Pizza and Burgers and Tacos, Oh My! - The benefits and challenges of buying a food franchise

Posted on February 25, 2009 by Jeremy Myers

If someone asked you to name your favorite franchise, would you think of a sandwich restaurant or perhaps a pizza shop? Food franchises are among the best-known businesses in America and have been a staple of our culture for five decades. If you’re interested in business ownership, chances are you’ve considered buying one of any number of food franchises. But would a food franchise be the best choice for you?


Beware: a food franchise can be much more difficult to run than other businesses for a number of reasons. Before you invest too much time looking at which food franchise to buy, take time to weigh the advantages and disadvantages of owning a food franchise to determine if you have the skills, finances and patience to be successful in this business.

Consider these issues as they relate to a particular food franchise:

Cost of Investment. Most food franchises require a significant investment to get started. First, you will need to lease a physical location in a high-traffic area with good customer access. Next, a franchisor will often require a specific design for your business and their specifications will need to be met. Depending on the business, you may need food preparation stations, ovens or grills, refrigeration, sinks and dishwashers, grease disposal systems and vents, customer seating and bathroom areas, just to name some of the possible expenses. Between your liquid capital and what you can borrow, it will cost you between $150k and $350k to open a Taco Time franchise and your investment for a Taco Bell will be over a million dollars.

Health Codes, Zoning and Permits. Complying with numerous government health code regulations can be very time consuming and expensive, if tackled on your own. A good franchisor should be able to help you navigate these issues.

Recession Resistant. Will this business survive a recession? During the current economic downturn, people are embracing the value meal menus on popular quick service restaurants but are avoiding more expensive establishments.

Low Ticket Items Means Focus on Volume. The net margins of most food businesses are not as high as many other franchise opportunities. When you consider the cost of the goods, the labor costs, food spoilage, and the competitive nature of fast food pricing, your markup per unit of food is small and you will need to sell a large volume to make a profit.

Ability to Adapt. During the low-carb craze, many businesses suffered or even failed because they weren’t able to adapt their menus to offer low-carb options. Similarly, if the public is worried about mad cow disease or bird flu or whatever, will the food franchise you join be able to offer alternative items?

Status. Many people consider owning a food business to be prestigious. If you can establish yourself as the proprietor of a restaurant you may feel you’ve achieved community status. However, the reality is that you may be cleaning grease traps while managing employees with poor communication skills. If your goal is status, choose your franchise carefully.

Immediate Customers. On the positive side, people need to eat and they’ve become accustomed to looking for food franchises when hungry. This can be a big advantage to a new franchisee - no need to convince people to try your product. On the negative side, there are a ton of quick service restaurants and you will have a lot of competition for that lunchtime crowd.

Proven Operations. The best way to determine if you could be successful in a particular franchise business is to talk to franchisees in the system. A well-established food franchise will have multiple units and a large pool of franchisees from which to draw information. This will enable you to gather sufficient data to make an informed decision.

Low-wage Labor. Most food businesses require a large number of hourly wage employees. People willing to accept an hourly wage are generally new to the workforce and this usually means they will require extensive training and supervision. Turnover in these businesses can be high so recruiting and training may be an ongoing struggle. Typically, labor challenges are listed as the number one frustration by franchisees in the food business.

Hours of Operation. Most people choose to become business owners to have some control over their work hours. However, many food franchises are open every day and often into the night. If employee turnover is a problem in your business you may find yourself being more hands-on than you intended. For example, if your delivery driver suddenly quits, you may find yourself driving around looking for an address at 11P.M., a stack of quickly cooling pepperoni pizzas in the passenger seat.

There are differences in the difficulty level of the business depending of the type of food served. Take for example a sandwich outlet which receives all food pre-cut, pre-sliced and pre-cooked. These types of businesses allow one to avoid some of the hassles and expenses mentioned above but you will still have to deal with food spoilage and labor issues.

The food business can be very rewarding to a person who has the special set of skills necessary to be a successful restaurateur but it’s not a business for everyone. When evaluating a food franchise, it is important to clearly identify the skills you’ll need to be successful. Are you willing to work long hours, at least until you can afford to put a manager in place? Do you have experience working with teenagers, bilingual and other hourly wage employees? And do you have the patience to wait for the site selection and build-out process to be completed before you can open?

The best way to determine if you will really enjoy this type of business is to go to work for an existing unit and shadow the owner for at least several weeks. Some franchise systems will even require this before granting you a franchise and the experience can be invaluable to help you understand the business and to help you decide if you’d thrive or fail in the environment. For the right person, buying a food franchise can be the start of a thrilling and very rewarding new career.

A FranChoice consultant can help you explore a number of franchise opportunities. You are invited to sign up for our free service HERE.



About FranChoice:
FranChoice is the leading network of franchise referral consultants in the United States. Since 2000, FranChoice has been providing a free service to those interested in franchise ownership. Our consultants guide prospective franchisees through all stages of the business ownership process, from franchise investigation to the final sale, matching each individual’s interests, talents and investment level with a strong franchise business.