The Basics of Restaurant Franchises
The practice of the right to use a firm’s business model and brand for a prescribed period of time is referred to as franchising, wherein the parties involved in this practice are the franchisor, who owns the business model, such that his franchising business is a resulting alternative to building a chain of stores to distribute goods that avoids a huge investment and having the liability of each chain store, and the franchisee, who purchases the right to use the franchisor’s business model or franchise.
In order to under this restaurant franchising business, the following are pertinent facts presented for better understanding of this kind of industry.
All franchises are chains, but not all chains are franchises, in which case, if a restaurant chain is owned by a single proprietor company, it is not a franchise, but if a restaurant is both a chain and a franchise, you can buy individual units of the restaurant.
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Restaurant franchises come with a hefty price tag, due to the fact that the franchise is an established brand and is popular; an example of which is that Dunkin’ Donuts requires prospective franchisees to have a minimum of 1.5 million dollars net worth and $750,000 in cash reserves.
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For to qualify in restaurant franchising, one among the requirements is a previous restaurant or other business related experience, before you are allowed to represent the franchisor’s brand.
Requiring for multiple locations from the prospective franchisee is usually considered a viable investment deal by the franchisor, an example is Pizza Hut and Taco bell require a minimum investment of three new restaurants in different locations within three years.
Part of the hefty investment in restaurant franchising is due to the fact the most restaurant franchises provide turn-key operations, meaning the kitchen layout, dining room design, menu, and even the market promotions are all done for the prospective franchisee as part of the franchisee’s franchise purchase.
Because consistency is the key to restaurant franchises, there are stringent rules which will have to be observed by the franchisee and staff in order to keep everything consistent across each unit.
The following are the types of franchise ownership: single unit franchise, multi-unit franchise, area developer or master franchise.
With the emergence of software technology, even the franchising industry is provided with software applications, such that a franchisor may avail of these applications to improve related and reporting efficiency in his franchise operations, and, at the same time, receive the following software solutions, such as: integrating vendor systems, incorporating website commerce, integrating shipping solutions, provision of common franchisee operating and reporting functionality.
Restaurant and franchise operators can also benefit from centrally hosted applications that efficiently consolidate and analyze operational data and automatically alert management to issues that require attention, such that the data input are turned into actionable information distributed via reports, dashboards, or mobile solutions.