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


Posted: June 5th, 2014

Category: Franchise Experts

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.  

Thinking about a food franchis

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.