When I talk about running a franchise business, most people automatically assume that I’m talking about restaurant franchises. This is because most franchises in the food industry become extremely successful and in turn grow in number and popularity. It will be difficult to find independent restaurants due to the success of food franchises.
The best part is that despite the growing number of food franchises, buying a restaurant franchise is still one of the few opportunities close to being a guaranteed opportunity in the business world today. It’s true that there are a number of difficult issues that come with owning a restaurant franchise, but that’s true with any business. Here are the two aspects of owning a food franchise that show its advantages and disadvantages:
Advantages
- embedded demand – For years and years, people have been programmed to grab something to eat at a franchise food chain when they are hungry and away from home. This is a huge advantage for any start-up business. That’s years of marketing already done for you. The only thing you need to consider is the future of your product and whether there will be a demand in your local geographic area.
- Money – You can choose from several different outlets to find financing. When it comes to finding financing for a food operations business, the process is extremely easy and not that complicated. The reason is that banks generally know what is involved in opening a restaurant and are more comfortable approving loans. The high income generated by some of the food franchises doesn’t hurt either.
- track record of success – Since a typical food franchise has multiple franchisees, it’s easy to determine how successful they are or not. You can see if they have a track record of success along with where and what demographics are the most successful. With this type of information available, you can make an informed decision before making an investment.
- Prestige – Depending on who you talk to, people tend to think that all restaurant owners are socialites who also have a touch of glamour. There are many franchise owners who enter the restaurant business for this reason alone.
Disadvantages
- Labour – I’m sure you’ve noticed that most food businesses need a lot of employees to run smoothly and properly, and most of those workers are underpaid. That leads to a workforce of unreliable employees with a high turnover rate. Finding and keeping qualified employees is a huge challenge for a food franchise.
- low margins – The food industry is very sensitive to prices, even more so in the world of fast food chains. This leaves you with a fine line to walk with the cost of goods and labor and turn a profit. It’s true that food franchises often earn high revenue, but net margins are often overlooked. It is also susceptible to food spoilage and theft along with other problems only found in the food industry.
- Expensive initial investment – A food franchise will require a substantial investment on your part to get started. You have to pay for many items up front in order to run the business. You not only have to pay for food and labor, but also for ovens, grease removal, ventilation, furniture and maintenance, among many other expenses.
