Going around the town and noticing that there are multiple restaurant outlets like CCD, McDonalds, Pizza Hut within the 10km range.
We end up wondering that these restaurants are so well established that even if we don’t have much knowledge of operating a restaurant, we might still become successful if we can buy their franchise, right? WRONG! Even wondered the most important things you should consider before buying restaurant franchise ? Well, we have listed here the 5 most important points to consider before buying restaurant franchise.
1. What is a Franchise? Why should you be buying restaurant Franchise?
People usually cannot distinguish between franchises and a restaurant chain. Consider this fact that Starbucks , one of the most established chains in the world is not a franchise, it’s corporate owned and operated. While McDonalds and KFC’s are franchises and anyone can buy them and start operations. The owners called franchisees pay royalties to the head office and in return they get brand recognition, free marketing and other benefits which vary from franchise to franchise.
2. Which type of restaurant franchise is the best buy for the local market?
While buying restaurant franchise one must consider various factors like the local competitors, spending capacity of the customers. For example if you want to open a Taco-Bell, then you should consider how many Mexican restaurants are there in that area as well as the level of interest of people in trying out Mexican food. It shouldn’t be too expensive compared to the average household income.
3. Examine your budget and restaurant qualifications
Definitely the idea of owning a Dominos or CCD outlet is exciting for people but there are many things which have to be kept in mind , cost being the most important factor. Many franchisors don’t even hand out the franchises if the person doesn’t have enough experience or a minimum net worth. Minimum net worth can be in millions for some franchises. So it’s better to start slow and new. Once you have built a decent reputation then go for a franchise based model.
4. Creating a business plan for the restaurant
A business plan is basically needed for any sort of business you do and getting a franchise is no different. Infact, it will help you look at some of the loop holes that you might have missed. It will force you to analyze things like population base of the area, choices of the people, their consuming power, choice of location. You would also need to investigate, the franchise’s history, reputation , market impact , especially if the parent restaurant is a new one.
5. Always have a lawyer for franchise contract
Getting approval from the parent outlet is just the first step of owning a franchise. Almost everywhere, you need to sign a lengthy contract with the franchisor. All the details should be checked under a microscope, most importantly what can happen if the franchise fails. Different franchisors have different set of agreements.
- Will you pay the franchisor every month or year?
- Who will own all the equipment?
- Would you get your investment money back?
- All these questions need to be clarified.
So, there’s definitely a lot to ponder about before just buying any famous franchise. Never assume that just because it’s a big chain, it will be an instant success. Any business takes a lot of hard work and patience to succeed and this is no different.