When I talk about running a franchise business, most people automatically assume that I am talking about restaurant franchises. This is because most franchises in the food industry are wildly successful, and in turn growing in number and popularity. Independent restaurants will be difficult to find due to the success of food franchises.
The best part is that despite the growing number of food franchises, buying a restaurant franchise is still one of the few that is close to being a guaranteed opportunity in today’s business world. It is true that there are several difficult problems that arise when owning a restaurant franchise, but that is true in any business. Here are both sides of owning a food franchise that show both the pros and cons of them:
Advantage
- Built-in demand – For years and years, people have been programmed to eat something in a franchise food chain when they are hungry and away from home. This is a great advantage for any start-up company. They are years of marketing already done for you. The only thing you need to consider is the future of your product and there will be demand in your local geographic area.
- Financing – You can choose several different outlets to find financing. When it comes to finding financing for a food operations business, the process is extremely easy and not that complicated. The reason is that banks typically know what opening a restaurant entails and are more comfortable approving loans. The high income generated by some of the food franchises doesn’t hurt either.
- Success record – Since a typical food franchise has multiple franchisees, it is easy to determine how successful they are or not. You can see if they have a track record of success along with where and which demographics are the most successful. With this type of information available, you can make an informed decision before making an investment.
- Prestige – Depending on who you talk to, people often think that all restaurant owners are high society people who also come with a touch of glamor. There are many franchise owners who enter the restaurant business for this reason alone.
Disadvantages
- Work – I’m sure you’ve noticed that most food businesses need a large number of employees to run smoothly and properly, and most of those workers have low wages. That leads to an unreliable workforce of employees with a high turnover rate. Finding and keeping qualified employees is a major challenge for a food franchise.
- Low margins – The food industry is very sensitive to prices, especially in the world of fast food chains. This leaves you with a fine line to walk with the cost of goods and labor and make a profit. It’s true that food franchises often earn high incomes, but net margins are often overlooked. It is also susceptible to food spoilage and theft, along with other problems only found in the food industry.
- Expensive initial investment – A food franchise will require a substantial investment on your part to get started. You have to pay for many items in advance in order to run the business. You have to pay not only for food and labor, but also for ovens, grease removal, ventilation, furniture, and maintenance, among many other expenses.