The Advantages and Disadvantage of Opening a Restaurant Franchise
When I talk about running a franchise business, most people automatically assume I’m talking restaurant franchises. That’s because most franchises in the food industry are wildly successful and in turn growing in numbers and popularity. You’ll be hard pressed to find independent restaurants at all anymore due to the success of food franchises.
The best part is that despite the growing number of food franchises, buying a restaurant franchise is still one of the few close to being a guarantee opportunity in the world of business today. It’s true that there are number of difficult issues that come with owning a restaurant franchise, but that’s true with any business. Here are both sides of owning a food franchise showing both the advantages and disadvantages of them:
- Built-in demand – For years upon years, people have been hardwired to grab something to eat at a franchise food chain when they are hungry and away from home. This is a major advantage for any start up company. It’s years of marketing already done for you. The only thing you need to consider is the future of your product and will there be a demand for it in your local geographical area.
- Financing – You can choose a number of different outlets to find financing. When it comes to finding funding for a food operation business, the process is extremely easy and not as complicated. The reason is because banks typically know what is involved with opening a restaurant and feel more comfortable approving the loans. The high revenue generated by some of the food franchises doesn’t hurt, either.
- Track record of success – Since a typical food franchise has multiple franchisees, it is easy to determine how successful or not they are. You can see if they have a record of success along with where and what demographics are the most successful. With this type of information available, you can make a well-informed decision before making an investment.
- Prestige – Depending on who you speak to, people often think that all restaurant owners are people of high society that also comes with a touch of glamor. There are a lot of franchise owners that get into the restaurant business for this reason alone.
- Labor – I’m sure you’ve noticed that most food businesses need a lot of employees to function properly and smoothly with the majority of those workers being low-paid. That leads to a workforce of unreliable employees with a high turnover rate. Finding and keeping qualified employees is a major challenge for a food franchise.
- Low margins – The food industry is very price sensitive, more so in the world of fast food chains. This leaves you with a very fine line to walk with cost of goods and labor and making a profit. It’s true that food franchises often see high revenues but the net margins are often overlooked. You are also susceptible to food spoilage and theft along with other issues only found in the food industry.
- Expensive initial investment – A food franchise will require a substantial investment from you in order to get started. You need to pay for many items up front in order to run the business. Not only do you need to pay for the food and labor but also ovens, grease disposal, venting, furniture, and maintenance among many other expenses.