Is Restaurant Franchising for You? A Look at the Pros and Cons

Opening up a new eatery is a gamble, and restaurant franchising is a well-established way to tilt the odds in your favor. If you've thought about opening a franchise, here are some points to ponder.

The Pros

An Established Brand and Identity

Deciding on your identity—your look, style, menu, and target demographic—is a fundamental part of opening your own restaurant, and a difficult process to do right. With restaurant franchising, all of those details come as a package. In fact, the most established food franchises are so iconic that just about anyone will recognize their packaging and logos. You won't have to scrounge for customers because they'll show up on their own after word gets out that you're open.

It's a More Predictable Experience

Established food franchises have hundreds or thousands of current and previous franchise owners, so you'll have a pretty good idea of what to expect right from the start. Your costs and revenues, and your time to profitability, are more predictable than they would be with an independent start-up. And down the road, should you choose to retire or simply change careers, it will probably be easier to sell an established franchise than a comparable independent business.

The Wheel Has Been Invented

Unless you have a long history in restaurant management, getting the operational side of your business running smoothly can be an ongoing source of stress. With a franchise, part of what you pay for is a tried-and-true set of operating procedures. You'll know—usually in explicit detail—which equipment to buy, how to lay it out, when and how much inventory to order, and more. If the administrative side of owning a business isn't your strong suit, buying into a franchise can make life a lot simpler.

It Comes with a Support System

The high level of support is one of the biggest advantages of franchising. The parent company and your fellow franchisees represent a wealth of experience and assistance on details ranging from choosing a space and negotiating your lease, to the ongoing challenge of keeping staff. Some offer full-blown formal training programs, while others encourage you (or oblige you) to shadow an existing franchisee before signing up. Ultimately, the success or failure of the restaurant is on you, but you'll be given the tools you need to succeed.

The Cons

It's Not Your Brand

If making your own mark in the foodservice world is your goal, you'll have a hard time achieving it through a franchise. You won't own the brand, and will only license it, and part of the deal is that you adhere to the franchisor's standards. There's little to no room for freewheeling, improvising, or (in most cases) addressing local preferences that are unique to your market. Franchises hold out the promise of predictable success, but won't scratch your entrepreneurial itch in quite the same way as opening your own restaurant where you call the shots.

Costs Are High

It's possible to open an independent restaurant on a shoestring budget. The start-up costs of buying a franchise are usually much higher, with fees for the major food franchises ranging from hundreds of thousands of dollars to $2 million or more. In most cases, you'll also pay ongoing royalties, which peel away a layer of profitability from your enterprise. In the service industry, where margins are already thin, this can be painful.

There Is Potential for Conflicts of Interest

When you own your own restaurant, all of your decisions focus directly on your own bottom line. When you franchise with a chain, the franchisor has overarching goals for the success of the brand that might not always align with your own interests. You may be asked to cough up uncomfortably large sums periodically for shared advertising, or to lend your support to promotions that drive your sales volume but shred your profits. Other franchisees, although usually supportive, can also be a liability. If a franchisee in your area has a poor reputation as an employer, for example, you may find that good applicants avoid your outlet as a result.

Investigate several franchises before you decide to jump in, and see which chain's culture and operational style feels like the best fit for you. There are no guarantees, of course. The brand can lose its luster, new rivals can lure away customers, local economic factors can hurt you, and—to be blunt—some owners may find out the hard way that they're not cut out for restaurant management. The franchise model is not for everyone, but if you can work happily within its limitations, it can sharply improve your chances of success.

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