Factors to Consider When Purchasing a Restaurant Franchise

There are numerous ways to start your own business. One option is to purchase a franchise with a proven track record of success.

A franchise involves the owner of a business selling the rights to operate that business to a third party. The seller is called the franchisor and the buyer is called the franchisee.

The sale includes the rights to use the products, business systems, slogans, logos, and other trademarked branded materials.

Why Purchase a Restaurant Franchise?

If you have always wanted to run a restaurant, purchasing a franchise is something you should definitely consider. It is very difficult to be successful with a new restaurant because you are starting from scratch by creating your own brand. By purchasing a franchise, you can save time and money by investing in a brand that already exists.

Restaurant franchises are generally turn-key ready. When you purchase a known-brand, the menu, marketing campaigns, kitchen layout, and dining room design are done for you.

Brand Strategy

Branding is critical for all businesses. The more unique and compelling a restaurant’s brand is, the more it will stand out from its competitors.

This is especially true with franchises because franchisees are paying money for the strength of the franchiser’s brand. Do some research to find out how others view the brand.

What does the restaurant do that is different than others in the same niche? Is the restaurant keeping up with the latest trends in technology, marketing, and innovative franchise restaurant design options? Does the franchise have a unique selling proposition?

Proven System?

When you purchase a restaurant franchise, you are paying for a proven business model. It is your responsibility to evaluate if the systems are working. Do your research and ask questions. It doesn’t make sense to buy into a company that isn’t successful.

You should understand everything about how the business operates including training, marketing strategies, operations, technology, and ongoing support. The systems that should be in place include just about every aspect of the restaurant’s operation.

Investment

When purchasing a franchise, you are paying the franchisor fees for licensing rights, equipment, and training.

The amount of these fees varies greatly depending on a host of issues including size and location.  Evaluate and assess what you are getting in return for your investment.

Assess Success

Before signing a contract, you want to make sure the franchise you want to purchase is successful. Even though future performance doesn’t always correlate with past successes, you want to be sure you are buying into a company with a good track record.

Earning Potential

It is not an easy task to figure out how much money you might earn. Location and other factors can affect the profitability of a franchise. The best you can do is get as much financial information as you can about other franchise locations.

Training

One of the main reasons someone decides to purchase a franchise is to take advantage of recognized brands and proven successful business models.

You want to make sure you will receive considerable support and training to help you be successful. Smart franchisors know that the more successful their franchisees are, the more successful they will be. Choose the franchise that offers the best structured and proven coaching program.

Check the Demand

Before you purchase a restaurant franchise, examine your area. You will have better success if you are in a niche that doesn’t already exist in your location. You don’t want to be one of six pizza shops in a two-mile radius.

Earning Potential

When you purchase a restaurant franchise, you will be provided with a Franchise Disclosure Document.  This is a legal document so make sure you understand it clearly. You might need to hire an experienced franchise attorney to help clarify every detail of the deal.

The Document will show average expenses, including operating costs, overhead, and unit volume. You can use this information to get an approximate calculation of how much money you will need to earn to make a profit.

Ask Questions

Buying a franchise is a huge investment that requires a lot of time and money. You want to be sure you understand every aspect of what you are about to get into.

Don’t be afraid to ask questions and don’t sign any contracts until all your questions have been answered and all your concerns addressed.