Restaurant Clients: To Franchise or Not to Franchise?
Posted on: January 29, 2018 by RMS Hospitality Group
As we continue on in the new year, some of your restaurant clients might share interest in franchising their business. Not every restaurant model is sustainable in franchise form, and their success depends on a few different factors. In this article, we’ll provide some key insights into what makes a franchise successful so that you can share it with your interested clients. Keep in mind that this advice doesn’t take the place of protecting their assets and their processes with a Franchise Select Insurance program, but rather it should supplement it. In fact, a new venture that can expand their business and revenue has even greater reason to adequately protect itself.
Ask whether or not it will sell.
You can’t franchise something that’s just a great idea; start with a successful, operating prototype. Key selling points include credible management with food service backgrounds, differentiation from major marketplace competitors, a “sizzle” element that draws people to your brand and, ideally, queries from parties who admire your business and are interested in buying a franchise, recommends the National Restaurant Association.
The first step in any successful franchise is a proven track record of success. If the business still needs tweaking in any aspect – including management, processes, menu, and more – now is not the best time for your clients to realistically thinking about expanding. Instead, they should build upon an already successful model.
Is it scalable?
The more teachable the restaurant is, the better candidate it is for franchising. Essentially, your clients will need to clone their restaurant in as many more locations as they desire. (Ideally, they’ll start with one other location and wait to work out the kinks before moving forward with more locations.) Remind your clients to be realistic about their operation and determine which facets might be challenging to recreate, including:
- Systematic processes
- Resources available
- Operation style
- Training guides
Crunch the numbers.
Franchising might be a dream, but your clients need to crunch the numbers before choosing to franchise. Examine sales-to-investment ratios, food costs, labor costs, your overall prime costs and other figures important to affordability. This will give your clients an accurate projection on return on investment (ROI). Experts recommend franchising only if the ROI is at least 15%.
Gauge its probability of success.
Franchising requires a lot of moving parts. First, the demand for the product should be evaluated, followed by a review of the market. Next, identify exactly how many resources are available and if the right people are in place. Cloning a restaurant is going to take a lot of hard work and leadership, so your clients can evaluate their staff to see if they have a strong team to support this decision.
Once your clients can confidently answer these questions, they’re ready to move forward with the franchise.
About RMS Hospitality Group
At RMS Hospitality Group, our expertly crafted policies are written specifically for the hospitality industry. We offer custom tailored solutions to meet any venue’s specific needs. For more information, contact our knowledgeable experts today at (516) 742-8585.