A franchise with a proven track record will probably have a lower risk and should therefore be an attractive investment.
When investors are considering a franchise in the restaurant industry they should, however, evaluate the following pointers that could influence their decision:
- Making the cut as a franchisee gives you the confidence that you are making the right decision
You may think psychometric testing, three days in a restaurant following a franchisee around, and a panel interview with the senior management of the franchisor.
That is a bit over the top, but the franchisor that puts you through your paces and assesses your ability and commitment to running the business, is doing you a huge favour and may even help you see this is not for you.
It goes both ways, and after an intense courtship, you should know if you want to try a long-term relationship.
- Assistance with location selection and negotiation of the terms of your lease
One thing you can do to limit your risk is to not open a restaurant in the first place if your rent is not going to be reasonable or you simply won’t get customers through the door.
The franchisor will vet and approve the site – they will have extensive insight into what has worked or not worked location-wise for their brand, and can assist you to weigh up the area and it’s potential to attract customers.
The commercial terms of a lease is very important – you can’t be too ambitious about turnover targets, and having the backing of a franchisor can be beneficial if a landlord becomes unreasonable.
- Staff training and development tools on hand
Consistency is important with restaurant franchises, as a customer visiting a brand anywhere in the country, goes there knowing exactly what they are going to get.
This is best achieved with solid training, perhaps access to resources such as training videos, and regular visits from franchise managers.
You should check with your franchisor what level of training and franchise support you will have on an ongoing basis. Ask about the ratio of field trainers and operations managers to the number of franchisees in the group.
You want the franchisor in your restaurant in some shape or form, two or three times a month, whether it be the training manager, the regional franchise manager or the national operations manager.
- Access to supplier networks to manage your input costs
Negotiating basket pricing with distributors regionally and nationally, the franchisor will leverage their buying power on your behalf.
They should assist to manage your suppliers and make sure deliveries happen on time, and ensure that product quality remains consistent.
They can also negotiate to ensure your input costs do not increase before the next menu launch – so you can ensure your margins remain intact.
- Brand loyalty and locality marketing
When you buy a restaurant franchise, you gain a group of customers who know who you are, the food you serve and the way you make them feel.
The money you will pay towards marketing each month gives you insight into the broader restaurant market, the experience of what is working across a number of sites, and how best to keep the attention of new and existing customers.
Some franchisors offer locality marketing assistance – your site and area has specific needs that other outlets may not have, or there may be events in the area that can be leveraged to run special offers.
Ask if the franchisor offers this as a service, as it can assist you greatly to have an advantage over other restaurants in your area.
- Business development insights
The franchisor has access to insights gained across the group, and the systems that they have in place to track costs and increase profit margins, can be of huge assistance.
If you are looking for business support, a franchise manager can be the one sitting with you telling you that you spent R2,000 too much on cleaning this month or saying you need to wait till next month to make that purchase.
The level of business support you will have access to, is an important factor to consider, depending on the level of support you may require.
Recipe for success
Nine times out of ten, a restaurant franchise that fails, fails because the franchisee loses interest or lacks the commitment to make it work.
Selecting the best franchise for you as the investor, or as a restaurant entrepreneur, is the most important first step you can take towards success, so do the homework.
Don’t assume that because you are buying into a successful brand that it will be a success – business is not an exact science – you need to do your own due diligence and take responsibility for your business, because it is after all your own investment.