Food and restaurant franchising is one of the trusted methods if a restaurateur aims for expansion. Just this year 2020, food-related franchises covered the thirty percent of the Entrepreneur’s 2020 Franchise 500. This just shows that the Food and restaurant industry is still one of the booming industries in franchising.
WHAT IS RESTAURANT FRANCHISING
Restaurant Franchising is the act of buying the right to use a certain restaurant brand. The restaurant brand is already established and the operations around the restaurant are fixed by the Franchisor. Primarily, the franchisee utilize the brand name in order to earn profit.
In a restaurant franchising, the daily operations of the restaurant are managed by the franchisee while decisions that cover location, technology to use, and training of staff are usually handled by the franchisor.
Restaurant franchising provides opportunity to obtain a restaurant brand and model that has a stable training program, a loyal customer base, and a successful track record. And as a restaurateur, it is important to know how you will benefit and what are the possible disadvantages should you decide to enter the franchising world.
RESTAURANT FRANCHISING APPLICATION
The first thing to do, if you found a restaurant brand that you want, is to contact the restaurant if they’re open for franchising. By then you’ll be handed a form on which you have to indicate your detailed information about your finances. It is important for a franchisor to know how stable you are as a franchisee.
Questions about your background, goals, and experience will also be included upon the application. It is important for the franchisor to learn about these factors as you, the franchisee, would also represent their brand into the market.
RESTAURANT FRANCHISING FACTORS TO CHECK:
Here are the factors you need to look out if you decided to pursue restaurant franchising:
- Franchising Contract. Keep in mind that contracts under franchise are not permanent. The franchisor has the right to not continue the franchise once your contract ends. It also works for you as you have the option to not renew if the franchise is not working for you.
- Franchise Community. In restaurant franchising, it is just not you and the franchisor, it also involves other franchisee under the same restaurant brand. Being involved in this community is challenging, yet it can be rewarding as you have a support system that could guide you through your franchising journey.
- Marketing Expense. Make sure to check the contract thoroughly as other franchisors state that the franchisee should be responsible for the marketing and advertising expenses.
PROS OF RESTAURANT FRANCHISING
PROFITABILITY
Since the restaurant brand you acquired is already bearing a proven track record and is already a successful business, restaurant franchising ensures you a business model that generates profit.
ACCESS TO EASIER FINANCING
Financial institutions would give you better funding since they know the requirements involved in opening a restaurant or in restaurant franchising. They’ll be comfortable in closing a transaction with you since you’re financially capable and stable.
BRAND AWARENESS
Restaurant franchising involves a successful and well-known restaurant brand. And as a franchisee, you’ll be able to enjoy its loyal customer base thus leaving you no room to worry about your brand recognition.
BUYING POWER
In restaurant franchising, the franchisor provides what’s needed for the whole operation of the restaurant including the list of suppliers that you need. This is also to maintain the uniformity of the food items and service quality of the brand.
This collective buying power gives you access to lower inventory prices. And since the restaurant brand is known, you’re most likely to have a better bargaining power in your hands.
BUSINESS SUPPORT
Being part of the restaurant franchising community provides a network of entrepreneurs which could be beneficial for your restaurant business. You can ask for advice since they already have enough exposure to the franchise world.
TRAINING PROGRAM
Another heavy load off your shoulders is the training program for your staff as the franchisor also provides the training and support for the restaurant. It is a proven and successful training program that ensures the success of your franchise.
CONS OF RESTAURANT FRANCHISING
HIGHER INITIAL INVESTMENT
Upfront investment for restaurant franchising is typically higher since you’re technically buying the right of a successful restaurant brand. You may also need to prepare financially for the location rent, and other building and renovations needed, as Deliveroo restaurant partners have discovered.
ROYALTY PAYMENTS
These are the charges that the franchisee settles, every year or month, directly to the franchisor. This is usually for the operation support the franchisor offers.
LOWER PROFIT MARGIN
Restaurant franchising, especially in the fast-food industry, is known for its low margin and price sensitivity. Make sure you’ll conduct a good research regarding the whole operations of your restaurant, and what are the usual costs that bleed it.
LIMITED CREATIVE INPUT
The brand is already established, it is expected to be maintained that way. Everything must stay the same, or should there be changes to be made, it should apply to every restaurant under the same brand. This might be frustrating for the franchisee in terms of creativity as there’s no opportunity given to innovate in restaurant franchising.
CONFLICT IN SUPPORT
Other franchisors don’t provide the adequate support a franchisee needs and expected. This is usually seen on the marketing and advertising part of the operation.
RISK OF LOSING THE BRAND QUALITY
Restaurant franchising aims to preserve the effectiveness of the franchisor’s brand. And though the franchisor provides the system, there’s still a huge risk of losing consistency in maintaining the brand. Different management and the local community may be a factor for brand dilution.
TOP 10 UK RESTAURANT FRANCHISE (2020)
This year concludes the following as the top franchise in the Food and Restaurant Industry in the UK:
- McDonald’s
- Costa Coffee
- Starbucks
- KFC
- Pizza Hut
- Subway
- Papa John’s
- Dominos
- Burger King
- Baskin-Robbins
CONCLUSION
Starting a business in the Food and Restaurant Industry is challenging as the competition is already heavy, plus the hard work needed in order to place your brand out there is nothing to take lightly. That’s why other food entrepreneurs find restaurant franchising as a great help for them in order to have a boost and support in their success inside the industry.
