10 Things to Know About Restaurant Franchises

All About Restaurant Franchises and Chains

Are Americans all done with McDonald's?. Quartzla

Do you want to open your own restaurant, but aren't sure where to start? A franchise offers a turn-key opportunity for owning a restaurant that has built-in name recognition and a proven track record of success. Read on for 10 things you should know about restaurant franchises.

1. Restaurant Franchises and Restaurant Chains are Not the Same Things

Starbucks is a restaurant chain, but because it is owned by one single parent company, it is not a franchise.

You can't purchase a Starbucks coffee shop. Burger King is a chain and a franchise, because you can buy individual units of a Burger King restaurant. So, all franchises are chains, but not all chains are franchises.

2. Restaurant Franchises Aren't Cheap

Most restaurant franchises come with a hefty price tag. Dunkin' Donuts requires prospective franchisees to have a minimum of 1.5 millions dollars net worth and $750,000 in cash reserves. Wendy's requires $500,000 in liquid assets and one million net worth.

3. Franchises Often Require Restaurant and/or Other Business Experience

Many franchises require previous restaurant or other business related experience before allowing you to represent their brand. Keep in mind, even if you were to open an independent restaurant, investors may be looking for experience in the restaurant industry, as well.

4. Franchises May Require Multiple Locations

Both Pizza Hut and Taco Bell Franchises require a minimum of three new restaurants within three years, and Dunkin Donuts requires a minimum investment of five new restaurants at a time.

5. Restaurant Franchises are Turn Key Operations

One of the reasons restaurant franchises are so expensive is that they are turn-key ready. The kitchen layout, dining room design, menu, even the market campaign are all done for you. You don't have to work at building name recognition- it's part of what you are buying.

6. Restaurant Franchises Have Rules

Consistency is key when it comes to restaurant franchises. Customers expect the same service, food and atmosphere, whether they are in Alabama or Arizona. To keep everything consistent across each unit, restaurant franchises come with a pretty thick rule book outlining the do's and don'ts of franchise ownership. When you agree to purchase a restaurant franchise, you are also agreeing to adhere to all their rules.

7. Restaurant Franchises Don't Leave Much to the Imagination

If you like to cook and create new foods and like to plan out all aspects of events - like menus, dining room design, etc…the structured set up of a restaurant franchise may not be creative enough for you. Ditto if you like to set the rules and try new things. Read on the see if you are cut out for a restaurant franchise.

8. You Still Need a Business Plan to Buy a Franchise

Even though restaurant franchises are turn-key operations, you should still have a well thought out business plan. Read more about how to write a stellar restaurant business plan.

9. There are Different Types of Franchise Ownership

You can be a single unit franchise, multi unit franchise, area developer or master franchise.

Read more about each of these types of restaurant franchise ownership, here.

10. McDonalds is the Most Recognizable Restaurant Franchise.

With over 27 million people served daily around the world, McDonalds is still the restaurant franchise. It has more than 300,000 units worldwide. Taking a cue from Henry Ford's assembly line concept, the McDonald brothers began offering the fastest, cheapest food possible by employing low skill workers to assemble it. While the brothers were successful at serving food efficiently and inexpensively, they were not so good at franchising. A restaurant equipment salesman by the name of Ray Kroc saw the potential in the McDonalds concept, buying the brothers out in 1954. His formula for franchising set a precedent for fast food chains, changing the landscape of American dining.