Why Do Franchise Stores Close?
It’s the elephant in the Discovery Day Boardroom; Franchise Unit Closures. The Franchisor may not even bring up the fact that there have been store closures under their watch, but it’s important for you as a potential buyer to find out how many and why. In today’s post, I’m going to cover:
1) the reasons why a franchise store may close, 2) how closures reflect on the brand, and 3) at the end of this post, I’ll discuss a metric tied to store closings that can help you reduce your risk when choosing a franchise.
Continue reading “Franchise Store Closings”
By Steve Slowey
So I have written some blogs on various issues and I have talked about some of the challenges I have had in my career but I’d like your input on what you’d like to learn.
I have made a lot of mistakes in my professional life and have learned from them. I have watched successful people and learned from them also. What do you want to learn? What are the challenges you are facing?
We (Paul, Tiffany and myself) have about 75 years of combined experience and it covers a broad spectrum; from being part of an existing franchise to starting a new concept. We have negotiated over 1000 leases and have owned more than 20 businesses. We could blog for years about running a profitable business, franchising, leases, and many other topics; but if there is a specific topic you’d like to hear more about, please let us know!
When I opened my first restaurant, I had no idea what I was doing. I would call the bank and get my balance and that’s how I knew I was making money. I did my profit and loss statement at the end of the year for tax purposes and learned the hard way about cash flow and taxable income. If I knew then what I know now, who knows?! But I do know now and I’m happy to help others that are currently in the position I was once in.
If you are considering leasing space and you have never done this before please let us know and learn from our experience. If you are considering a franchise let us know it is a huge decision that will contractually obligate you personally for the next 10 years. If you are struggling to make money in your business and don’t know what to do to turn it around then let us know.
I know there is tremendous value in my experience and would like to help you in your journey. I want this blog to be a service to you. Please comment below with any questions on franchising, leasing, construction, or running a profitable business.
By Paul Giggi
If you have made the decision to become a restaurant owner, one of the first questions to address is if you want to operate a franchised concept or go it on your own. Many feel they want to create and open their own concept and that is an admiral objective but be sure you understand the process of concept development and roll-out. If you are not in that position or wish to consider all of your options, you may want to research a franchised concept.
When considering why you would franchise versus develop your own, you should think about the points that underline the reason to seek a franchise. These factors include:
- You would be purchasing an established and recognizable concept name and would not have to go to market and drive brand awareness and consumer trial where there was none
- The franchised concept has a track record with associated historical information on financial performance, franchisee success, programs to support the concept, best practices and the experience of their concept testing: all of which expedite your opening for business and would be attractive to lending institutions if you chose that route for financing.
- If you are not experienced in the field, or the concept, then the learning curve is much steeper and your risk of high cost and/or failure is greater; a Franchisor offers their experience and expertise in the business as a piece of your business foundation
- The normal cost of developing and commercializing a concept can be much greater that you expect and includes design planning, recipe development, brand identity, FF&E, food distribution and much more… all which require time and testing which translate to monetary cost.
- You may not have experience in all of the components of restaurant development, and if not, understand that the Franchisor delivers this to you. These areas include Real Estate, Marketing, Operational Systems/Standards, IT Systems, Management/Staff Training, Purchasing Programs, Design and Construction. Each of these disciplines carry a host of detailed components each of which you will require understanding and the Franchisor will bring these to the table for you. The Franchisor also has the responsibility of keeping the concept refreshed and in-step with the industry. This means they should be conducting ongoing research and development of the items mentioned; this takes time, effort, testing and funding… all of which will be done for your concept once you are a Franchisee
- An additional and long term benefit of a franchised concept is that there will be ongoing operational/field support and training which you will receive in the areas of operations and marketing. Franchisors offer this support, through field personnel, not only assure that you are upholding the standards of the concept, but to assist you in maximizing your potential financial returns
These are some of the key factors to consider when deciding if franchising is right for you. Understand that the fees and royalties you will pay as a Franchisee are there to afford you this expertise and support in the successful marketing and operations of your restaurant(s).