Hospitality Know-how

Restaurant Franchising: Key Insights You Need to Know

Learn about the franchise model in the restaurant industry, what it takes to open a restaurant as a franchise, and which companies are already doing it successfully.

Do you dream of investing in your own restaurant or café, but have little experience in the restaurant industry? Then you should consider franchising! This model offers you the opportunity to implement an established and popular business idea as an independent company.

In this article, you will learn what franchising is in the restaurant industry, the pros and cons for restaurateurs, and what you need to know to open a franchise restaurant.


The mechanics of restaurant franchising

Everyone is familiar with McDonald's, Burger King, Subway and KFC. The term "franchising" has become widely used, especially thanks to the worldwide popularity of fast food chains. But what is behind the franchise concept and how important is it?

Franchising is essentially the use of the same business idea in multiple locations. Restaurant owners (franchisors) sell their successful concept to independent business owners (franchisees).

By signing a contract, the franchisee ultimately acquires the right to use the entire concept, brand, and operations for a fee. In this way, franchisees can open a branch of a well-known company and even run it under their own management.

There are now many franchise systems in the hospitality industry, including restaurants, bars, cafes, and delivery services. However, the franchise model is not only popular in the hospitality industry, but also in healthcare, manufacturing, services, sports and more. According to Franchise Statistics 2024, there are more than 3,000 unique franchise businesses in the United States, and the U.S. is home to more than 70 of the top 100 franchise businesses in the world.

Discover the pros of restaurant franchising

Franchising in the restaurant industry offers many advantages that will make your start in business much easier.

Franchise marketing

For example, you have the advantage of using an already established and strong brand. This saves you the hassle of building your own. From social media to email marketing: you can use proven marketing strategies specifically designed to promote the brand and attract customers more effectively.

Professional support

Another benefit is the franchisor's ongoing support in all areas: from the start to the day-to-day running of your restaurant. You also benefit from the franchisor's advice, training, education and expertise.

Financial support

Many franchisors also offer financial assistance, which can make starting your own business much easier and reduce the financial risk. In addition, banks are more likely to lend to proven and successful restaurant concepts.

Vendor network

When the franchisor handles the purchasing, you do not have to find your own suppliers. You have access to an established network of suppliers, which guarantees quality and reliability. You may also benefit from more frequent discounts. 

Employee works behind the counter of a small cafe.

Exploring the challenges of restaurant franchising

In conclusion, there are many advantages to franchising a restaurant. However, before you decide to franchise, you should be aware of the disadvantages and weigh them carefully:

Restrictions 

For example, you must adhere to a very rigid concept with fixed guidelines. This leaves little room for your own creative ideas or customization and severely limits your initiative in the business.

Ongoing franchise fees

You will also have to pay ongoing franchise fees that will eat into your profits. These are specified in the franchise agreement and range from 4 % to 12 % of total sales, depending on the type of franchise. In most cases, the fees are paid monthly for the use of the brand and concept.

Risk sharing

In for a penny, in for a pound! If one franchise fails, potential problems spread to the other franchises because many customers are unaware that the stores are run by independent entrepreneurs.

Long contract term

Franchise agreements often bind you for a long time, which can limit your flexibility, especially if your business or personal circumstances change. The average franchise term is from five to 10 years.

Requirements for starting a restaurant franchise

There are two key issues to consider when starting a franchise: First, financing, and second, meeting certain requirements and conditions.

Financing the franchise

Opening a restaurant as a franchise requires a significant investment, especially in the beginning. This includes the cost of furniture and equipment, real estate, initial operating costs, and, of course, a franchise fee paid to the franchisor.

In addition to monthly franchise fees, there are costs for legal requirements, a liquor license, business registration and merchandise. As mentioned earlier, one advantage is that banks are more likely to lend to franchisees because the business idea is already a promising concept compared to independent business ventures.

Our tip 💡

Before starting a franchise, always be realistic about your financial capabilities and include additional reserves for unforeseen expenses.

 

Requirements and conditions

As a franchisee, you must meet several requirements in addition to financing, which are set forth in the franchise agreement. These include requirements for the location, appearance of the restaurant, and food and beverage offerings.

When you open a franchise restaurant, you must adhere to the established business policies and undergo regular quality inspections. This ensures that the strict operating standards are being met.

Our tip 💡

Exact requirements may vary from franchisor to franchisor. It is important to research and understand all the details before signing a franchise agreement.

 

A bright restaurant with guests at the tables and staff behind the counter.

Inspiring franchise success stories in the culinary world

Today, there are many franchises in the restaurant industry that provide guests with great food and convenient service. Some of these franchises have become household names because of their consistency, convenience, and ability to adapt to changing consumer preferences.

Worldwide McDonald's is known as the global giant in the fast food industry, providing fast and convenient food service. Can you believe that a staggering 90 % of McDonald's restaurants are franchises? This model allows the company to maintain high standards while giving individual owners the opportunity to run their own business. McDonald's sets strict standards for its franchisees to ensure that each restaurant meets the company's expectations for quality, service and cleanliness.

Another well-known franchise is Subway, which specializes in customizable and signature sandwiches. As of 2023, the Subway franchise had more than 37,000 restaurants stores, all of which are independently owned and controlled by franchisees. Subway has successfully adapted to consumer trends by introducing healthier options such as salads and wraps and offering online ordering and delivery services.

Last but not least, Kentucky Fried Chicken (KFC) also has a remarkable success story to tell. The company is known for its delicious fried chicken. KFC franchises about 95 % of its restaurants, which has helped the brand expand worldwide. Franchisees must follow KFC's strict guidelines to ensure that every piece of chicken meets the company's standards for taste and quality.

Start your adventure with restaurant franchising

The dream of running your own restaurant does not have to remain a dream – even if you lack the necessary experience. With a restaurant franchise, you can take an already successful business idea and open your own location.

Franchising in the restaurant industry offers many benefits: from an established brand and full support to access to a proven supplier network. But there are also challenges, such as creative restrictions and operating costs, that you should carefully consider before opening a franchise restaurant.

Take inspiration from many well-known restaurant franchises and make the leap into the restaurant business by opening your own franchise restaurant!

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