When it comes to opening a restaurant franchise, you cannot just rely on the information passed on at the gym, the casual diner or between holes at the golf course. There are common myths that may set up a franchise for failure. This usually happens when you start the franchise with high expectations only to realize it is not what you had anticipated. It’s important to do a little research about the restaurant business and weigh the pros and cons. With that in mind, below are some myths about starting a franchise in the restaurant industry.
1. You will be your own boss
Without a doubt, opening your own franchise has its own benefits but you will have to play by the rules provided by the franchisor. You will have to adhere to their hours of operation, use their approved supplies and equipment and even marketing materials. This means that you will not be at liberty to close and open as you wish.
2. Your franchise is a guarantee to success
The number one reason as to why franchises are successful is because they have rigorous requirements. For example, the capital required to start a franchise in the restaurant business is quite substantial. Some restaurant chains may require a very high amount of capital and only serious entrepreneurs would consider signing on. The truth is that you will not generate a profit immediately. The business still has to pay off royalty fees, investment, etc. The number one reason as to why franchises fail is due to under-capitalization and failure to follow the system.
3. Starting your own restaurant is more expensive than a franchise
This is actually not true because the cost of buying a franchise is more or less the same as starting your own restaurant. It involves a lot of things such as paying franchise fees, royalty fees, supplies and equipment and real estate. The cost of all these things will be deducted from your profits. This might sound a little discouraging but the key to managing a lucrative restaurant franchise is to find the right restaurant concept. For instance, would you like to venture into fine dining, fast food, food truck, pop up restaurant, etc?
4. You need to be rich to invest in a franchise
Opening a franchise can cost anything from tens of thousands of dollars to hundreds of thousands but this does not mean that you need to have a bank account overflowing with money. There are many ways that you can finance a franchise. For instance, you can finance using small business administration loans, personal loans, home equity loans or self directed loans.
5. All chain restaurants are franchises
Most people take their business proposals to chain restaurants with the assumption that they are franchises only to be surprised that they are not and they do not franchise. Chain restaurants are known to operate using two models. The first one includes hiring managers to run corporate owned locations and the other one involves selling franchises. They can choose to use either one of the two.
6. Running a franchise is easy
The truth is there isn’t a business venture in this world that is easy to run. Restaurant franchises offer terrific benefits in terms of ongoing campaigns, a working infrastructure and established recognition but they are not free from the ups and downs associated with the restaurant business. As a restaurant franchisee, you are accountable for the financial losses and success of your business. If the restaurant experiences a drop in sales over one month, not only will you provide an explanation to your franchisor, but you will have to deal with loss of revenue.
7. Owning a franchise means you won’t mingle with employees
This is not true because chances are you will end up spending some time with your employees to make sure things go smoothly. For example, if you find the parking lot is unusually full, your employees are working at their maximum yet food, and drinks are completely backed, you may have to jump in and start making drinks to make the surplus customers happy.
If your goal is to manage a multi-unit restaurant franchise, then you will have to employ a team of managers and develop excellent communication strategies. In a nut shell, it will not all be about running things from the office.