Top 5 things to Know about the Food Franchise Industry

Posted on May 27, 2011 by Eric Bell

When the average person hears the word franchise, a food franchise is usually the first thing that comes to mind. Nearly every town in America has a few chain restaurants or coffee shops, and they represent one of the most profitable franchise opportunities in the industry. While food franchises today are ubiquitous, most people still have plenty of questions about the specifics; to that end, here are five things you need to know if you're considering opening a food franchise of your own.

1. How Much Does It Cost?
   This is often the first question people have related to food franchises, and it's a bit of a complex question to answer. The cost of the franchise license is usually a static number, but the actual investment, or liquid capital, can vary greatly depending on location, size of the establishment and plenty of other variables. As a rule of thumb, expect to have between $150 and $500k in liquid capital, depending on the franchise you choose.
2. Ongoing Costs and Franchise Fees
   In addition to the initial startup costs (leasing property, purchasing equipment, etc.) most franchisors also require some ongoing fees. These fees cover things like advertising, product development and central management. The fees will vary depending on the franchise, so the only way to find out hard numbers is to do your research on the specific franchise you're considering.
3. Choosing a Location
   Location is one of the most important elements in a food franchise. Having your franchise on a busy corner can equate to massive profits. Many franchise restaurants have take the strategy of simply opening up across the street from another successful restaurant, but there is a lot more to consider in choosing the perfect location. Many food franchisors will have dedicated staff who are experts in franchise location, so if this is your first franchise, make sure you partner up with a franchisor that has plenty of experience in location selection.
4. How Long Does The Process Take?
   Again, there are a lot of variables involved, but typically (assuming that the real estate and location is all squared away) a food franchise can complete construction and be ready for a grand opening in as little as 5-6 months. Obviously, the more complicated the restaurant or location is, the longer is will take, but your franchisor will be able to give you firmer numbers as you get closer to making the decision to purchase.
5. Does (name of company) Offer Franchises?
   One of the most frequently asked questions about franchises is about whether or not a specific company offers them. Google can steer you in the wrong direction on this one, because many sites will pick up on the trend that people are searching for "starbucks franchise" for example, and then write some content to show up on that search, leaving you more confused than when your started your research. The best way to find a specific franchisor is to search through the franchise directory of a reputable franchise site. Here, not only will you find the answer as to whether or not a company franchises, but you'll also immediately get answers to several other questions like, "How much does it cost" and "is financing available".

There's a lot to learn about the franchise industry, and reading this article won't make you an expert, but hopefully this information will get you going in the right direction.