How To Start My Own Franchise Business – There are more than 200,000 non-corporate fast food restaurants in the US. Instead, these locations are franchised, meaning that the company (the franchisor) allows an individual or a group of partners (the franchisor or franchisors) to operate the restaurant location under an agreement to franchise.
At first glance, starting and managing a restaurant franchise seems easier than creating your own restaurant concept. They are well-known brands and most of the sales come from the corporate offices. But that doesn’t mean it’s easier for franchisees to make restaurants successful. Franchising presents unique challenges. Here are 7 and what to do with them.
How To Start My Own Franchise Business
The franchisor and franchisee are a team. For a successful partnership, the brand must match the franchisee and the franchisee’s brand.
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Franchise agreements are also long-term relationships, with 10- to 15-year contracts being the norm. Getting it right is very important. This means that the approval process is often long and arduous.
To speed up the process, make sure you collect all the necessary documents and follow the franchisor’s requirements. A longer approval process helps prevent many problems, whether financial or cultural. For franchisees, take the time to evaluate whether a franchise is a good fit
Franchisors must be willing to invest large sums to get their business off the ground. Between the initial license fee and the opening fee, the amounts can easily break into six or even seven figures.
Some franchisors even require prospective franchisees to have hundreds of thousands of dollars in cash available, making the fee more expensive.
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In addition to these one-time opening investments, franchisees also pay recurring fees based on sales and operating costs. For example, McDonald’s charges a service fee of 4 percent of monthly gross sales, while Subway charges 12.5 percent of weekly gross sales for royalties and advertising.
There is no real way to avoid royalties and fees because they usually require a contract with the franchisor. However, you can lower your opening costs by shopping around with contractors and interior designers in your area to see who can give you the best price, which will lower your opening costs. restaurant. You can also look into buying an existing franchise instead of opening your own, which can reduce the cost of renewal and renewal.
Another way to solve this problem is to integrate restaurant technology, such as cash registers and restaurant planning software. When franchisees have detailed data on sales and employee performance, they can make effective changes that save money. Franchise fees can be more manageable if you can cut a few percentage points off your fees.
Being associated with a favorite brand gives the franchise owner an advantage in terms of brand awareness and involvement. But it can also work against you. When foodborne illness outbreaks erupted at several Chipotle locations in late 2015, the brand’s entire reputation suffered — even though only a few of its 2,000 locations could report the outbreak. Restaurants with multiple locations receive intense media attention due to their presence across the country. One person’s mistake in one restaurant (big or small) can affect the operation of other restaurants.
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The first step to avoiding this problem is to maintain the highest possible service standards. If these major issues affect your brand, you and your loyal customers will be relieved to know that your location is not your business.
If this situation becomes a bigger issue (see Chipotle’s half-day food safety training), the only thing you can do is stay close to your franchisee to understand what is expected of you at this time. .
Independent restaurateurs can define the theme of their restaurant, change the menu at any time, and work to create a presence in the community.
Franchises often have executive-authorized promotions, new menu items, LTOs, and rebranding. That’s not a bad thing – and change doesn’t just happen in a vacuum. Researched, tested and found to increase revenue and/or profit – a win-win for franchisee and franchisor.
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This can be frustrating for owners who feel they have no control over their business. They are the people who live this life every day. But that doesn’t mean the voices of franchise owners aren’t being heard.
Franchisees who have ideas on how to improve their business but are unable to act on them are always contacted by their head office. Make your point clear, back it up with numbers, and there’s a good chance your idea will be considered. If possible, it is recommended to send the survey to other franchisees. Maybe you’re not the only one who thinks this. Change is possible, but given all the changing parts of a national franchise, change can be incremental.
Regardless, individual franchises may have a chance to make a difference. After all, some of the iconic fast-food brands—the Big Mac, the KFC Bucket, the 5-footer, and the filet—were created by individual franchisees.
Do you operate your franchise in a big city like New York, San Francisco or Chicago? If so, you must follow additional rules called the Fair Workweek Act that affect Oregon and the following cities:
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These laws apply to restaurants that operate from the locations listed above and have more than 20 to 56 locations worldwide and/or employ more than 500 people worldwide — franchises almost always meet these criteria.
These laws make significant changes to restaurant management and staff scheduling, requiring affected restaurants to pay employees for last-minute shifts, split schedules at least two weeks in advance, and / or allow input on schedules, and other things.
Check the laws and regulations in your area. Additionally, you can benefit from the resources available to many restaurant groups. For example, many franchisees require the use of employee scheduling software at all of their locations to help them easily schedule shifts and avoid violating Fair Workweek laws.
In general, the restaurant industry has a turnover rate of about 75%. However, franchises have significantly higher turnover compared to the industry average, which is double the fast food industry at over 150%. For example, Panera’s churn rate is reported to be close to 100%, while Domino’s bounces back with a reported churn rate of 107%.
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Part of the reason turnover is so high is the constant demand for staff at these restaurants (which makes it easy for disgruntled workers to find work elsewhere) and their reliance on a younger, not very special worker who usually does not have Momentum. franchise year.
Working for a franchise may seem like a good idea to aspiring restaurateurs because of the brand name, but unfortunately, it attracts unqualified candidates because of their perceived convenience. Be sure to take the time to find and hire the right talent, such as proactively searching for candidates and asking the right restaurant interview questions.
“As people continue to return to the hospitality industry, restaurateurs should consider implementing creative incentive programs to help them quickly hire employees and retain them for the long term,” said Ryan C Whitfill, partner at Culhane Meadows Successful Employees. .
A final common problem with franchising is market saturation for the same restaurant. Believe it or not, Chick-fil-A will generate more revenue per store by 2020 than McDonald’s and Starbucks combined, according to this QSR report. This means a 15% reduction in working days per week!
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There are many reasons, but the number of locations definitely tops the list. About one in six McDonald’s or Starbucks and one in ten Subways has a Chick-fil-A store. With fewer stores, each Chick-fil-A becomes more unique, which in turn attracts more people to that location.
If you run a franchise restaurant (and more specifically a franchised fast food restaurant), you can expect strong sales because of your brand recognition and convenience, but you also need to know your potential segment of market. This is because you know how far a restaurant with the same name and menu is.
Having too many restaurants in your town or city can reduce its innovation and affect your sales. After all, being one of two McDonald’s restaurants in a city seems more economically attractive than one of seven McDonald’s restaurants in the same city, doesn’t it?
Before opening a franchise, do a feasibility study to see how unique you are in the area where you want to open your store. Forcing yourself to sit down and evaluate sales projections against costs and the role of other franchise locations can play a role in helping you choose the best location to maximize sales.
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Provide excellent customer service and food quality reflected in your online reviews and word of mouth. People may choose your location over another nearby location.
While opening and running a restaurant franchise has its own unique challenges, most can be solved with a brainstorm, a new process, or a call.
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Hi, I am Erick Norman. A blogger specialist in Kitchen Design.