Franchise investments don’t come without a steep cost. Most restaurant ventures require a considerable amount of capital and industry savvy to even get off the ground, but franchises can be a suitable option for those looking to invest in the restaurant sector without starting from scratch (plus, the success rates are much higher). If you’re thinking about taking the leap into a food-related franchise, make sure you’re well-versed on the responsibilities and costs that come along with this endeavor.
The Drawbacks
While opening a restaurant franchise might seem like a walk in the park compared to other independent restaurant ventures, that’s not to say it’s without its drawbacks. Finding the right franchise to invest in from a site like Franchising.com is just the tip of the iceberg.
The Personal Sacrifices
The restaurant industry is no walk in the park. The hours are long, the labor can be physically intensive, and the stress level is high. You’ll often get there before anyone else, leave long after everyone has left, and you’ll be responsible for any legal issues that may arise. If you don’t have a cache of time to commit, this endeavor might not be suited for you.
The Initial Investment
You’ll need quite a bit of capital to ensure your plans for a food franchise come to fruition. From venue renovations to rent, food preparation equipment to furniture, plumbing and utilities, and more, you’ll need to come up with a hefty sum before making headway in your venture. You’ll also need to pay your employees, access the right insurance, and consider the rising costs of vendor supplies. Remember that when profits do start rolling in, you’ll be handing over a significant chunk of what you make to the franchisor.
The Permits and Regulations
There’s no end to the permits you’ll need to secure and regulations you’ll be required to abide by. Food businesses are governed strictly, and must keep up with legislation and various codes to ensure product safety for customers. This can be an expensive venture, and securing the permits initially (and renewing them) can take quite a bit of time and capital. For starters, you’ll need to secure your venue, then apply for zoning permits, and make sure all of your equipment is up to standard. On top of all this, if your restaurant franchise is known for serving alcohol, you may find it hard to secure the proper liquor licenses. Say you’re in a highly saturated area, like California. Your chances of securing a liquor license can be slim to none, depending on your budget and the current economics of your specific area. More often than not, franchisees will need to secure these licenses through brokerage services like License Locators, Inc, and heavy competition might mean soaring prices.
These are just a smidge of the stressful aspects of the business. You’ll have to have a comprehensive handle on the tax implications of your new franchise venture, deal with unsavory guests, and pay fees to the franchisor in addition to the abovementioned issues. However, with all of these risks addressed, it’s important to take a look at the major benefits inherent to a franchise investment.
The Advantages
A Pre-Existing Plan
A lot of the work is done for you when it comes to franchise ventures, as the business has shown itself to be previously successful and forged out a specific concept. From customer service to the foods served, operation facets to atmosphere, you’ll have a roadmap of sorts to get your business off the ground.
Franchisor Support
As a franchisee, you’ll be given a variety of materials and assets that independent restaurant owners don’t get. From advertising and marketing help, to customer support, to training seminars, you’ll have a variety of resources to draw from, there for you from the get-go.
Securing Investors
Luckily, financing for franchise ventures are relatively easy to come by. Private lenders and banks alike are often approached by those looking to succeed with restaurant franchises. As they’ll likely have a good handle on the real estate, equipment, and day to day operations that come along with such a proposal, convincing private investors of your potential is a much easier task. Similarly, franchise investments tend to have a fairly high return rates, which can be extremely attractive to investors who have run this particular gamut before.
Buying a restaurant franchise might be the perfect business endeavor for you, but it’s essential to have the proper education and knowledge about the industry before diving in head first. While franchise ventures are generally considered to be a safer bet than starting a business from scratch, it’s definitely riddled with its own risks so do your homework on the franchise sector.
