08 Sep, 2017

How To Franchise A Restaurant

Franchise businesses offer some of the country’s best returns in business and it is not surprising then that many people think of a franchise when they want to start a new business. It is estimated that the country’s franchises generated over $1.5 Trillion in revenues in 2010 and provided jobs for more than 18 million Americans. The overall success rate for new franchises is much higher than that of new independent business start ups. Some of the most successful restaurant franchises in the country include Mc Donald’s, Kentucky Fried Chicken(KFC),Hampton’s etc. Restaurant franchises are the country’s biggest and most successful franchises. For a restaurant owner who feels that their operation is mature enough for franchising, there are a few points that need to be considered. The need to franchises is normally driven by the lack of time, money or even people. Whenever the franchise is expanding by opening more branches, the franchisor’s costs are limited to recruiting costs and franchise documentation costs, which is much lower than the cost of opening a new branch otherwise. Many restaurants also face difficulties in recruiting and retaining good managers with the industry averaging a mind-boggling 100% turnover per annum for managers. These are just some of the problems that franchising solves for a restaurateur. Some of the criteria used to determine whether a restaurant can be franchised are its financial performance and in particular its ROI (return on investment),its salability and its clonability. Your restaurant should have what is called the “sizzle factor’’ i.e. it should have an allure that helps it stand out from other run of the mill restaurants. A good way to check whether you have this subjective factor is if there have been any independent requests for franchising. If after deducting the royalty fees there is a good indication that your restaurants will generate at least 15 % ROI then you are good to go. The clonability factor refers to the ease with which a prospective franchisee can replicate your particular operations (which determines how attractive it is to them). Once you pass the above test, you should proceed to develop a franchise contract and fulfill state registrations (these depend on where you plan to be selling your franchises).An operation manual that clearly defines the quality control measures you shall adopt as a standard for your franchise should be developed. This manual contains all the details your franchisees may need to know when starting a franchise. It is important, however, that you safeguard your industry’s secrets such as recipes. You need to develop policy and procedures checklists, quality control checks and so on.