How Can I Franchise My Small Business – The company does not own more than 200,000 quick service restaurants in the United States. Instead, these locations are franchised, which means the company (the franchisor) allows an individual or a group of partners (the franchisor or franchisors) to operate that restaurant’s website under a franchise agreement.
At a glance, opening and operating a restaurant franchise seems more straightforward than creating your own restaurant concept. They are well-established brands and most of the marketing comes from the corporate office. But that doesn’t mean franchisees have an easy path to restaurant success. There is a unique set of challenges that come with franchising. Here are 7 of them and what to do about them.
How Can I Franchise My Small Business
The franchisee and the receiver are a team. For a successful partnership, the brand must be right for the franchisee and the franchisor must be right for the brand.
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Franchise agreements are long-term relationships — 10- to 15-year contracts are the norm. Being right is essential. This means that the approval process can be long and intense.
To speed up the process a bit, be sure to gather all the documents you need and follow the franchisor’s requirements. A lengthy approval process can help avoid (or) many problems later, whether financial or cultural. For franchisors, take this time to evaluate whether a franchise is a good fit
Aspiring franchisees must be prepared to pay large sums of money to complete the business. Between initial licensing fees and start-up costs, the amount can easily break into the six-figure or even seven-figure range.
Some franchisors require aspiring franchisees to have hundreds of thousands of dollars in cash, which adds to the bill.
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In addition to this one-time initial investment, franchisees pay regular fees based on sales and operating expenses. For example, McDonald’s charges a service fee of 4% of gross monthly sales, while Subway charges 12.5% of gross weekly sales for franchises and promotions.
There is no real way to avoid royalties and fees, as they are usually required to be contracted with the franchisor. However, you can work with purchasing contractors and renovators in your area to see who can give you the best rates, which can lower your opening costs. You can also explore buying an existing franchise rather than opening your own franchise, which will reduce renovation and remodeling costs.
Another way to solve this problem is through integrated restaurant technology, such as point of sale and restaurant scheduling software. When franchisees have accurate data about sales and employee performance, they can make effective changes that save costs. Franchise fees are easier to manage when you can deduct a few percentage points from the cost.
Affiliation with beloved brands gives franchisees an edge in recognition and brand affinity. But it can also work against you. When several Chipotle locations were blamed for foodborne illnesses in late 2015, the brand’s reputation as a whole took a hit—even though only a few of the 2,000 locations at the time were found to have an outbreak. Multi-location restaurants are closely watched in the media because of their presence across the country. Any mistake made by a person in one restaurant, big or small, can affect the performance of other locations.
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The first step to avoiding this problem is to adhere to the highest possible service standards for yourself. If these major issues are affecting your brand, you and your loyal patrons can rest assured that your site is not at fault.
If a major problem arises (see Chipotle closing for half a day of food safety training), the only thing you can do is stay in close contact with your franchisee to know what is expected of you during this time.
Independent restaurateurs can define the theme of their restaurant, change the menu whenever they want, and work to build a presence in their community.
It is common for franchisees to have promotions, new menu items, LTOs and top-commissioned rebranding efforts. That’s not a bad thing – and changes don’t happen in a vacuum. Their research and efforts are geared towards increasing revenue and/or profitability – a win-win for franchisors and franchisees.
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This can be frustrating for owners who don’t feel like they are in control of their business. That is what they live by day by day. But that doesn’t mean franchisees’ voices aren’t heard.
Franchisees who have ideas on how to improve the business, but can’t act on them, can always call their head office. Explain your point, with numbers to support it, and there’s a good chance your ideas will be considered. If you can, suggest a survey to send to other franchisees. You’re probably not the only person thinking this. Change can happen, but given all the moving parts of national suffrage it is gradual.
However, individual franchisees may have an opportunity to make an impact. Finally, some famous fast foods—the Big Mac, the Kentucky Fried Bucket, the 5-foot tall, and the Filet-o-Fish—were all produced by individual franchisees.
Run your franchise in a big city like New York, San Francisco or Chicago? If so, you must comply with an additional set of rules known as Fair Workweek laws, which affect Oregon and its cities:
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These laws apply to restaurants operating at more than 20-56 locations worldwide and/or those aforementioned locations that employ more than 500 people worldwide — criteria that franchise locations almost always meet.
These laws add significant changes to the way restaurants manage and schedule employees, requiring affected restaurants to compensate employees for last-minute shift changes, share tables at least two weeks in advance, and/or allow information to be entered into scheduling, among other mandates. .
Learn about the laws and regulations in your area. Additionally, you will benefit from the resources available to you within your larger restaurant group. For example, many franchisors require all of their locations to use employee scheduling software that helps them schedule easily and avoid violating reasonable work week laws.
In general, the employee turnover rate in the restaurant industry is around 75%. However, franchisees see significantly higher turnover rates than the industry average, with turnover for fast food industry locations more than double the 150%. For example, Panera’s turnover is said to be close to 100%, while Domino’s is recovering from a turnover of 107%.
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Among the reasons for this high turnover are the constant demand for employees at these restaurants (allowing disgruntled employees to easily find work elsewhere) and the reliance on smaller, less specialized work groups, who generally have less incentive to stay with the franchise for years. .
Working in a franchise may seem like a good idea for aspiring restaurant workers because of the brand recognition, but unfortunately it can attract some less-qualified candidates due to their convenience awareness. Make sure you take the time to find and hire the right people, such as actively researching candidates and asking the right restaurant interview questions.
Ryan C says:
A final common franchise problem is market saturation of the same restaurant. Believe it or not, Chick-fil-A earned more revenue than McDonald’s and Starbucks at every location in 2020, according to this QSR report. And that’s 15% fewer working days per week!
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There is a long list of reasons behind this, but the size of the sites is definitely at the top of that list. Chick-fil-A operates about one store for every six McDonald’s or Starbucks restaurants and about every 10 Subways. With fewer stores, each Chick-fil-A becomes unique and, in turn, attracts a larger audience to that particular location.
If you operate a franchised restaurant (more specifically, a franchised fast food restaurant), you can expect strong sales due to your brand recognition and convenience, but you should also be aware of your potential market share. This comes from knowing how close another restaurant with the same name and menu is.
If you have a large number of locations for your restaurant in your city or town, it may affect your sales rather than being new. After all, being one of two McDonald’s in a city sounds more financially attractive than being one of seven McDonald’s in the same city, right?
Before opening a franchise, do a feasibility study to see how you’ll stand out in the area where you’re looking to set up shop. Forcing yourself to sit down and think about your sales projections against costs — and what role other franchise locations might play in those projections — can help you choose the best locations to drive sales.
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Provide excellent customer service and food quality, so it shows in your online reviews and word of mouth. People may choose your location over another nearby location.
Although opening and operating a restaurant franchise comes with its own unique set of challenges, most of them can be solved with a change in mindset, new processes, or a phone call.
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