HomeGetting StartedMUST Read Pros & Cons Of Owning a Restaurant Franchise

MUST Read Pros & Cons Of Owning a Restaurant Franchise

When people think of restaurant franchises, names like McDonald’s, Domino’s and Subway often come to mind. A franchise business is something we are familiar with on a surface level, yet there are many common misunderstandings regarding it. There are many things that business owners still don’t understand about restaurant franchises.

You’ve come to the right place if you want to learn all about the franchise business. Read this blog till the end to clear all your doubts.

What is a Franchise?

A business owned by one or more persons that sell the parent company’s branded goods or services according to the franchisee’s established procedures and guidelines is known as a franchise. The franchisee pays the parent company a fee in exchange for the company’s help with marketing and supplies.

Franchises are defined by the International Franchise Association as a “method of distributing products or services involving a franchisor, who establishes the trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system.”

Now that you understand what a franchise means and how it works, let’s move to the pros and cons list to further understand if getting a franchise business is worth your time and money or not.

Pros of Owning a Restaurant Franchise 

1. Ready-Made Brand

The number one benefit of owning a franchise business is obviously the brand recognition that you get beforehand. Most start-up businesses spend a fortune & years trying to build a brand for themselves so that they can increase their sales. But in a restaurant franchise, you don’t have to build your brand from scratch. 

You get an established name already attached to your business, allowing you to focus entirely on its smooth operations and long-term sustainability.

A restaurant franchise owner has to follow the business model provided to him/her by the parent company.
Pre-established and fixed business models are helpful but restricting at the same time for new entrepreneurs.

2. Business Model

The franchisors provide extensive guidance to franchisees on how to run their businesses properly. This advice will be far more beneficial to entrepreneurs than you might think. The parent companies supply the entire strategy, from inventory management to sales and waste management. Franchisers also take care of marketing strategies. 

Start-up owners, on the other hand, expend the majority of their energy attempting to figure out the entire business process. Investing in marketing is also a major headache for many businesses because revenues are so minimal in the beginning. It takes a significant amount of time for any new company to standardise a viable business model.

3. Profits

Profit margins are typically higher for franchises than they are for independently founded enterprises. The majority of franchisees have well-known brands that bring in large numbers of customers. This popularity leads to increased amounts of money made.

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Even franchises that demand a large initial investment for the franchise fee can generate a substantial return on that investment. 

4. Network 

This is yet another fundamental reason why independent business owners opt to invest in franchise enterprises in the modern era. When compared to launching a company from scratch, the risk involved in purchasing and operating a franchise is significantly lower. 

They are able to make use of the network that the parent company has established in a given city, which enables them to obtain their goods instantly at competitive prices and eliminates the need to shop around with ten different vendors.

We know that you are already browsing the internet to find the top ten franchise businesses available for you to buy. But, before you dive into the restaurant franchise craze, read the list of cons first.

Employees  preparing customer orders in Domino's Pizza, a popular restaurant franchise.
Hiring the right employees for your franchise business is very crucial for its success.

Cons of Owning a Restaurant Franchise

1. High Initial Investment

It’s easy to get carried away with a brand’s familiarity. However, you must understand and think about the amount of money you will be investing in a franchised firm simply for the brand’s previously established name. Franchise costs for major companies such as McDonald’s and Subway are between INR 30 and 50 lakhs or more. 

This is a non-refundable fee that you must pay to the company before purchasing their franchise. In addition, you will need to spend extra money to furnish the space with the necessary tools and equipment.

2. Fixed Model

It is possible that acquiring a business model that has already been established and is successful will make you feel happy. Yet, if you are not given any type of independence to employ your own creativity in the management of the business, this could make you feel restricted.

You will be required to adhere to their model, their ideas, their designs, and their ways of doing things. This encourages uniformity but eliminates individuality.

Subway is a popular restaurant franchise in India
Often the most popular restaurant franchises will be equally expensive to acquire & manage.

3. Contractual Problems

You will be required to sign a document outlining your rights and responsibilities as a franchisee when you agree to purchase a franchise, such as a Franchise Disclosure Agreement. If you fail to comply with any of the various regulations, you risk having to shut down your company completely. 

Alternatively, if you decide you no longer want to be in this business, you will find the process of closing down much more complex than starting the business.

It can be a difficult endeavour to devote one’s time, effort, and financial resources to the ownership of a franchise (or any other type of business). Before you go ahead and purchase a franchise, you should first make sure that you have a clear understanding of why you want to own one.

Although the ownership of a franchise might appear to be less frightening at first appearance, any business owner worth their salt knows that there are always challenges to overcome.

Hope this helps. Follow us on Instagram for more restaurant updates!

Kushank Joshi
Kushank Joshi
Kushank is a content writer for Petpooja. He thinks he has a good sense of humour, but he constantly cracks lame jokes while sipping his tenth cup of chai for the day. You can contact him at kushank.joshi@petpooja.com; he's fun to talk to (minus the jokes).

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