A Few Tips to Chew On Before Investing in a Fast Food Franchise

By Ken Jennings

Posted : June 5, 2014

Category : Franchise Experts

A Few Tips to Chew On Before Investing in a Fast Food Franchise
Thinking about a food franchis

Food franchises are popular, but are they a good fit?

The most
popular franchise to invest in is fast food, according to Entreprenuer.com. Food franchises dominate the
Franchise 500®, making up half of the top 10 and more than a quarter of all
ranked companies. Additionally, food franchises are one of the most populated categories at Franchise Gator. While fast food franchises can be an amazing, revenue-generating
business, the food and beverage industry is not for everyone. Depending on your
preference and personality, certain investors might want to also consider service
franchises. Here are a few elements to keep in mind before considering purchasing
a restaurant or service franchise.  

Food cost

First is
food cost. Food cost is one of the largest investments when starting a fast
food restaurant, and wasted food cost can be exorbitant, especially for seasonal
cuisine. Additionally, food costs change frequently, for instance, the recent
quick rise in lime
prices. These costs are unavoidable and not necessarily something that owners
can prepare for or, if need be, quickly gather up the extra financing. Whereas,
the costs for a service business, such as a gym, would go to products that last
for years and owners would continue to benefit from every dime spent on the
purchase.  

Initial investment can be higher

The
initial franchisee investment tends to be higher for well-known fast food
companies. There are plenty of great restaurants available for franchises that
might not be as popular and should be considered if food is your passion. However,
be mindful that the stronger the brand identity " think of some of the most
loved and internationally known restaurants " the higher the franchise fee for
name recognition.

Quick employee turnover

Furthermore,
the fast food industry tends to have a very quick turnover because of the
number of young workers that typically handle all of the cooking and customer
service. A high number of the positions are typically minimum wage jobs, which
attract young employees with little to no experience. These employees aren’t
always the most trustworthy or loyal members of a team, and more likely to quit
if they are leaving town to pursue additional education or when the seasons
change and they would rather be outdoors than at work.

Tough and stressful job

There
is a lot of strain on restaurant owners across all varieties of the food and beverage
industry " it continually ranks on the lists of the most stressful jobs. While there
are plenty of hard-working and passionate managers, managing a restaurant can
be one of the toughest jobs out there. Particularly, for the first few years of
a new restaurant’s opening, the owners need to be completely hands-on and
prepared to be on the job 24/7.

Reliance on repeat customers

Finally,
restaurants typically require more marketing needs than service businesses.
Restaurants rely heavily on repeat customers and attracting new patrons, which
can certainly add hefty advertising and promotional fees into the initial budget.
Due to the low price of fast food dishes, fast food restaurants need an even
higher number of steady customers to ensure profits.

There are many franchise options to choose from

There
are a plethora of franchise options that don’t involve food, ranging from home
cleaning to office technology to my business, locksmith. These service
franchise businesses are available in a range of prices and provide more
stability, and potentially, an economic advantage over the food and beverage
industry.

Employees
in service-based jobs will either have experience or receive job training so they
are more likely to be committed to the industry for the long-term and stay
loyal to their employer.

Generally,
service jobs are on a more typical nine to five schedule. Minus the rare
emergency, these types of jobs do not require around the clock supervision and provide
a much more flexible schedule for franchise owners and employees.

For
many, working in the food and beverage industry can be extremely rewarding.
They love working around food and young people, and are satisfied with the long
hours. However, for those interested in stepping into the franchise game, keep
an open mind on the wide range of options that are available. These are just a
few of my tips to help folks make the decision on what’s best for their franchise
investment.


About the author:

Ken Jennings started Texas Rekey Locksmith Service from the trunk of his car in 1995. The company was rebranded as Mr. Rekey Locksmith® Services when it expanded outside of Texas 10 years later.

During the last 35 years, Ken has founded more than 40 businesses and spent time studying the success of other business leaders in thriving industries and applying them to his own business ventures. He also mentors numerous entrepreneurs in his hometown of Austin, Texas.

Ken has two children who both play an active role in his organizations. He enjoys traveling with his wife Vicki and playing tennis.