Buying a restaurant franchise presents a great opportunity for many wanna be restaurant owners that just aren’t sure how to start their own restaurant.
Let’s face it, it’s a lot easier to buy something that already exists than to build it from scrap. The same thing happens with food franchises.
You’re practically buying a name that’s well recognizable and has already a significant number of customers.
However, owning a food franchise has its disadvantages as well. Read further to find out more about buying a restaurant franchise and things to look after.
Difference between a franchise and a chain
In order to buy a franchise, you must first understand what is and isn’t for sale.
For instance, Starbucks is a chain and not a franchise, meaning you can’t open a Starbucks with your own investment.
It’s corporate owned unlike Subway which is a franchise and with the initial investment, you can open your own.
Buying a restaurant franchise is costly
If you were wondering how much does it cost to open a franchise restaurant, the answer is- Not cheap.
It varies from different franchises but the most common pattern is that you must have a substantial amount of liquid assets and net worth to get in the business.
Pizza hut requires minimum net worth of $700,000 and minimum liquid assets of $350,000 while KFC demands minimum net worth of $1.5 million and minimum liquid assets of $750,000.
As you can see the figures aren’t small. If you can’t come up with the cash upfront or take a loan you can forget about owning a food franchise.
For the exact amount of funding to buy a specific franchise, here is a detailed restaurant franchise list.
Make a business plan
This is one of the things to help you get a clearer picture of your future enterprise.
Market research for the perfect franchise concept, choosing the best location depending on the population of the area and the presence of other restaurants etc.
Those are just some of the things to look after. You should also consider investigating the franchise’s history and find out how lucrative the business really is.
If the predicted period of the investment return ends up being longer than expected, choose another franchise.
Rules to obey
In the final stage of buying a restaurant franchise, you’re going to have to sign a contract that will oblige you to all sort’s of things.
For starters, on top of the initial investment, you’re paying up to $50,000 in franchise fee and up to 12% of the gross sales (depending on the franchise you’re buying)
On the other hand, you don’t have to worry about advertising because that’s already included in the fees you’re paying
The contract may include other obligations such as the commitment to open a couple of restaurants on more locations in a few years or that you can’t even get a franchise if you don’t have the experience in the restaurant business.
Keep in mind that you won’t be able to offer any special meals and drinks that the franchise doesn’t approve and they usually have pretty strict rules about that.
Most of the franchised restaurants are fast foods anyway so at least you won’t spend much money on wages regarding the fact that the price of labour in such establishments is pretty low.
Since it is a big investment and there are a lot of legal procedures it’s a good idea to hire a lawyer to help you protect your interests in this matter.