Understanding the Pros and Cons of a Restaurant Franchise

Some people see getting involved with the franchise as a sure thing business opportunity. It is however a business like any other and it comes with its own risks. The reason franchises tend to do better than independent restaurants has more to do with their requirements that whether or not they are actually better businesses.

For example, by requiring a certain level of net worth of liquid capital franchises are trying to ensure that undercapitalized restaurants aren't being launched. If there was a similar requirement for independent restaurants their failure rates also go down. In addition, much of the planning is required to be successful has been done by the franchise and independent owners performed a similar level of planning they would likely achieve a similar level of success but likely with greater profitability because they wouldn't have the expense of the franchise fee or the ongoing cost of royalty payments.

There is no question that there are pros to joining a restaurant franchise even if you aren't necessarily buying into the strongest top tier brand. The pros include:

There are also obviously cons to starting a restaurant franchise including:

Whether or not a restaurant franchises a good idea for you particularly hinges on a few important questions that depend on you knowing yourself well in answering these questions honestly:

How these pros and cons relate to your personal situation should be the determining factor in which route you choose for starting a restaurant.

If you decide to continue on the restaurant franchise path, make sure you take your time in carefully selecting a restaurant franchise (or more than one) that fits with your market and goals and then do a thorough investigation of any restaurant franchise you are considering.

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