How to Select the Best Restaurant Franchise for You

If you have weighed the pros and cons of restaurant franchising and decided that you want to pursue it further the next step is to determine which franchises are going to be a good fit for you.

This may sound like a difficult task but in fact it isn't that complicated. While there are well over 400 different restaurant franchise concepts available there are some starting criteria you can use to quickly narrow the list down:

Most of these are obvious qualifiers but let's run through them.

First, most franchises have both liquid capital (money you can get your hands on such as cash, stocks, bonds, etc.) and net worth requirements (the value of your total assets minus whatever debts you have) that you either meet or you don't. If you are within 10-15% of the requirement for a franchise you really want they may work with you but if you are off by more than that you are out of luck unless you bring in a partner or co-investor.

Next, not all franchises are looking to open locations everywhere- most expand first in one region, then the next and so on. It is too difficult to support one location on the East coast, two on the West coast, one in the South, etc. A quick call to the franchise will let you know if they are considering you area for expansion.

Third, most people have their own preferences on what they want to open which helps narrow the list.

Finally, not all concepts will fly in all markets. Just because there is no Cajun place in your neighborhood doesn't mean you should open one. You have to find a concept that will be attractive to the people in whose midst you plan to open your restaurant.

Once you've narrowed your list, then you want to rank your choices according to which one is going to be the best investment. Generally, you can fit the franchise concepts into three categories, roughly based on how many units they have and how long they have been franchising. The biggest and oldest concepts are usually (but not always) the least risky because they have the most momentum and recognition behind their brands. Conversely, the newest concepts have little to offer in the way of brand value or proven operating systems.

Therefore, all other things being equal, you should pick the best known and biggest brand from your list that fits your market and your investment.

Of the top tier franchises there only a dozen or so which could be considered a household name around the country and maybe a dozen or more in various regions with enough name recognition to provide the brand value that is a no-brainer. These are franchises run large and consistent marketing campaigns and where she said the name most people would be very familiar with the restaurants and probably have been a customer at some point.

These restaurants are also generally at the top of their market in the category that they compete in which means is an independent could be very difficult to displace them. f you were comparing opening Joe's burgers versus opening a McDonald's, for example, you can be almost certain that the McDonald's will do significantly more business than Joe's assuming they offer about the same menu at the same prices. That's the value you're paying for becoming part of one of the major brands.

This still doesn't mean necessarily that for your specific location and situation that you be better off running a franchise than an independent restaurant. The only way to know for sure is to run your financial software through both scenarios and see which one works out better. The royalty you pay, while sounding like a small number, comes from your gross sales. When you work out the actual impact on your profit it becomes a much larger number- in some cases 50% or more of what you would otherwise keep yourself.

The mid tier brands may or may not be a good fit. While the name may not be a household word yet concept itself may be attractive and quickly growing. You could in fact be getting in on the ground floor of a concept that soon becomes the next McDonald's or Subway. On the other hand, you may end up paying hefty share of the profits to the company that has little or no value for those payments once you've benefited from the initial startup help. The only way to determine whether or not the brand it could fit in worth the money in your area is to do your market research to figure out if this is something that will resonate with customers in your area who would be the target market.

The brand-new concepts that are offering franchises are in many ways the most risky bet. They've had the least amount of operating history on which to base their system that you are paying money to copy. They are also likely to have the least thorough training program in the least amount of marketing support and help. They will also, by virtue of the fact that they simply haven't been around very long, and little brand equity to offer. If you are an experienced restaurant manager or owner already and you'll be locating your franchise near to where there are already existing operations so that what brand equity there is has a chance of reaching you then this could still work. On the other hand if you're brand-new to restaurants in your location will be in a different city or even a different region from the current units that it will be hard to justify the additional cost of owning a franchise compared to simply opening a similar but independent concept instead.

The main considerations when trying to determine which franchise to select are the following factors:

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