Buying a franchise restaurant eliminates the headaches of developing a restaurant concept from the ground up. And although you get to take quite the shortcut, it can still be daunting and probably even confusing. So, we’re here to guide you on how to franchise a restaurant properly to get you where you want to go.
Crucial to how to franchise a restaurant with great success is finding the right franchisor for you. If you don’t have a particular franchise in mind, Franchise Direct and QSR Magazine have an updated list of available franchises that show the opportunities you can tap into in your state. An essential step in making your choice is to evaluate your personality and ability.
Quick-service or fast food
Full-Service Restaurants
Fast-casual Restaurants
An important but criminally overlooked part of learning the process of how to franchise a restaurant is making sure there’s an actual marketing opportunity. Does it make sense for the local market and the economic situation? Common franchise agreement lengths range from five to 10 years so you need to evaluate the viability of the franchise during this period.
We can’t discuss the subject of how to franchise a restaurant without going over financing. Before you even start your search for a franchise, you should set your budget and make it a point to stick to it. This narrows down your choices so you can spend more time researching franchises that you can afford.
There are franchisors that can offer financial support. These are the ones from The Franchise Registry, a catalog of businesses that the Small Business Administration (SBA) has reviewed for eligibility for SBA financial assistance This will make your loan applications faster and easier.
For a new business owner, single-unit ownership is recommended for the lower startup costs and risks. Purchasing an existing restaurant franchise from another franchisee is also possible with the benefit of built-in exposure and patronage.
At some point, you can switch to multi-unit ownership to open and run multiple locations in a specific area over a specified period of time (area developer ownership) or sell a number of units in a specific geographic location to other franchisees (master franchise ownership).
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A franchise’s website is your first destination to find basic financial requirements and available territories. You’ll have to dig a little deeper for more specific and objective information beyond the sales pitches and potentially seeded reviews. The best way to do this is to purchase or preview the Franchise Disclosure Document of franchises you are interested in. Below are some more resources to help you how to franchise a restaurant that works for you:
A franchise disclosure document (FDD) contains all the information about the franchisor, its system, and the terms of the relationship. Generally, this document is given to you 14 days prior to signing any contract with the franchisor. Take your time to study every single page preferably with a lawyer who can provide helpful input and analysis of the document.
By law, the FDD should have specific information regarding the franchisor’s history, background, success rate, profitability, and other information that will impact your decision. Look for the following:
Next step on how to franchise a restaurant is attending “discovery day” at the franchisor’s corporate office along with other potential franchisees. The franchisor will prepare presentations and will conduct Q&A sessions and one-on-one discussions to tell you what the business endeavor will entail. Sometimes, they also organize tours of different departments.
Listen to what they say and pay attention to what they don’t say. This will reveal the kind of treatment and support you will get as a franchisee and what matters most to the franchisor. Here are some questions that can help you learn more:
Form a corporation to ensure limited personal liability and protect yourself and your personal assets. An S-corporation is advised for franchisees because they can elect to have profits, losses, deductions, and credits to “pass-through” the entity level so that they can only be taxed at the shareholder level and also significantly reduce FICA payroll taxes.
After that, secure the necessary licenses and permits needed to operate your restaurant legally. More often than not, your franchisor can assist you with this task.
At this point, it becomes all about making your restaurant fully functional with the commercial restaurant equipment that will allow you to produce consistently high-quality food and service. A franchisor might require you to purchase specific brands and models from recommended suppliers.
Having the proper equipment at your restaurant is vital. Recognize the positive impact and profitability of having the best and most trusted commercial ice machine brands for your ice supply such as a Manitowoc ice machine or excellent refrigeration including a walk-in refrigerator for keeping bulk ingredients fresh for longer.
If they haven’t already, franchisors will provide you additional training you may need to prepare you for the opening. This will involve hiring and training the right employees, properly marketing the restaurant, and negotiating with suppliers.
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