The purchase of a franchise – any franchise presents itself with both advantages and disadvantages. Many of these so called “advantages” and “disadvantages” are similar between different types of franchises. However‚ when dealing with the purchase of a “restaurant” franchise‚ prospective franchisees must be aware of unique factors particular to the restaurant industry.
A recent article in Food & Drink Digital addresses some factors that prospective restaurant franchisees should evaluate and consider when purchasing a restaurant franchise. In the article the author lists the following factors/considerations [I have included my comments after each point].
Advantages of a Restaurant Franchise
A Well Established Name
Most franchise locations have a well known and established name. This is especially true of restaurant franchises. From people on lunch breaks to those traveling to the person having a craving to eat the franchised company’s food specific food franchises are usually well known enough that people already know if they want to eat the product. The only major thing that must be considered is the most beneficial location for the restaurant franchise.
[My take: Don’t “overestimate” the value of a franchisor’s trade name. Sure there will be significant brand recognition if you are dealing with a well known and established restaurant or food service business such as a McDonalds ®‚ Dunkin Donuts ®‚ or other established national or regional franchise. However‚ the vast majority of restaurant franchises involve regional franchisors who still have a long way to go in establishing brand recognition. So‚ don’t overestimate a potential franchisors fancy trademarks and trade dress]
Financing
Funding for food operation businesses is usually simple with banks because they typically know what is involved with opening a restaurant therefore the bank knows exactly what to look for to make them feel comfortable approving the loan.
[My take: Financing is never easy and in today’s economic climate no matter what franchise you are buying‚ always assume that bank financing will be difficult. Chances are that your best source of financing may come from an equity loan on your home. If this is the route your are taking – proceed with caution]
Training and Support
The amount of training and support given by a good restaurant food franchise businesses is valuable.
[My take: This is true. But every franchise is different. Some franchisors offer valuable and thorough training and others completely “drop the ball” when it comes to training. Do your research]
