Does Your Restaurant Have What It Takes to Become a Franchise?

by Bruce Hakutizwi5 Min Read

Just imagine: You’re filling the dining room every night. Sales are phenomenal, and you’re getting rave reviews in the local blogs and newspapers. Every night, your host or hostess needs to politely encourage walk-ins to call ahead to avoid the 45-minute wait.

Your restaurant — your baby — is finally off and running, and the future looks bright.

That’s probably not even too difficult of a scene to picture for most of you if you’re reading this article right now. After all, you’ve no doubt already put your heart and soul into building your restaurant dream. It may not even take much imagination at all to see the fruits of that hard work and dedication.

Whether you’re already at that stage right now, or you’re eagerly looking forward to that time in the future, an important question looms on the horizon:

What then?

Your Options

Technically, you can do whatever you want if and when your restaurant takes off. Assuming it’s profitable and you can entrust its day-to-day management to someone else, you could even potentially retire on your success.

Or, you could consider selling your restaurant and moving on to something completely different.

But, they say running a restaurant is in the blood. As an entrepreneur in the restaurant industry, you’re more likely considering how to expand your current operation or get into your next big restaurant venture. If that’s true in your case, you really have two major options available to you:

You probably already know what it takes to start a restaurant from scratch, so you need to ask yourself: Am I ready for that level of commitment again? Do I have the resources, ideas, and energy to start over again? These are important questions because, as you know, starting a brand new restaurant is no easy matter.

On the other hand, expanding your restaurant into a franchise by opening additional locations can seem far easier, especially if you’re facing the dream situation described in the opening paragraph. But a lot of talented and experienced restaurant owners have overextended themselves trying to take on an expansion on their own when the timing and circumstances weren’t exactly right.

Is There a Third Option?

There’s actually a third option available that offers the benefits of starting with a successful brand and reputation, but avoids the heavy cost and schedule-crunching labor required to expand on your own:

You Can Turn Your Restaurant Into a Franchise

For most of us, the word “franchise” brings to mind images of the bright and shiny fast food logos floating over seemingly every street in America. And it’s true that fast food and other quick-service food establishments make great examples of franchise operations. But that doesn’t mean the principles of successfully growing your business through franchising don’t apply to other businesses, both inside and outside of the foodservice industry.

The food franchise model can actually work very well for your growing establishment, since other entrepreneurs (your franchise owners) would be shouldering the bulk of the financial and labor investment of expanding your business while you offer support and direction, and earn passive income through franchising fees.

But it’s only a viable option if your restaurant meets three important requirements. Let’s discuss those requirements in more detail and determine whether your restaurant is well positioned to expand through franchising.

Plenty of Independent Competition

The first requirement that lends itself to successful franchising is a competitive — even crowded — marketplace filled with a large number of locations run by independent operators.

This well describes the fast food marketplace in the U.S. in the middle of the 20th century, when small, independent burger shops, diners, and soda fountains were operating all over the country, all doing pretty well on their own.

That’s when Ray Kroc — a traveling milkshake machine salesman — realized there was room in the market for a chain of fast-and-cheap burger joints that could concentrate on speed and quality. By limiting the menu and establishing uniform recipes and processes, he could duplicate the entire restaurant as many times as necessary.

That’s how one of the largest fast food franchise operations in the world, McDonald’s, was born.

Independent competition is a requirement for franchise success because the fact that many independent operators are succeeding in the market proves it’s a viable business opportunity where customers are willing and able to spend money. In nearly every population center in the country, restaurants operate in this kind of atmosphere.

Now, consider what a franchise operation can bring to the customer in that environment:

  • Consistency of quality
  • Consistency of selection
  • Consistency of price
  • Consistency of service

Right now, all the customers looking for dinner in the area have to gamble each time they choose a new place to eat. They have no idea whether their experience is going to be better, the same, or worse than it was at the last place they visited. If you were to open up a brand new restaurant, you’d be asking them to do so again.

A franchise operation, on the other hand, alleviates that uncertainty by promising an identical experience at every location. Assuming that experience is excellent — and if it wasn’t you wouldn’t be considering expansion — customers will naturally be drawn to consistency over uncertainty.

A Duplicatable System Behind the Success

Just opening up a number of different locations with the same name and decorating motif isn’t enough, though. A successful franchise is built on a collection of successful, easily duplicatable systems. What does that mean?

Let’s look again at Ray Kroc and the McDonald’s example:

When Kroc met the McDonald brothers in 1955, they were already running a highly successful fast food restaurant that stood out above their competition in San Bernardino, California. The secret to their success was an assembly line-style food preparation system (called the “Speedee Service System”), a very limited menu that eliminated delays caused by too many choices, and a highly recognizable brand, including the famous Golden Arches and bright red tile all over the restaurant, which McDonald’s still exploits to this day.

After buying out the McDonald brothers, Kroc quickly applied their highly-efficient production system and great visual branding to a host of franchise locations that popped up quickly all over the country. Everything was about the system, and creating consistency in quality, taste, and price.

As an added benefit, the franchise model allowed McDonald’s to control a greater economy of scale among suppliers, making each new location slightly more profitable than the last. Today, nearly 37,000 McDonald’s locations serve over 68 million customers every day around the world.

Yet, despite their being located in numerous countries with menus written in dozens of languages, a customer can enter any McDonald’s location, order a Big Mac, receive it in just a few minutes, and enjoy the same exact experience no matter where they are.

That’s the power of franchising a successful operation using duplicatable systems.

Adequate Training and Support

Even the most incredible food preparation system and duplicatable delivery process isn’t going to lead to a successful franchise operation if new owners and employees have a difficult time figuring out how to make it work.

That’s why the third essential ingredient of a successful franchise is adequate training and support from the parent company.

For the tens of thousands of entrepreneurs who bought into the McDonald’s franchise over the last 60 years, it was almost a no-brainer: Franchise owners confidently bought into the system because it was set up to be a true turnkey operation from day one. Every franchisee received everything they needed from supplier contact information and order forms to step-by-step process checklists, and even training for the kid who would be flipping the burgers. All they had to do was step into the role of owner and keep that well-oiled machine moving.

If you can provide a similar level of training and support for franchise owners interested in helping your restaurant expand, you can expect similar rapid growth.

So, Could Your Restaurant Become a Franchise?

Ask yourself:

  1. Am I currently operating in a highly competitive market where most of my competitors are independent?
  2. Does my restaurant run on a successful, easily duplicatable system? (And if not, can you get it there?)
  3. Can I provide training and support to help others follow my system so they can get up and running quickly and easily?

If you can honestly answer “yes” to all three questions, you may have just found the perfect framework for the next chapter in your journey as a food service entrepreneur. Why not explore franchising as a viable growth strategy for your restaurant?

Bruce Hakutizwi

@BizForSaleUS | LinkedIn | Website

Bruce Hakutizwi is the U.S. and International Business manager for us.Businessesforsale.com. He is passionate about helping entrepreneurs succeed and regularly writes about restaurant growth and small business management.

Related Articles