Should I Franchise My Restaurant?

Is Franchising Your Restaurant Right For You?

Do you have a successful restaurant that’s ready to grow? Franchising just may be the best fit.

In dynamic (and even uncertain) economic times, restaurant franchising remains a viable expansion method; it allows a brand to grow by taking advantage of its own strengths (an established brand, supply chain resources, technology tools, exclusive procedures and processes) while leveraging the skills, time and capital of independent franchise owners to open additional units.

Why Franchise Your Restaurant?

Money. People. Time. Generally, these are the three reasons companies franchise their restaurant.

Money

With growth, capital is a big barrier for most restaurateurs. However, in franchising your restaurant, your costs can be lowered significantly due to the franchisee providing the initial investment in the restaurant.

As a franchisor, your investment in expansion is a significant reduction from the typical costs of opening a restaurant.

People

Finding and retaining reliable unit managers is another barrier many restaurateurs face. With an excessive turnover rate that can exceed 100% per year, a restaurateur can spend months recruiting and training a manager only to see that manager leave or hired by a competitor.

In franchising a restaurant, the restaurateur avoids the challenge of retaining a restaurant manager by having a highly motivated franchisee acting as that unit manager.

Time

Opening a new unit takes time – the amount of restaurants you can open at any given time is limited.

How does franchising solve the problem of restaurants having too little time, staff and few resources? The franchisee does the heavy lifting. This allows the restaurateur both financial and resource leverage.

Criteria to Franchise a Restaurant

Most restaurants can franchise providing they meet three basic criteria:

• “Sale-ability”: Your restaurant must be credible to prospects in order to sell franchises: professionally designed, unique in some way, and most importantly it must have “sizzle.”
• “Clone-ability”: You will need the ability to clone your restaurant. The primary criteria here: teachability and systemization. If your restaurant needs a high-end, trained executive chef, you may want to rethink your expansion strategy.
• ROI: One of the most important criteria. Both you and your franchisee will need an adequate return from the restaurant.

How to Franchise a Restaurant

Ready to Take the Next Step?

Step 1: Address the Necessary Strategic Decisions for a New Franchisor

As you make the decision to franchise, first you must address many decisions that need to be made by a new franchisor, as they relate to:

• Speed of growth
• Territorial development
• Support services
• Staffing
• Fee structure

These are only several of the most important issues. And of course, your plan should be subjected to close financial scrutiny.

Step 2: Develop Franchise Legal Documents

Develop a franchise agreement (contract), a franchise disclosure document (as required by the FTC) and, depending on the location of franchises being sold, state registrations or filings. (*This should be ideally done by independent franchise legal counsel).

Step 3: Create a Franchise Operations Manual

Quality control generally translates into the development of an operations manual and well-defined training programs. Your manual should contain everything on:

• How to open and operate your restaurant
• Quality control checklists
• Policies
• Procedures
• Tactics that will allow these systems to be uniformly enforced (be careful to avoid anything that creates liability).

Step 4: Develop a Franchise Marketing Plan and Franchise Marketing Materials

You will then need to develop marketing materials for franchise sales and a plan to generate franchise prospects. In brochures (such as an e-brochure) and on a dedicated website or webpages, you will need to incorporate your compelling and compliant franchise messaging. Also, due to the franchise sales process being highly regulated, you will need to be properly educated in sales, disclosure and compliance techniques.

Why Hire a Consultant?

If you decide franchising is right for your restaurant, you will soon realize that you’ve entered a completely different type of business: selling and servicing franchisees. You will also learn that the ultimate key to success in franchising is having a sound plan and strategy to bring on and support successful franchisees.

Hiring a trusted and experienced franchise consultant will help tremendously for the following reasons. You can…:

• Avoid costly mistakes that are often overlooked by DIY franchise systems, which could have a significant impact on long-term profitability.
• Increase protection from liability by working with knowledgeable advisors to avoid potential disasters.
• Get regulatory knowledge by working with advisors that know what legal hoops you need to jump through.
• Gain institutional knowledge from advisors that have first-hand marketing data that you can use.
• Have the ability to focus on your current business priorities while a dedicated franchise consultant focuses on your franchise program.
• Gain first-hand knowledge from an experienced consultant who has worked franchised many systems in the past.
• Reduce the risk of a failed system by working with industry leaders.
• Improve your results with optimized franchise sales, increased revenues, and lowered expenses.

To learn more about how to franchise your restaurant, get free information, or have an expert franchise consultant contact you, please fill out the form on this page.

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