There was a time when nearly every American teenager spent at least a few weeks of their youth working in a local restaurant. A fair percentage of those kids walked away with clear knowledge that restaurant work is hard work. A lot of that knowledge was gained by watching owners, managers and career waiters/waitresses and kitchen staff toil away.
Put simply, the restaurant biz is tough. Typical business hours don’t apply and the hours you do work are long and stressful. The profit margins are thin and the competition is relentless. If you want to start a restaurant it takes a lot of money to go from idea to feeding your first customer. Plus, it’s a big risk. Restaurant failure rates are all over the map but it’s no secret that starting a restaurant is fraught with complications. And industry veterans know that while getting to the grand opening is hard, that real work is being able to keep the doors open.
Generally speaking, restaurateurs take one of three paths after deciding to become their own boss 1) buy an existing operation 2) start their own independent restaurant from scratch or 3) become a franchisee. There are pro’s and con’s to all of these options. This post gives 5 key tips to those who go the franchise route:
- Never consider opening any restaurant until you’ve spent a few years working in somebody else’s restaurant, preferably in a successful franchise
We must repeat that running a restaurant is hard work and it takes all of the owner’s attention. It’s true that many of the marketing, menu and policy tasks are offloaded to the franchisor but that doesn’t mean they won’t take some of your time. And after all is said and done, it will be your job to make sure that the doors are open and both the back of the house and front of the house are running smoothly. The more restaurant experience you have the better prepared you will be when you are running your own franchise.
- Learn the franchise business model and study the pro’s and con’s of restaurant franchising
Franchising has been an American success story primarily because when both the franchisor and franchisee are experienced and competent there are winners all around. But success is not due to happenstance – there’s a unique and proven business model to franchising. Study the business model and stick to it. The franchising graveyard is filled with those who never understood the business model and/or tinkered with it too much and causing it to break for them. In short, won’t try to re-invent the wheel. The wheel has been working fine for a long long time.
- Get your finances in order before exploring opportunities
People who love to cook and those who love restaurants sometimes forget that in the end it’s a business. Hopefully it’s a business you love but it comes down to dollars and cents. Running a successful franchised restaurant takes lots of capital. Just some of what you’ll be responsible for include franchise fees, location fees (initial & ongoing), leasehold improvements, inventory, professional service fees, insurance, permits and taxes. And before you are even considered by a franchisor you’ll have to prove that you are able to carry the load. Get you finances, and your financing, in order as soon as possible. We can’t stress this enough.
- Find an experienced mentor or consultant to help pick your franchisor and location
There’s all sorts of restaurant franchise opportunities out there and, in general, the more costly and competitive the opportunity is, the more promise it holds. Think of selecting the right franchisor as similar to choosing a spouse because in a way you’ll be married to them for as long as you both may franchise. If it’s your first time going down the franchise route then a find someone you trust to help you with the many pitfalls and challenges you will face. Picking a franchisor is important and tricky work; and picking a location (location… location… location…) is sometimes even more important. Ideally your mentor will be someone who has been through the process themselves – it may be a consultant or an industry veteran – the right person can save you time, money and frustration. Don’t try to go it alone!
- When you’ve narrowed down opportunities hire a lawyer specializing in franchising
An experienced franchise veteran can help you through the early phases of the process but at some point – around when you start reviewing franchise disclosure documents (FDD) – you will need to hire an experienced franchise lawyer to be on your side. Beyond the FDD there will be leases, discovery sessions, agreements and more and you will need competent legal advice up to closing, and beyond. Unfortunately, the best attorney’s still bill by the hour (some will send you a bill for saying hello to them at the supermarket) so you’ll want to be smart about when you call on them.
We’ve gathered some links to help: