If you’ve already looked into becoming a franchisee for a major restaurant chain, you’ve probably learned that starting a franchise involves making a significant initial investment. With restaurant chains requiring so much from their new franchisees, you might be asking yourself whether that money should be invested in a restaurant of your own instead. After all, there’s certainly an allure about bringing an all-new local restaurant into existence and then growing it into your own chain over the years. However, if you’re trying to take the most lucrative and enjoyable route, there a number of factors worth considering before you make the final decision. So, here’s how franchises compare to independent restaurants in three key areas of business setup:
1. Learning Curve and Effort
Starting your own restaurant can involve a serious learning curve, especially if you don’t have much experience in restaurant management or the hospitality industry in general. Even if you’re an expert chef or former kitchen manager, you’re still going to have to put in long work hours in the beginning to get the place up and running right with a well-trained management staff. You’ll have to create your own menus, establish protocols for food preparation and delivery, and create an entire system for your new restaurant to run on. On the other hand, if you choose to own a franchise instead, most of the aforementioned challenges will be taken care of for you.
Chain restaurants give their franchisees all the materials and resources they need to easily open and start running a franchise without too much innovation or hands-on involvement necessary. When you start hiring managers and employees for your chain restaurant, you’ll probably encounter applicants that have worked for, and maybe even managed, another franchise in that same chain of restaurants, so you’ll instantly have access to prospective employees that know exactly how to operate in your new place of business. For example, if you open a Checkers Burger franchise and start searching for a manager to hire, there’s a chance you might encounter quite a few applicants that have worked for Checkers or similar burger joints in the past.
2. Advertising and Publicizing
Starting an original restaurant that no one has ever heard of will undoubtedly involve a great deal of marketing and advertising to get the name out there. You’ll have to pay for advertisements out of your own pocket, and chances are your marketing efforts won’t be nearly as effective as the ads run by restaurant chains. Furthermore, restaurant chains advertise nationwide, whereas a single restaurant can only really target a specific region. That means that people passing through your area on the freeway will already know about the food deals your franchise is running.
One of the reasons why fast food chains and steakhouses have been so successful is because people trust food from companies they know. It’s the same reason why grocery stores around the country are filled with the same brands. Most people don’t want to veer too far into the unknown when it comes to food, which is why brand trust is so essential in the food and restaurant industry.
3. Profit Potential
Finally, the one question you’ve probably been pondering the most is, “which one will earn more profit, a franchise or your own restaurant?” Franchises are built on sustainable business models that have been combed through, analyzed, and revised by experts hundreds of times over. One thing is certain, if you follow the franchise model, the business will most likely be profitable in the long-term. The same cannot be said for independent restaurants, which are plagued by a very high rate of failure in the first 5-10 years – nearly 70% of restaurant startups will go out of business in the first decade of operation.
There is a flip side to the coin though – if your independent restaurant has what it takes to takeoff and become a chain of its own, then of course you’ll wind up with fatter pockets in the end, but the chances of that happening are very low in comparison to the chances of successfully running a lucrative franchise for an established chain.
Overall, starting a franchise is much easier and less risky than starting your own restaurant. On the other hand, if you have a lot of time (at least 60 to 80 hours a week) to devote to opening and establishing your own personal restaurant, and you have enough experience in the backend restaurant operations, starting an original local restaurant can be a fulfilling endeavor as well, albeit a riskier one.
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