Many aspiring entrepreneurs perceive restaurant franchising as a safe way to go into business for themselves. After all, franchise concepts already have established brands, customer bases and operational systems in place. Buying a restaurant franchise is a much less risky investment than creating a concept from scratch. So, what’s the catch?
Becoming a restaurant franchisee means doing things someone else’s way. Franchisees are stripped of many of the freedoms that independent owners have, and restaurant franchise owners must find a realistic balance between the two roles they are forced to play – entrepreneur and employee.
Restaurant Franchising: Getting Involved
Being a restaurant franchise owner is not a behind-the-scenes job. It’s not the type of business that investors can set into motion and then walk away. A successful restaurant franchise owner must be a restaurant operator and business tactician. In most cases, a restaurant franchisee doubles as a general manager.
In addition to putting their own sweat and tears into their operation, restaurant franchisees must have “skin in the game”. Buying a franchise concept demands the same amount of start-up costs and financing as an original concept. While some franchisors offer financing, an initial down payment can be quite large.
McDonald’s requires franchisees to pay an initial down payment equivalent to 40 percent of a new unit’s total cost or 25 percent of an existing unit’s total cost. Twenty five percent of the down payment must be paid in cash and come from the franchisee’s personal, non-borrowed finances.
Every restaurant franchise has its own start-up fee requirements. A restaurant financial consultant can help potential franchisees figure out ways to raise funds for purchasing a franchise.
Restaurant Franchising: Changing It Up
Many potential franchisees have the misperception that they will have the freedom to operate their restaurant franchise unit according to their own terms.
They see the franchise brand as a springboard for their own culinary, design and marketing ideas. However, these elements are generally set in stone with most franchised concepts, a contributing factor to the success of the concept.
Every successful restaurant franchise got that way because of consistency. Guests expect to receive the same quality of food, service and atmosphere at every location of a restaurant chain – whether it is corporate or franchise-owned.
With that said, franchisees still have opportunities to make improvements to a franchise concept. One of the best-known franchisee innovations was the McDonald’s Egg McMuffin.
However, improvements need to be made within the boundaries of franchisor’s systems. Many restaurant franchise concepts have rigid requirements for the smallest details – from how to display merchandise to where to hang display banners.
So many rules and regulations can seem like a hassle, but they ensure consistency, which is part of the strength of franchise systems.
Restaurant franchisees must be willing to trust their franchisor’s systems, even if they do not understand or agree with them.
Restaurant Franchising: Protected Territory
Potential franchisees often wrongly assume that they will have a corner on the market in their area.
However, some franchisors do not allow franchisees to own more than one location. If they do, the protected franchise zones they provide may be much smaller than anticipated. Some chains even allow multiple franchisees to own locations in the same town. Still, neighboring franchisees and corporate locations offer a major advantage – they have the opportunity to band together for greater purchasing power.
Potential franchisees should always do their research to find a concept that offers a franchise agreement that is in line with their own expansion plans.
Restaurant Franchising: Is It For You?
Restaurant franchisees must walk a fine line between being an entrepreneur and an employee. While there are plenty of advantages of franchising, the main drawback is the lack of total freedom to make one’s own operational decisions.
Most people go into business for themselves to gain a sense of independence. Not everyone can find that through a restaurant franchise.