Is a Restaurant Franchise the Right Choice for You
There are many different types of restaurant concepts to choose from. A tried and true restaurant idea is a franchise. Restaurant franchises have had huge successes, starting with McDonald's, which set up the model most fast food concepts are based. Restaurant franchises also include fast casual concepts like Chipolte and Panera Bread, as well as family casual chains like Applebee's and Ruby Tuesdays.
If you are considering buying a restaurant franchise there are many factors to consider including cost, location, and franchise fees. Restaurant franchises have several benefits over independent restaurants, including name recognition, a history of success, better buying power and internal support. However, they also have several drawbacks, including lots rules and regulations, fees and potentially higher start-up costs. To help you decide if a restaurant franchise is the right choice for you, here are the pros and cons.
Benefits of Opening a Restaurant Franchise
• Instant Business- A restaurant franchise offers you an instant business. You don’t have to worry about the name, the décor, the menu or the marketing. It’s all done for you. This is ideal if you want a scalable business model. If you dream of opening multiple locations in different areas, a franchise is set up to do just that.
• Support- A restaurant franchise comes with support from the head office. If you have questions or concerns, you can ask them. This can be very helpful for new restaurant owners, who don’t always know what to do when they encounter certain problems. There is a big comfort to know that you can call headquarters for help with problems.
An independent restaurant owner has to rely on their own knowledge and intuition to solve problems.
• Better Buying Power- Restaurant franchises have bigger buying power. Food and other inventory can be purchased far cheaper than your local independent restaurant. Smaller food cost is a big benefit, but keep in mind it does limit your ingredient choices.
• Name Recognition- Name recognition is a huge benefit of a restaurant franchise. You don’t have to worry about start-up costs for advertising.
Problems of Opening a Restaurant Franchise
• Money- Money (or lack of) is major drawback of buying a restaurant franchise. Many of the bigger restaurant chains require at least a million dollars in assets, before they will consider letting you buy into their company. Of course, the theory is that you will make all your initial investment money back sooner than if you started an independent restaurant. Either way, unless you have great credit and plenty of assets, buying into a major restaurant franchise is not going to happen.
• Lack of Creative Freedom- Part of buying a restaurant franchise means that you won't have any say in the menu, the décor, or the signage of your restaurant. If you have a certain theme or concept in mind, it may not mesh with a restaurant franchise.
You are locked in to whatever the company decides to do, including menu specials, advertising campaigns and restaurant design.
• Lots of Rules- In order to maintain a certain quality of customer service, as well as continuity at each location, franchises have many rules and regulations that must be followed. Everything from the seating plan of the dining room, to the color of the restrooms can be subject to specific rules. Make sure you are okay with all the rules beforehand. Failure to follow the rules can result in losing your franchise rights (and all your money and hard work!)
• Royalties- On top of paying for the rights to a restaurant franchise, you are also expected to pay royalties. This covers the advertising, menu flyers, and other support the restaurant corporation gives you throughout the year.
Make sure to add franchise fees into your budget.
Essentially, deciding to either buy a restaurant franchise or create an independent restaurant will depend on your wallet and your personality. If you are comfortable working with a team and being told what and how to do something, a franchise may be the right move for you. However, if you are starting your own restaurant to get away from people telling you what to do, an independent is probably a better choice for you.