Food Franchise

Posts Tagged ‘Restaurant Franchises’

A Franchise Opportunity – What Is This Exactly?

The best way to describe a franchise is to imagine it as a business that is delivered to you in a box at a certain cost and after approval. When you open the box, you will find marketing materials, contract templates, business plan templates. In short, everything you need to get legally started with a business, usually in an exclusive territory where only you can operate and sell.

Why Are Franchises Popular?

Franchises are popular. Research was conducted by the International Federation Association and the National Franchise Association recently. In 2005, there were about 850.000 franchises operating in the U.S. alone in which around 10 million people are employed. Sales volume accounts for about 40% of all retail sales with around $1.5 billion.

At this point, I do not really know if there is any business left that has not been using the franchise model already. You can find restaurant franchises, cleaning services and even dental practices. Most popular franchise categories still seem to be the restaurant, deli and sandwich franchises.

Franchises all have a couple of things in common that makes them attractive to potential business owners:

1. Fast start up utilizing a working marketing system;

2. Peace of mind because it has been proven to work already;

3. Exclusive territory (in most cases).

There are known disadvantages as well. For example, a lot of franchise companies do not give the level of support they promise. Some of them can be overly strict with their branding and marketing requirements, which may be disappointing for a creative entrepreneur. And there is obviously the work pressure, especially when operating a franchise that requires staff as well.

Cost and Benefit Analysis – Quick Overview

Costs

The convenience and peace of mind comes at a certain price. Let’s look at some typical startup fees.

The average investment level is around $250,000 excluding real estate. This is the average investment requirement for about 80% of the franchises.

A typical example is Rising Roll sandwiches who requests a total capital investment of $300,000 and a net worth requirement of $500,000.

So called low cost franchises can start with a capital investment typically in the range from $15,000 – $40,000.

A typical example is a video business card distributorship that comes at a cost of around $15,000.

Benefits

No exact figures are known but I found the following indications based upon figures researched by the International Franchise Association. They found that the annual gross income for a typical franchise ranges between $75,000 – $125,000 (before taxes).

With an investment level of let’s say $250,000 you can expect a pay back time of around 3 years.

It is clear that becoming a franchisee requires cash to sustain yourself and the business in the first years. It also requires some sustained hard work to get the business off the ground so to speak.

Franchise Entrepreneurs – Are You Capable

An survey among Franchisors (by Franchise 500 and published in Entrepreneur Magazine Jan 2007) has revealed they are looking for the following characteristics in a person to be considered to become a successful franchisee.

1 – People Skills

94% of the franchisors that were interviewed mentioned this to be a key skill. Not really a surprise. Even if you do not have staff, to move goods in most industries, you need at least some communication skills.

2 – Coaching

If you are unwilling to learn or accept proven formulas and methods it is very unlikely that you will become successful. Reinventing the wheel is not what makes franchisees successful. A view shared by around 87% of franchisors that were surveyed.

3 – General Business Skills

This is an interesting one. The percentage agreeing with general business skills being a requirement to become successful is 86%. Interesting because you would expect proven methods and systems to be in place already. Not so. In order to make it all happen, you need to study financial information, cash flow, balance sheets on a regular basis. You need to make decisions on your own regarding additional investment, marketing strategies, staff and so on.

4 – Access to Capital

If you do not have any money to get your business off the ground, it’s better not to start at all. Careful planning is the key combined with a preparedness to live a frugal lifestyle for years to come.

Conclusion

Buying a franchise is a popular thing to do nowadays but it never appealed to me. It always felt like buying your own job. The amount of investment combined with the amount of work to put in simply does not match with my personal lifestyle. I would rather invest a bit less and work less hours but with a much faster pay back time.

There are still plenty of opportunities with proven track records over a couple of years that are suitable for lifestyle entrepreneurs and that will generate good income for years to come.

Restaurant franchising opportunities are now very large, and have been known to record the largest franchise restaurant business franchises sales in the modern world. It’s no task to understand how fast food franchises have become so popular. Many know that owning a fast food franchise can make you rich, but it is also a very difficult business to start. There are, nevertheless, some things you can do to make the method of starting a franchise somewhat easier.

Look at your skills and talents long before you buy a fast food franchise. It is of importance to consider your abilities and interest. Something to ask is why do you need to run a franchise restaurant? Are you the kind of person that really enjoys to work a lot without a break? And finally, you should get a hold of your available funds, because knowing the amount of money you have available will help in your decision process.

After you have a few food franchise opportunity areas chosen according to your funds and needs you can begin to Learn more about the franchises of your choice. One thing you really should do is to meet with owners of the franchise for sale you are considering buying, and to critique the corporate documents of the restaurant franchise company.

Then you have to find out something about your town or area where you want to place the franchise. Just because a franchise does really well in one area doesn’t necessarily mean the franchise will have the same success in a different location. A fast food style business like a entrepreneur something that you have to do is think about the other businesses around your location. Are there too many similar franchising opportunities? Are there adequate customers to keep up one more franchise like an ice cream franchise?

After you have found the best franchise that fits, and started to scout out good locations for your franchise business, you will need to figure out how to purchase the franchise. Getting a franchise loan can be tough but there are several options that include loans from banks, SBA grants and money from rich uncles. Key franchises for sale may even handle the financing for you. If you decide to buy a business franchise or a business opportunity you will probably be able to purchase the opportunity with savings or with a credit card because they usually don’t cost as much.

when purchasing a business a thing to look at is the training. The franchise company usually will offer a very good franchise training program. Make sure the franchise school offers training for the managing of workers. The average food franchises have to have a dependable staff to function like a machine. Even if you are the type of person that is good with business and you have an world class aptitude for business, dealing with people can often be demanding. So, make sure your franchise selection is one with a fine hands-on educational system that includes people management tools.

Being the proud owner of a food franchise is often the best thing franchise owners will ever do. With a little help from your friends you can be really prosperous. Consider all your options and question everything when you make your selection. When you pick the best franchise that has a good reputation all your dreams of business ownership should come true.

Depending on the time of year, the hottest restaurant franchises are probably in the Middle East and Africa where temperatures regularly reach 50 C and more during the day in summer.

For more regular and consistent heat though, most people look in the Tropics with its all year round climate dependent only upon the aspect, geographical features, meteorological and culinary changeability, for their hot franchises.

The possibilities are almost endless nowadays.

Many people suspected that the opening of a Mc thingy in Moscow in the last century was the start of something pretty big which would lead to the worldwide expansion of franchised fast food chains and their smaller hangers-on.

Well, they were right, despite the many sceptics at the time. Many franchisors suddenly thought that they may be able to sell chicken in Cambodia, beef burgers in Borneo, pizzas in Paraguay, steak in Singapore, coffee in Colombia and so on. And they’ve done it. You can probably think of many, now famous, names from the top of your head, if you think about it.

Many people consider restaurant franchises in a hot climate as a way of getting away from the rat-race of their own lives and jobs. Your own business in the climate and country of your choosing, presuming you find the right location, may be offered up to you on a plate by a good franchisor, or it may be very hard work (and expense from your own pocket) to even get the place open.

The heat of the tropics means that hygiene is almost more important than at home in temperate climes. Food goes off quickly and dust, dirt and germs gather rapidly if you’re not careful. Some countries in the tropics are very aware of the importance of hygiene and everywhere you go is spotless, whilst others are downright filthy.

Town and cities in the tropics also get very humid at times, making eating without the benefit of air conditioning a pretty sticky experience.

Help is at hand to solve any problems you may experience in other restaurants in the shape of familiar restaurant franchises, their air conditioning, their cleanliness and their food. They are just the same as at home. You may find other local delicacies in the ‘variety on a theme’ items on the menu such as Thai chilli burgers, curry pizzas, Egyptian coffee, kangaroo steaks or doughnuts with chilli sugar, but the standard fare is the same whether you are in Arizona or the Amazon, Baltimore or Borneo, Canada or Cameroon.

Franchises in the tropics are of course mainly for Western or Northern tourists so that they can taste a bit of home, but are also very popular with locals in nearly all countries.

It’s wonderful to have a doughnut, or a pizza, or a burger or whatever when you’ve been living on ‘local food’ for a long while or if you have not attuned to it in the first place.

And they all taste every bit as good as they do at home even if the weather’s hot.