The Ultimate Guide to Choosing a Right Restaurant Franchise

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Planning to set up a restaurant or thinking about associating with an already established brand? If so,  then this blog is for you. 

Investing in the right franchisor can take your business to the next level. But it’s not as easy as it seems, there are a lot of decisive and pivotal things to consider while choosing a franchise restaurant.

After all, you don’t want your well-set business turning to dust. 

For that, you will have to do a lot of groundwork before coming to a decision. Because there are numerous reasons why a franchisee fails. 

But don’t worry, with this blog, we will help you figure out things to consider while opting for a franchisee and also answer your questions like “are restaurant franchises profitable?” and “how to invest in a restaurant franchise?”

What is a Restaurant Franchise?

A restaurant franchise is a right to run a restaurant business that has someone else’s brand name. Meaning, a franchisor gives the right to use his branding and services to a third party. This is usually done by paying a royalty fee to the franchisor.

These brands are usually well established in the market and their name is enough to define the quality of service that they provide. 

All the franchisees follow the same working style. Be it working hours, quality standards, policies, pricing, etc.

McDonald’s is a well-known example of a franchise that has a dignified look and has maintained quality standards across all of its outlets. 

Why Do Restaurants Go for Franchising?

It is no easy task to build a profitable restaurant business from the ground up. You need to build a reputation in the market, earn the trust of your customers, and whatnot. 

But with a franchise, you get that, plus a steady stream of customers, marketing assistance, and more without breaking a sweat. 

And this is the primary reason why franchising is so popular. Also, less risk is involved as you don’t have to work on branding.

Further, you also get the help and support required from a larger venture that has proved itself as a leader among other competitors.

But like I said above, despite the merits, even the franchise path isn’t a cakewalk. 

And this brings me to the next point.

How to Choose the Right Restaurant Franchise?

Taking up a restaurant franchise can turn out to be a successful decision. But you need to give enough thought to all the important factors that measure whether a particular franchisor is good for you. 

To make things easier for you,  we have studied the franchise space and listed all the key factors to consider when selecting a franchise restaurant. 

1. How popular is the brand?

It’s crucial to know how dominant that particular restaurant is in the market and also its popularity among consumers. This is the first step you need to take when opting for a particular franchisor. 

Now, you must be seeing the words “popular” and “brand” a lot of times in the blog. The reason is, when it comes to a restaurant franchise or be it any franchise, the brand’s character, whether it’s in vogue, or its public appearance matter to a great extent.  

After all, one invests a handsome amount of capital in this business model and I am sure s/he wouldn’t want to be associated with a brand that has not established itself in the industry. 

The more popular the restaurant brand is the more profit you will reap.

2. How are other franchisees of the franchisor performing?

When you are choosing a restaurant franchise, the next thing you must do is analyze existing franchisees in the market. 

You must understand whether a particular franchisor is reliable to work with. 

Take into account their sales figures, profitability, and how successfully they are running the business.

Not just that. Study how effectively are they sustaining in the competitive industry, how consumers are perceiving them and preferring them among other similar outlets. 

If required, talk to the restaurant owners about their experience with the franchisor and what are the factors that influence their popularity among consumers.

3. Decide your restaurant franchise model

There are 3 main types of restaurant franchise models and each type defines the nature of the franchise you are going to take. It includes Business Format Franchise, Product Distribution Franchise, and Management Franchise. 

Let’s have a look at them.

Business Format Franchise

It is the one where all the aspects and areas of work of the franchisor are replicated in totality. The parent restaurant franchisor is responsible for brand building and executing all the strategies of the business activities. The best example of this type of franchise is Mcdonald’s and KFC.

Product Distribution Franchise

In this type of restaurant franchise model, only the distribution right of products is given by the franchisor. As the franchisor cannot be present at all the locations he gives the product distribution agency to the franchisee. Coca-Cola and Pepsi are great examples of such franchises.

Management Franchise 

It is a type of franchise model for restaurants where the franchisor is responsible only for the operation and all the management decisions are taken by the franchisee. The franchises who are well experienced in managing people or managing business excel in this type. This type is not so prominent in restaurants though.

Depending upon your expertise, you can opt for the restaurant franchise that suits you the best.

Scrutinize the fees and the agreed share of percentage

A franchise fee is the amount of money you pay to get an entry to run the business. Royalties or the agreed share of percentage is the amount you pay mostly on a monthly basis which is the share of the profit.

So, before opting for the franchisee, scrutinize this amount, understand how much does it cost to buy a restaurant franchise. Also, gauge whether you will be able to maintain constant profitability. 

This is the first thing you need to consider. 

There is less risk involved in bigger brand names but for the less popular brands, you need to give this a thought as a lot of factors influences the franchisee’s success.

4. Understand for how long the franchisor is in the market

This is a crucial factor as this defines the sustainability of the franchisor. This also states that the franchisor has gone through the different stages of business growth and is achieving constant profit in the market. Opting for such franchisees is a safe decision, but you need to consider other aspects too.

Any restaurant becomes popular because of the response it gets from the consumers. The older the restaurant is, the more popular it is and the more profit it earns. 

5. What extent of support the franchisor is willing to offer?

Getting support from the franchisor is crucial as they are the ones who understand their area of work more than anyone else. 

Though this differs from franchisors to franchisors, most of them offer basic support. But you should give a thought to the ones who offer assistance such as financial, location selection, advertising/ marketing, and tech support.

This helps as they are aware of the consumer requirements and have knowledge of the market. And most importantly they have proved that their business model is successful by employing various techniques.

6. Properly understand the terms and conditions

Before opting for any restaurant franchise you need to properly understand the terms and conditions set by the franchisor. 

Some of the key points are the duration of the contract, support and training, fees and expenses, site selection, and termination.

These are the factors that govern your association with the brand. So it’s crucial that you understand these points and then make your decision.

7. Consider whether you feel attached to what you are selling

Your attachment with what you are selling is most important. 

When you start a restaurant franchisee you must associate yourself with the food and services on offer. It’s all about giving your heart and soul to your business.

When you feel enthusiastic about your restaurant then only you will feel committed to achieving something and in this case, it’s all about earning profits. 

So it’s really imperative that you ask yourself whether you would like to associate with this/that particular restaurant. 

8. Keep up with the time, think ahead

To sustain in any business you need to be with current trends and see yourself achieving growth in the times to come. Think about getting associated with a brand that’s there to sustain with changing times. See how the brand will perform after say 10 years. Also, gauge factors like current and future market trends and see where you stand.

Think ahead and see what the future holds for your business.

9. Set your goals

In order to grow your business, prosper and achieve loads of profit you must set goals for yourself and your business. Set a plan and strategy and work towards it. Design your system to adhere to the brand you are associated with. Try to achieve long-term and short-term goals.

If you want to stay in the business, expand, and most importantly pay fees you need to approach towards achieving the goals you have set for your franchise.

10. Perform a SWOT analysis

SWOT analysis is all about identifying strengths, weaknesses and finding opportunities, and also keeping in mind the threats that are associated with your line of business. Its also called situational analysis. That is, you study whatever affects your business and if you are mindful of all these factors then you can keep your business sustainable in the competition.

Study all the possibilities that can directly or indirectly affect your business.

We have a dedicated blog on “how to perform SWOT analysis“. Even though it is around hotels, I am sure, you’ll be able to take a cue from it.

Also, if you want us to write a dedicated blog on restaurant SWOT analysis, do let us know in the comments.

11. Have a backup plan in case of any adversity

Yes, there are potential risks in any business, and adversities do happen. Be mindful of this and have a backup plan if you taste failure. Many factors are beyond your control and this leads your business to collapse. Make sure that you have other sources of income, don’t rely on your primary source of income if you sense failure.