If you are considering running a restaurant or food service business, there are two ways that you can go about it: buy a restaurant franchise or buy a stand-alone restaurant/ set up a restaurant from scratch in a new location. Whatever the case, if you are interested in the restaurant business you will have to make a choice that present fewer risks.
Franchising is a business model that has proven successful for many businesses over the years. It is a process where the franchisor or business owner sells to a third party or franchisee the rights to use the business name and system of doing business for a certain period of time.
In order to make a good decision, you need to know the reasons for and against each of the two routes.
Reasons to go for a restaurant franchise
- The business concept is already laid out
Buying a restaurant franchise is just like being a car dealer for a certain car manufacturer instead of being the manufacturer yourself. This means that you already have the product to sell, the philosophy of operation and customer relations that are already well laid down.
In terms of a restaurant business, you will not have to scratch your head over which food to sell, who you will get to sell to and whether you will get any competitive advantage. These are things that your franchiser has already taken care of and you can prove it before making any purchase.
- No worries about branding
Building a business brand can be a daunting task for any start up business and it may take years to achieve a solid brand. Depending on the franchiser that you chose to buy into, it may either be a hit or not when it comes to branding. This is because there are franchisers who have been there long in the market and others who are still new and without much brand awareness.
- You will benefit from bulk buying
As a startup business owner, it will take some time to build a good buying power that will qualify for discounts and other benefits associated with bulk buying. With restaurant franchising, this is a benefit that you will instantly get because of your franchisor’s group buying.
- Get help and support
Although it is advisable to learn to solve your own problems as a franchisee, it is still beneficial to utilize your franchisor support in terms of training, advertising, marketing and IT among other support services.
- Make profits faster
Although this depends on many factors, the chance of making profits may be higher with buying a franchise because most of the business operations and support are already laid down for you. This is unlike in a start-up where you need to take care of everything on your own and it may take time to see profits trickling down.
Reasons for opening a new restaurant
- Exercise your entrepreneurial skills
If you have an entrepreneurial mind and always dream of achieving great things then the franchise system may not work for you. Who knows, you may even come up with a strong business model that will be more successful than the franchise you would have bought.
Even if your franchisor will offer you all the above benefits, you will still pay hefty fees which could be the same or more than when you start your own restaurant. You should also be wary of the standards and rules that you will need to strictly follow when you buy a restaurant franchise.
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