Restaurants are some of the most well-known types of franchises — and for good reason! Quick-service restaurants across the United States provide customers with a high-demand product that is convenient, affordable and tasty. Drive through any town in the U.S. and you’re bound to see a McDonald’s, Sonic or even a Panera; visit a few bigger cities and you’ll find Buffalo Wild Wings, Cold Stone Creamery and Bruegger’s.
Many small business entrepreneurs have found that the franchise restaurant business can be very rewarding and profitable, but it takes a particular person with the right skills and aptitude to make these businesses thrive. Below is a list that every restaurant franchisee owner knows to be true, things that set their business apart from the competition and ensure their dining room (or drive through) is full of happy customers.
High demand
Franchise restaurants carry a lot of brand recognition, which has trained consumers to look for quick-service franchise food outlets. I remember driving across the country and looking forward to McDonald’s for lunch in Arizona and breakfast in California. The fact that I was visiting two separate restaurants in two separate states, each operating independently of one another, is one of the reasons why entrepreneurs often choose to invest in a restaurant franchise in the first place. The ability to provide restaurant customers with a consistent experience, regardless of location, is an extremely valuable feature that franchisors bring to the table.
Consumers are now spending as much as they did before the recession hit on away-from-home food, with the average American household spending 5.2% of their yearly expenditures on it. Eliminating the sense of unknown drives a significant amount of customers into restaurant franchises. You can visit any McDonald’s and, minus minor regional menu preferences, the experience will be consistent at all locations. Staying consistent with the overall franchise brand will create a high-demand for your food offerings because they will always appeal to consumers.
Zoning + code compliance
One of the main things you should be aware of are the extensive zoning and compliance laws put in place for food products. Complying with regulations is an on-going process and is absolutely necessary to be successful.
Almost every food franchisor provides assistance and guidance to new restaurant franchisees, whether it is an online class or a guide with a pass/fail test, so that your location runs smoothly without any issues.
Stay informed about trends
Depending on the type of restaurant franchisee you are will impact the type of trends you need to stay abreast of. For example, if you run a quick-service bakery, such as Cinnabon or Auntie Anne’s, you should be aware of how health concerns are impacting nutrition and obesity policies in your area. In New York City, quick-service restaurants are now required by law to post calories on the menu in order to create awareness among consumers. To keep health-conscious customers coming into your restaurant, you may want to change up your menu slightly, adding sugar-free or gluten-free options.
On the flip side, you are a business and your success is based on bringing people into your restaurant. There are a lot of franchises out there that cater to indulgences — and their customers don’t want them to change. Cinnabon did research around their signature 880-calorie pastry and whether or not customers want them to use less-fattening ingredients. While there is a definite health-conscious movement going on, Cinnabon’s research showed that customers strongly opposed changing the pastry to make it healthier and, thus, the company decided not to change the recipe.
Low margins
The cost of running a restaurant franchise is much higher than a service business because your margins are lower. Let me clarify that low margins do not equal lower profits, by any stretch of the imagination.
When calculating your net profit margins (profit margins before taxes, depending on your restaurant type) divide your costs into three main areas:
- Food and beverages: these are the cost of preparing meals, as well as coffee, tea, milk, fruit juices and alcoholic drinks.
- Salaries and wages: this includes regular pay, overtime, vacation, benefits, commissions and bonuses.
- Occupancy costs: rent, taxes and insurance.
Being part of a franchise will help you ensure you have a positive profit margin when you first start out. They will most likely help you secure a good location at a reasonable rate, hire/train and motivate employees and provide you with effective marketing collateral. Slow and steady wins the race is something restaurant franchisees need to be prepared for as it takes longer to grow your profit margins.
Restaurants that take advantage of social media, mobile phone apps and online review sites can increase their profitability significantly. As more and more consumers rely on new technology to determine where to eat, the restaurants that use these platforms will stand out from the competition and win more customers.
Hands-on work
Most restaurant franchisees wear many hats: they handle all the finances, manage staff schedules, place orders and even work in the kitchen. From customer service to cleaning toilets, nothing is out of the realm of responsibilities for an owner.
Customer relations isn’t a department
Unlike a large corporation, restaurant franchisees don’t have the luxury of a separate customer relations (or service or support) department. While your franchisor sets PR at a national level (securing spokespeople, etc.), managing rude customers and online reviews is your job.
Location limits
One big difference between a franchise and a small business is that a franchise has limits on where it can be built and where the owner can even advertise. As a franchisee, you need to stay within your territory when it comes to local business marketing, which is why online marketing is so popular with restaurant franchisee owners.
Watch for hidden costs
Every restaurant franchisor knows there are hidden costs to every business. Just like a new car isn’t just one car payment but insurance, inspections, gas, oil changes and general maintenance — make sure you plan for these hidden costs.
There are hidden costs that your Uniform Franchise Offering Circular won’t show you, these can range from rent and utilities to life and disability insurance for your employees. Whether you are looking into investing in a franchise or already have made your investment, learn more about hidden costs by talking to other franchisees. LinkedIn is a great resource where you can network with other franchisee owners and learn from their experiences.
Cash in on local online marketing
The Internet has changed the way that customers engage with restaurants and brands. Your customers now expect you to be everywhere online (social media, review sites, websites, apps, directories, etc.) and provide them with options to make their visit more efficient and to make decisions before they walk in the door.
An article in Restaurant Hospitality describes the five ways that technology influences consumer expectations:
- Customers want seamless ordering
- Customers judge a restaurant based on its website
- Customers want shorter wait times
- Customers look on a restaurant’s website for usable information
- Customers look online for deals
Most likely, your franchisor has an online marketing strategy in place that includes overall branding on social media and with advertising/promotion. You should check-in with your franchisor to find out if their online marketing plans cover local — or just national. Local online marketing is often left to the individual restaurant franchisee because it promotes a specific location (yours) directly to qualified buyers in a targeted region.
Local online marketing is great for the restaurant franchisee owner who wants to take elements of marketing into their own hands. Certain parts of local online marketing actually are best managed by the individual location owner — after all, who better to manage marketing efforts like social media, review sites and directories then the actual business location that customers are engaging with? Check in with your franchisor on if they allow you to manage your location’s local online marketing and if they have any strategies in place already.
Many franchisors keep a tight leash on what they allow individual franchisees to do in regards to marketing, simply because they want to keep the brand consistent (understandably). However, at the same time, franchisors do have limited resources and I have never met a marketer who would turn down extra help — so reach out and ask if you can take on your own local online marketing. There are lots of franchise marketing tools, LocalVox included, that manage local online marketing at the brand and location level, a win-win for franchisor and franchisee.
Anytime someone takes on a new business venture there are seemingly minute details that they just don’t know from the start, hopefully this list opens up the eyes to any prospective or new restaurant franchisee owners to the obstacles you may face.
Not every single one of these need to be a challenge or dilemma, with LocalVox you have a simple, effective and affordable online marketing platform, specific to local businesses. You can use it to build your online marketing strategy to engage consumers in your area. From local SEO to reviews, LocalVox can help spread your brand message across every online channel with the touch of a button. Learn more about LocalVox.
What did you wish you knew when you opened your restaurant franchise location? Let us know in the comments below.☟
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