owners. These are some traits veterans have that make them great owners. You may have these characteristics as well:
- Highly motivated
Advantages of Running a Franchise
Compared to small businesses, operating a franchise has many advantages. Here are some of them.
1. Name Recognition
Franchises automatically benefit from the brand they operate with. Loyal customers will come to a company they are familiar with. This will create success because you could capitalize on the name brand.
Guests frequent restaurants they have experienced at another location or have seen online or on TV. Be sure to choose a franchise with a record of success to keep the odds higher for your franchise to thrive. Some of the best restaurants to franchise are Taco Bell, McDonald’s, KFC, and more. See if there’s any overlap between the most successful and the most healthful establishments, too.
2. Proven System
Although you may pay more to get your franchise open, it’s a system that’s already set in its ways. It is a business model that has seen success and generates somewhat predictable profits. There isn’t much worry about getting started and having customers because it is a known quantity and a brand that has worked time and time again.
3. Advertising and Marketing
Franchises get lots of advertising and support, which is often not the case for independent small businesses. You will find that sales come from the marketing for the brand you are taking stewardship of. You will usually get support and advice from other franchise businesses as well.
4. Respected Reputation
Franchise owners normally have a good reputation in the community. Running a franchise can show off your outstanding characteristics and show your community members your business skills. You can take this recognition and become a pillar of the community.
Disadvantages of Running a Franchise
There are also some downsides when it comes to running a franchise. It’s up to you to decide whether the advantages outweigh the disadvantages.
1. Large and Risky Investments
Deciding to run a restaurant franchise requires a substantial amount of money upfront. This is just to get the restaurant started. Funds will be needed for decor, equipment, bathrooms, and more.
If the restaurant fails, then the investment is gone. A lot of the time, if you take a government loan, you have to put up something of high value for collateral, like your home. If your franchise fails, you can end up losing your home.
2. Difficult to Get a Top Franchise
It is much more of a safe bet if you can get a top franchise like McDonald’s, Chick-fil-A, or Panera. The catch is that it’s extremely difficult to get one of them. When owning an upstart franchise, it is similar to the risk of starting your own restaurant.
3. A Lot of Work
You are essentially purchasing a tough job when you buy a franchise restaurant. Running a business means long hours, weekend work, and lots of stress. Most restaurants are open seven days a week, so you will likely have to work long hours, especially if you have limited staff available.
It can be challenging to find employees because working in a restaurant is demanding work. Most of the hours are long and difficult, making it hard to find employees – especially ones who will stay.
The Bottom Line
Franchise restaurants can be a great business decision for people who are conscientious and driven. When you buy a franchise, you are purchasing a demanding job, so be sure you can be resilient and realistic about the work coming your way. Your responsibility is to protect your investment and grow your business units – a tough task in some markets – but the rewards can be considerable if you’re prepared.