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Franchising 101

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Is your restaurant ready to be franchised? So you have a successful restaurant, and you’re ready to expand. Of the many ways in which a restaurant can expand, franchising is the most alluring.

As strategy goes, franchising can be extremely lucrative for a restaurateur with an already successful concept and looking to expand. So let’s get started with franchising 101.

What is a franchise? – There are two different types of franchising relationships. Business Format Franchising is the type most identifiable.This type of franchise is a model where one party (Franchisor ) licenses its intellectual property, brand, the system for operating the business and rights to sell it’s branded goods and services to another party(Franchisee). In return, the franchisee pays a fee and agrees to comply with certain obligations set out in a Franchise Agreement.

A franchise, when implemented correctly, can be very advantageous for several reasons:

  • Selling franchises allow you to – expand rapidly across countries and continents.
  • As a franchisor, you do not have to bear the development cost and risks of opening a new location, as the franchisee is typically responsible for those costs and risks.
  • Through franchising, you have the potential of building a global presence quickly and at a low cost and less risk.

Franchising 101

Is your restaurant ready to be franchised?

Due to the nature of franchising, having a reliable working business model is essential before establishing your franchise. Franchisees generally receive site selection and development support, operating manuals, training, brand standards, quality control, and a marketing strategy/material from the franchisor.

When considering to franchise your restaurant, there are four key factors to focus on to ensure a successful venture.

Four Key Factors For a Successful Franchise

1) A proven operating prototype: No one is going to want to invest in a business that is only marginally successful and a minimal proven track record. Franchise buyers expect a working proven concept that is profitable and well implemented.

2) Quality Control: As a Franchisor, you need to ensure that consumers experience the same quality, regardless of location or franchise status.

Quality control can prove to be an issue with franchising – it’s all about delivering a product and experience the same way for every customer. If a customer has a bad experience at one franchise, they may assume that they will have the same experience at other locations.

3) Branding Your Concept: Franchising is about selling a brand. From an investors aspect – they are looking for a brand with a unique selling point that is not easy to imitate and disruptive to the industry (this makes the brand stand out and competitive in a listless market).

When customers step into your store or a franchisee’s store, the store should be indistinguishable from each other. Everything from the service, decor, music, right down to the overall feel – must be distinct and memorable.

4) Sufficient capital: One of the most overlooked aspects of starting a franchise is the cost of launching a brand. There are many costs associated with the sale of a franchise that you need to factor in. These costs include:

  • Sale commissions.
  • Legal fees for Copyrights, Trademarks, writing up contracts etc.
  • Cost to train and support the new franchisee.
  • Research and development.
  • Initial and continuing marketing and advertising costs.

Starting a budding franchise requires focus and determination to turn your first store into a working concept and establishing a brand that stands out.