The Pros and Cons of Running a Franchise Restaurant

The Pros and Cons of Running a Franchise Restaurant

Running a restaurant is an exciting, fast-paced environment that many enjoy.

Are you ready to open your own restaurant?

You probably know that there are several different types of restaurants, and one of those is the franchise.

While there are many advantages to opening a franchise, you’ll also find some challenges. To help you make your decision, we look at the pros and cons of running a franchise restaurant.

First, we take a look at the pros.

Turnkey Business

You may pay a little more to buy a franchise than open your own restaurant, but the franchise is already a proven system. It’s already a successful business and generates profits.

You may reach profitability sooner because your franchise is turnkey.

Marketing Support

For the most part, small business owners don’t have any support. But that isn’t the case with franchises.

You’ll find you get sales and marketing support. You also probably have access to a network of franchise entrepreneurs like yourself who’ve already been through the startup process.

So, not only do you have franchise support, but you may have a network of people to offer you advice.

Easier Financing

Some banks and traditional lending sources look positively on franchise restaurants. Start-up financing is often easier to get when you look for loans because franchises have already proven themselves as viable options. (tweet this)

Banks can see a history of success. This often makes obtaining financing easier than it would be for a traditional start-up restaurant.

Brand Recognition

Consumers are familiar with franchise restaurants, so you have a ready supply of eager diners.

The demand for your franchise may be immediate, especially if you run a well-established franchise.

Your customer acquisition costs will be lower because franchises often attract customers sooner.

Often, your guests will have eaten at your chosen restaurant while visiting another city, or they may have seen a national commercial on television or online.

Because of this, you don’t have a hard sell when it comes to encouraging people to give your restaurant franchise a try.

Do be sure when choosing your franchise that you choose one that’s well-known with staying power. It’s best to look for franchises that have a record of success. (tweet this) This helps you know that your odds are just as good.

Good Reputation

For the most part, restaurant franchise owners are well-respected in their communities. Some restaurant owners may like the immediate notoriety that comes with opening a franchise.

When running a franchise, you can capitalize on this reputation to market your restaurant and become a leader in your community.

Lower Inventory Prices

Because you can take advantage of the collective buying power of your franchise group, you will most likely have lower inventory prices.

Your bargaining power with vendors is also likely to be higher due to the name recognition.

Aside from the pros, you will find some cons to running a franchise.

Franchise Restaurant

Do the pros outweigh the cons? Only you can make this decision.

Large Investment

For the most part, restaurant franchises require a large and substantial upfront investment to get started.

In addition to purchasing the franchise, you can also count on outlaying money for location, décor, bathrooms, the kitchen, eating area, stoves, venting and much more.

Zoning Issues

Opening any new restaurant is going to come with zoning issues.  In addition, you’ll have to adhere to city, county and state codes.

Pay attention to this as your local government is in charge of overseeing that the food you serve is safe for public consumption.

Not only are zoning and code issues expensive, but they are also time consuming.

There is a silver lining, though. Most food franchisors will help you wade through zoning issue, permits and code compliance. They know you are probably unfamiliar with it, and they have a lot to offer you.

If your food franchisor doesn’t offer this assistance, it may be time to look for another food franchise.

Labor Struggles

Finding restaurant help is challenging, and it’s no different with a restaurant franchise.

Restaurant workers are often transient, and turn over is normally quite high.

Recruiting, training and retaining your staff is time consuming and costly. It can also be quite frustrating to train a new employee only to have him leave six months later.

To help with employee retention, pay close attention to your training and consider an incentive system to encourage longevity.

Low Margins

Do your research and talk to other franchisees to learn more about their margins.

Food operations in general, and especially fast food restaurants, are price sensitive and often have low margins.

Left, waste, spoilage and overhead are also concerns for the restaurant owner. Make sure you know going in what these costs are, so you aren’t surprised.

Quality of Life

Whether you open your own restaurant or a franchise, your quality of life will be different than the norm.

Hours are long. You’re often the first one there, and the last one to leave. Your hours may not coincide with those of your family.

It’s hard to take a vacation. Holidays are virtually non-existent.

Royalty Payments

These don’t go away. Every single year, your franchise owes royalty payments to the franchisor. This is usually for operations and advertising support.

Inadequate Support

Some franchisors may promise support, but in the end, they don’t provide all that you need.

You may find your marketing support lacking, or you may not have someone to bounce ideas off of. As we mentioned earlier, research this so you don’t end up in a bad situation.

Final Thoughts

Opening a restaurant is an exciting time, and for many people, a restaurant franchise is a good option.

The International Franchise Association says that franchise businesses are well-known for creating jobs faster than the national average. It says, “Franchise businesses will grow at rates that exceed the economy-wide growth of industries where franchises are concentrated.”

Do consider the pros and cons carefully before making your decision.

Note that buying a franchise is good for team-oriented people. Restaurant franchises are also good for those who don’t have a lot of industry or business background because they are often well-supported by their head offices.

Take some time, consider your options and do your due diligence before running a franchise restaurant for the best success.

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Image: Toni Cuenca and Dan Gold on Unsplash

 

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