If you love working in the food industry, opening your restaurant might be the right move. But, sometimes, that can also be a risky move, as the business may not grow or become as successful as already established franchise businesses. This is why most people opt for restaurant franchises like John Smith Subs, as they offer franchise owners the support they require to grow their businesses successfully.
However, it’s important to note that not all franchise businesses are highly profitable. The best way to determine the profitability of a franchise business is by understanding everything there is to know about the business. Let’s dive in.
1. Restaurant Franchises aren’t Cheap
The first thing you should know about any restaurant franchise is that they come with a hefty price tag. For example, to own a Dunkin’ Donuts franchise business, you need to have a $1.5 million net worth. You are also required to pay $750,000 as of the franchise fee.
Wendy’s will require a $500,000 fee and a $1 million net worth for you to have their franchise license. However, the amount you pay depends on the franchise business itself.
2. Restaurant Chains and Restaurant Franchises aren’t the Same
Most people often confuse restaurant franchises and restaurant chains. A restaurant chain is a restaurant owned by one single company like Starbucks. The reason why it isn’t a franchise is that you can’t purchase a Starbucks coffee shop.
On the other hand, Burger King is both a franchise and a chain, as you can buy individual units of the Burger King restaurant. So, from this example, all franchises can be chains, while not all chains can be franchises. But, if you are still not able to distinguish between a franchise or a chain, you can always ask the company if they do offer franchise opportunities?
3. Restaurant Franchises need Multiple Locations
Most of the restaurant franchise businesses we have in the U.S. today open at least three new locations every three years. Other restaurant franchise businesses like Dunkin’ Donuts will require an investment of at least five new restaurants. This is why it’s important to consider your net worth requirements before opening a restaurant franchise.
Investing in one franchise will take just as much time as three, so take your time.
4. They Don’t leave Much to Imagination
If you love creating menus or exploring your cooking skills while in the kitchen, owning a franchise business might not be the way to go. Almost all franchise businesses have a structured way of doing things, and they never leave room for imagination.
5. You Will Still Require a Business Plan
Like any other business, owning a franchise will still require creating a business plan. Ensure you run the plan through the proper professionals before showing it to the franchise committee.
6. There are Different Types of Ownership
Unlike owning your restaurant, there are different types of ownership in a franchise business. You can either be a multi-unit franchisee, single-unit franchise, master franchise or are a developer. The type of ownership you have will depend on your wealth.
7. Every Franchise Business Has its Own Set of Rules
One thing that stands out for almost all franchise businesses is consistency. The food, service, and atmosphere all have to be the same no matter your location. And the best way to do so is by outlining all the do’s and don’ts all the franchise owners have to follow.
8. They Require Restaurant or other Business Experience
To become an owner of some franchise businesses, you must have restaurant or business experience. And while the franchise does offer support, you still need to know how to run the business.
9. Almost Everything is Done for You
One of the primary reasons restaurant franchises are expensive is that everything is done for you. The dining room design, kitchen layout, and restaurant marketing campaign are already handled.
The upside is that you don’t have to work on building the brand name, as that has already been handled for you.
10. Quality Control
You never have to worry about the quality of your restaurant dipping as there are measures in place that ensure everything tastes the same. The ingredients you also use will be similar for all businesses, guaranteeing the same quality.
With the information above, it’s now possible to decide if you will own a franchise business or go ahead with opening your restaurant.