how to turn your restaurant into a franchise

How to Franchise a Restaurant: 8 Tips for Success

Full Answer

How much does it cost to start a restaurant franchise?

The initial investment for a stand-alone restaurant is between $1.2 million and $2.5 million, but these figures do not include the land or lease costs. The initial franchise fee is $40,000, and there is a royalty fee of 4 percent of gross sales and an advertising fee of 4 percent gross sales.

Do you need a buissness degree to franchise a restaurant?

While the short answer is "no," the question is much more complicated than just whether a degree is required of business owners. Foregoing a degree might seem like an attractive option when you're considering the time and financial investment you're about to make on a college program.

What are the risks of starting a franchise?

• 1. Product risk. Decide what you are selling. ...
• 2. Market risk. Knowing your customer and why, how and where they buy related products is arguably the most important risk factor to assess before launching your product. ...
• 4. Team risk. There is no way that one person can vanquish every risk. ...
• 5. Execution risk. ...

What is the best restaurant franchise?

Here are the most popular 10 fast food franchises in the USA

• McDonald's. McDonald's is the world's largest restaurant chain by revenue, serving over 69 million customers daily in over 100 countries.
• BURGER KING. ...
• SUBWAY. ...
• KFC. ...
• Checkers and Rally's. ...
• DAIRY QUEEN. ...
• DOMINO’S PIZZA. ...
• Dunkin’ Donuts. ...
• Taco Bell. ...
• Wendy's. ...

Is franchising a restaurant profitable?

This assumes the franchise has everything going for; good location, a great product, and effective management. First, there really is no simple cut and dry answer to the question, "Are food franchises profitable?" Yes, they can be, and many entrepreneurs have made fortunes operating food franchises.

What makes a restaurant a franchise?

A franchised restaurant is a restaurant brand that you as the owner would have bought the right to use for a royalty fee. The company that permits to use their brand name is called the 'Franchisor' while you who has bought the rights to use the brand name in a particular location are known as 'Franchisee.

How do I start a restaurant franchise?

Starting a Restaurant Franchise: A Step-by-Step GuideKNOW THE INS-AND-OUTS OF YOUR BRAND. ... CHOOSE THE PERFECT LOCATION. ... DEFINE AN OWNERSHIP STRUCURE. ... SECURE YOUR BUSINESS LICENSES. ... SECURE ALL NECESSARY PERMITS, LICENSES & INSURANCE. ... OBTAIN A TAX IDENTIFICATION NUMBER FOR YOUR RESTAURANT. ... REGISTER FOR STATE & LOCAL TAXES.More items...

How much does it cost to turn a business into a franchise?

How much does it cost to start your own franchise? Franchise startup costs can be as low as $10,000 or as high as $5 million, with the majority falling somewhere between $100,000 and $300,000. The price all depends on the industry, location and type of franchise.

How much does it cost to open a restaurant franchise?

Restaurant franchises tend to be more expensive than others types of franchises. Initial investments begin at around $100,000 and can range upwards of several million. Most fall somewhere in the middle - generally $500,000 to $2 million.

How much does a restaurant franchise owner make?

Franchise owner salary range? The average annual salary for a franchise owner in the restaurant industry is $82,000. This number is quite impressive considering that the range of salaries for a non-franchise owner of a restaurant can be anywhere from $24,000 to $155,000.

How much does it cost to buy a McDonald's franchise in USA?

McDonald's franchisee applicants must have a minimum of $500,000 available in liquid assets and pay a $45,000 franchise fee. Those looking to launch a new McDonald's franchise can expect to shell out between $1,314,500 and $2,306,500. Existing franchise prices can cost upwards of $1 million or more.

What is the cost of McDonald's franchise?

Documents- ID cards, lease documents, etc. Franchise Investment Cost- In India, if anyone wants to start a McDonald's franchise in India, then their net worth should be between INR 10 to 15 Crore. Also, assets worth INR 5 Crore should be in the form of cash or liquid assets.

How much does a Wendy's franchise cost?

What does the initial franchisee fee cover? Does it include start-up supplies and training? The standard franchise fee is $50,000 for a franchise agreement with a term of 20 years.

How do franchisees get paid?

How do franchise owners get paid? Franchise owners can pay themselves a salary or depending on their business entity, they may be able to take a draw from their accumulated equity.

How much to buy a Chick-fil-A franchise?

Despite its success, Chick-fil-A charges franchisees only $10,000 to open a new restaurant, and it doesn't require candidates meet a threshold for net worth or liquid assets, the company told Business Insider. That's cheaper than every major fast-food chain in the US.

Do franchisees pay royalties?

In addition to charging an upfront franchise fee, franchises also charge ongoing royalties. If you're looking at investing in a franchise, it's time to start getting comfortable with the idea of paying both. A royalty fee is an ongoing fee that a franchisee pays to the franchisor.

How do you know if a restaurant is a franchise?

With chain stores, the parent company retains quality control in each individual restaurant. In the case of a franchise, there's no central ownership actively involved with all of the stores. Investors often purchase more than one franchise, but many owner/operators typically run just one location.

How do you identify a franchise?

However, franchised businesses typically post signage in their stores and notes on their marketing materials (brochures, websites, vehicles, etc.) indicating that they are independently owned and operated.

Is McDonald's franchised?

McDonald's has been a franchising company since 1955 and has relied on its franchisees to play a major role in the system's success. Currently, about 95% of all U.S. restaurants are franchised to independent franchisees and about 5% are company-owned.

Is Starbucks a franchise?

Starbucks Coffee doesn't franchise. Even though franchising is a classic, successful growth strategy for myriad beloved, familiar brands, Starbucks does not grant franchises. It's not because franchising isn't a time-tested model for growth. Many companies offer franchises.

What about franchising your restaurant?

The third option noted above — growth via franchising — offers the benefits of starting with a successful brand and reputation while avoiding the heavy financial cost and effort required to expand on your own:

Is your restaurant run on duplicatable systems?

Just launching different locations with the same name and color scheme isn’t enough, though. Successful franchises are built on easily duplicatable systems that have provided a solid foundation for consistent success. What does that mean?

Is there a lot of independent competition?

The first requirement successful franchises have in common is a competitive — even crowded — marketplace filled with many independent operators.

Can you commit to providing adequate training and support?

Even the best, most duplicatable food preparation and delivery system isn’t going to automatically provide a successful franchise operation if new owners and employees have to struggle to learn how to make it work.

What was the secret to the success of the original McDonald's restaurant?

Let’s look again at Ray Kroc and McDonald’s: The secret to the success of the original McDonald’s restaurant was an assembly line-style food preparation system (which the McDonald brothers called the “Speedee Service System”).

What was Kroc's strategy after McDonald's?

Kroc’s entire strategy was about the systems and their ability to create consistency in quality, taste, and price.

Why is McDonald's a compelling buy?

The tens of thousands of entrepreneurs who became McDonald’s franchisees over the last 60 years generally agree: the system is such a compelling buy because it’s set up to be a turnkey operation from day one. Every franchisee receives everything they need:

How much did the food franchise industry grow in 2017?

So, you want to be a restaurant franchisee. Great! The food franchise industry is booming – even full-service franchises are expected to grow sales by 6.8% in 2017. Thinking of getting in on the action? Start by learning how to franchise a restaurant the right way with these 8 expert tips.

What should be your primary goal as you learn how to franchise a restaurant?

Repeat customers should be your primary goal as you learn how to franchise a restaurant.

How long does it take to see a return on investment for a restaurant franchise?

Even if opening goes smoothly, there’s no way to guarantee your market’s reaction. It could take weeks, even months before you begin seeing a return on investment.

Is it risky to open a franchise?

Many entrepreneurs believe it’s less risky to open a franchise instead of building their own restaurant name and concept from scratch. That’s not always true. Don’t rush into franchising without doing research first. Successful franchisees take time to plan out how to franchise a restaurant – so should you.

Do franchises have loose SOPs?

However, some franchises are more lenient with looser SOPs. The takeaway is this: review the franchise agreement thoroughly before signing. SOPs are usually covered in great detail, outlining constraints and freedoms that come with how to franchise a restaurant. It’s up to you to determine your comfort level with the terms.

Is it risky to franchise a restaurant?

There’s a reason franchises are often less risky than starting a business from scratch. Most franchises are built upon Standard Operating Procedures (SOPs). That means strict guidelines are in place for how to franchise a restaurant, including the menu, management, and marketing.

Do you need a franchise team to franchise a restaurant?

You will need an entire team to navigate the waters of how to franchise a restaurant – especially if this is your first venture.

Why start a restaurant franchise?

Many people enjoy spending time with others while dining on tasty food. Also, nearly half of American adults view dining out as an essential part of their lives, and 64% of adults eat out at least once per week.

What training do franchisees need?

Headquarters training: Franchisees will need to visit your location to learn the basics. Most training programs will include classroom teaching to grasp company culture and history, operations, and reporting. It should also include hands-on training in a mock restaurant

Why do people invest in franchises?

People invest in a franchise because it is a turnkey operation. New franchisees expect to receive successful business out of the box. Your restaurant needs to be this model.

What is franchise ready?

A franchise comes ready to go out of the box — that is one of its most appealing qualities. You will need to put in the effort to account for all aspects of your business before starting new locations.

How many franchises failed between 1991 and 2010?

The Small Business Administration found that nearly 17% of franchises failed between 1991 and 2010. Are you confident that you know how to franchise a restaurant?

Why do you need to empower your franchisees?

But at the same time, you will need to empower your franchisees so that they can handle online concerns specific to their restaurant. Your franchise business model needs to include tactics and community management.

What happens if you don't have proper documentation for a restaurant?

Without proper documentation, you can end up in dispute or lose the rights to certain aspects of your business.

What is franchise operations manual?

It is in the franchise operations manual document that you will be responsible for inserting your recipes, food preparation, presentation and service standards, forms (such as inventory forms) and of course all your operational checklists.

Is franchising a part of the restaurant industry?

Franchising really grew up through the restaurant industry. While there are many other industries that also have leveraged franchising, restaurants remain a popular category. Do you own a restaurant and have often thought about franchising? Maybe you have some doubts.

What is a good franchise growth plan?

One thing worth remembering as you work through your franchise growth plans: a good plan is typically an iterative process. You may need to revisit your numbers multiple times to make them work, based on your current resources.

Why do franchises need to tweak their original strategy?

One of the reasons emerging franchise brands often need to tweak their original franchise strategy is that they never really had a solid plan in place initially. Often, when I’m speaking with novice franchisors, they will offer vague goals like wanting to “aggressively grow while still maintaining standards” or share an arbitrary number of units they’d like to hit in a given period of time. It’s not that those aren’t good objectives to strive for; they just aren’t specific enough to provide a good road map moving forward.