While running and operating your restaurant can be incredibly fulfilling and generate significant profits, starting a restaurant business from scratch can be extremely challenging.
Given that only 20% of new restaurants usually make it past their fifth year in business, a lot of effort and dedication is required to deliver high-quality food while efficiently managing your staff, inventory, marketing, and other running costs.
Becoming a restaurant franchise owner helps minimize most of these risks, allowing new entrants to gain critical experience in the industry, with support and recognition from a well-known brand.
Understanding some of the below-mentioned details for owning a franchise restaurant can help you make a well-informed decision and allow you to invest your capital with minimal risks:
What is a franchise restaurant?
- The concept revolves around a franchisee purchasing a turnkey restaurant concept from the franchisor in exchange for an upfront payment and ongoing royalty payments.
- The franchisee accesses the existing and proprietary processes, recipes, restaurant software/hardware systems, supplier relationships, and overall brand marketing.
Benefits of investing in a restaurant franchise
- Purchasing a franchise can be significantly easier than starting from scratch and helps minimize execution risk resulting from a lack of experience.
- Franchise restaurants come with their customer base, and steady revenue growth can be expected. Customers can also have substantial brand loyalty, meaning consistent profits with low competition risk.
- Franchise owners can have access to a wide support and resource network, which allows them to build capabilities quickly, and successfully fulfill HR, IT, procurement, and marketing requirements.
Challenges around franchise ownership
- Significant upfront investments can be required to own well-reputed and successful franchise restaurants.
- Royalty payments for franchised brands can make a significant portion of your profits and leave you with low returns.
- Running a franchise restaurant also means you have little creative control over the menu, materials sourcing, restaurant ambiance, and overall brand image.