What to Consider Before You Franchise a Restaurant
Restaurant franchising has increased over the last decade with a 34% growth in Quick Service Restaurant franchise listings in just a five year period alone according to the 2019 Franchising Trends Report from the CFA. As the population continues to express interest in restaurant ownership for already proven brands and concepts, the growth increases.
Many restaurant brands we begin working with have a long term strategy to franchise the concept before the business model has even been proven in the marketplace. It is effective to identify this as a long-term growth strategy when beginning to build a restaurant business model and brand, as it inevitably impacts all of the decisions you will make about restaurant size, menu, pricing, supplier choice, etc.
But let’s face it, we don’t always we know we have a winning concept that is scalable in the beginning. Just because you’re having success with two different locations doesn’t mean you can (successfully) make the jump to a franchise, at least not without a little bit of help. Your goals must be reasonable for them to be achievable, as you are responsible for the growth.
No longer will your priority be on driving one successful restaurant location, but now you will be responsible for continuing the development of the brand you’ve created by driving new and exciting things to refresh the brand and avoid going stagnant in an ever-changing industry.
“In the restaurant sector, 35% of all sales are from franchise operations”
Our Vice President of Western Operations, Alex Fraser, has years of experience leading and supporting restaurants expanding into a franchise model. Alex’s hospitality career began 25 years ago, working as a chef, and he has now facilitated the opening of over 35 restaurants throughout Canada, including a partnership with world-renowned chef Wolfgang Puck.
Alex shares what to consider before you franchise a restaurant.
15 Group’s client West Village Cafe is a franchise in Vancouver. Photo: West Village Cafe Instagram
Is your business really prepared to franchise? Being busy or successful in one or two locations isn’t enough to make franchising the right next move.
Success in one or two locations is just the beginning. You are now starting a new company in a head office, and you need to develop the criteria to enable you to potentially franchise. As you begin expansion, you will still need to grow your existing locations, so ensure you have a strategy in place on how to manage in your existing business through the expansion.
Reflect on each current business and do an overall evaluation and assessment of the entire operation – from systems and procedures, guest experience, location overview, and analyzing your P & L statements, like a potential investor or franchisee would do. This is the time to tune up each location before going to market for expansion.
This is also the time to start building the operations, systems and procedure documents that will be included in the franchise agreement.
Identifying goals for the structure of the franchise agreement and balancing your expectations as well as the new franchisees will be key to positive growth.
Do you have the right infrastructure at the head office to be successful?
Once you have decided to explore the franchising route for your brand, building the right infrastructure in both the new company and the existing locations will be very important.
Begin by considering if you are the right person to build the franchise strategy, or if you need someone to help build and execute the strategy.
Then develop roles and responsibilities to facilitate the growth strategy and manage the relationships with the franchisees.
Review how your team is built, the supporting roles, and where there are potential gaps in the team structure that could impact expansion.
The more prepared and well-trained your team is to support the growth strategy, the smoother the transition will be for your business and your new franchisees.
Choosing a Franchisee: Look beyond the financial strengths.
Choosing the right person or group to consider as a franchisee is hugely important when growing your brand, and it can’t just be because they have adequate investment or financial strength to do so.
Consider these critical factors when reviewing your franchisee applications:
What is their reason for wanting a franchise – is it to retire and make a lot of money, or is it a hobby for them?
Will they be working in the location each day? This is an important step to understanding what their goals are in starting a franchise of your brand.
Do you share similar business values?
Is their business acumen as strong as it needs to be to operate a store?
Can you see them representing the brand with integrity?
Will they take direction from head office well?
How involved or not involved in the day to day operations will they be?
Develop a Strategy that’s achievable and responsible for proper growth.
Determining what your goals are as a franchisor, along with creating an attractive franchisee model, is the right balance to strive for.
The growth strategy should be one that is built from growing the brand responsibly, to the core values that makes the brand so special to begin with. Controllable, sustained growth models build scale the proper way; controlling quality, choosing locations properly, building interest in the brand, creating and understanding new advertising and marketing plans, and getting quality metrics on each store’s performance on a daily, weekly and period based cycle will yield stronger future results.
Don’t forget that the original concept stores still need attention and continue to develop, update and change the brand offering to be ahead of market needs.
Once you’ve built the head office, and established the roles, make sure that the original locations are still getting the attention they deserve, as the success of these businesses is what led to you franchising.
Your originals locations are a representation of the brand for new potential franchisees, so they have to be operating efficiently, profitably, and be ‘on brand’ for everything that is benchmarked for quality and standards. This also relates to the physical store’s atmosphere and cleanliness of the environment. Look for opportunities to evaluate the original stores on conceptual, operational, fiscal and profitability metrics to ensure the brand stays relevant.
Lastly, if you are considering franchising a current brand, or looking to develop one that is franchise-able, call us, we can help identify next steps, and help create a successful franchise concept and strategy!
Alex Fraser, VP of Western Operations
afraser@thefifteengroup.com