The Value of Franchising

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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).

 

2 Replies to “The Value of Franchising”

  1. This tells you of all the benefits of franchising but just like everything not all franchises are created equal. Finding the right franchise that supports its franchisees and making a real profit on is the challenge.

    1. You are correct, thanks for your comments. What we are attempting to do over the course of or a number of articles, is to point out the pros and cons of franchising and, in this one, tried to identify the most prevalent pros. As you note, there are many items to consider relative to franchising in general and in the choosing a particular Franchisor to partner with. I appreciate your feedback and hope you will share your thoughts on future blogs.

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