Steps to Take Before Buying a Restaurant Franchise
So‚ I am not being negative here and I am not opposed to restaurant franchises but for those of you who are considering the purchase of a restaurant franchise you do need to consider and evaluate some important points. The biggest point being – as Joel Libava puts it – that Quick Service Restaurant (QSR) (think: McDonalds‚ 5 Guys Burgers and an assortment of other established and start-up restaurant franchises) franchises just may be the “Toughest Franchise Businesses in the World”.
So why do I bring this up? Well this afternoon I was speaking with a very upbeat client who recently closed one of his restaurant franchise locations (it was a fast food / QSR tye of restaurant). He was ok with the closure since he operates multiple units and the one he sut down was a questionable operation that he took over with low expectations. His other units are doing well. For this client – a multi-unit operator – this one closure is not the end of the world. However‚ there are many single-unit operators that cannot afford a business closure and many of these single unit operators did not adequately evaluate what it really meant to be establishing and operating a restaurant franchise.
If you are considering the purchase of a restaurant franchise I strongly recommend that you read Joel’s article. His advice is spot on. One observation that I can share with you is that before buying a restaurant franchise you need to differentiate between revenues and profits. That is‚ although your restaurant may be busy‚ it may not be profitable. Consider that the franchisor will be controlling your food cost which‚ in turn‚ will significantly impact your profits (just ask failed Quiznos franchisees). Joel makes this important point in his article and many others.
Look not all franchise opportunities are equal and as with everything in life there are successes and failures. To help balance things in your favor‚ before you sign a franchise agreement‚ evaluate your options and consider some of the points that Joel raises – THEY MAKE SENSE.