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.

According to a study by IHS Economics and the International Franchise Association, both quick service and table/full service restaurants were expected to be among the growth leaders among franchise business lines in 2017.

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, the restaurateur avoids the challenge of retaining a restaurant manager by having a highly motivated franchisee for 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:
– Salability: 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 chef, you should rethink your expansion strategy.
– ROI: One of the most important criteria. Both you and your franchisee will need an adequate return from your restaurant.

Ready to Take the Next Step?
If you make the decision to franchise, first you must address many issues confronting a new franchisor:
– 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 severe financial scrutiny.

Next step: Develop a franchise contract, a franchise disclosure document (as required by the FTC) and, depending on the location of franchises being sold, state registrations or filings.

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).

You will then need to generate franchise prospects and develop marketing materials for franchise sales. On your website, you will need to incorporate your franchise message. Also, due to the franchise sales process being highly regulated, you will need to be properly educated in sales, disclosure and compliance techniques.

If you decide franchising is right for your restaurant, you will soon experience 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 successful franchisees.

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.