Restaurant ownership requires long hours and a broad range of skills and knowledge. Restaurateurs must deal with city health codes and food safety, personnel management and customer relations, marketing and finance. Even someone with years of experience in the industry as an employee may become overwhelmed with the demands of operating their own establishment.
For the budding restaurateur, what are the pros and cons of buying a franchise when compared to launching an independent business?
Great question. Independent restaurants fail at an alarming rate compared to properly franchised restaurants. In addition, most people who go into business are not entrepreneurs; they are technicians. Most first-time business owners do not know about or have adequate skills pertaining to the other aspects of running a business — i.e. site selection, equipment, marketing, hiring and training, advertising, accounting etc. On the other hand, the franchiser has a proven system that the franchisee follows, and if the franchisee runs the system, then the system runs the business. Statistics prove it is extremely difficult for a first business owner to do this on their own.
What type of personality is best suited for franchise ownership?
[The ideal personality is] a technician or manager, not an entrepreneur, who understands and enjoys the ‘work of the business’ but wants to be free from a boss, and create a business as large or small as he or she wants.
What type of experience does a franchise owner need to bring to the business?
Management experience is always good, or some passion for the tasks associated with the work of the business. A previously demonstrated strong desire to succeed is important, especially during the rough patches.
How is financing a new franchise different from financing an independent startup?
Banks feel more comfortable with proven systems. This allows banks and other lenders to move a potential franchisee through the funding process more quickly and with far more confidence in the outcome to loan approval.
What are the most common mistakes new franchise owners make?
They don’t conduct adequate due diligence on the franchise brand they are about to buy into. And, the number one reason, they underestimate the capital requirements and find they are under capitalized after the business opens and may not be able to sustain the business during launch phase or hard times.