How to Franchise a Restaurant In 5 Simple Steps

Dream of turning your restaurant into a successful franchise business? Discover how to franchise a restaurant in 5 simple steps with Groupon Merchant.

Franchise your restaurant by following these steps:

  • Decide if the Time Is Right
  • Research the Legal Requirements
  • Build Your Franchise Model
  • Find Franchisees
  • Develop a Franchise Restaurant Business Plan

Looking to grow and expand your restaurant? Franchising could be just the thing your business needs. Franchising is a common practice deployed by some of the most successful businesses in the world. In 2020, it was estimated that there were around 753,700 franchise establishments in the United States, outputting around 670 billion US dollars. 1

The food industry is said to account for 30% of those total franchise establishments in the US.2 From food trucks to full-service restaurants, the food franchise industry offers ambitious franchisees a way to chase their business goals through growth and expansion. 

While there are many advantages of franchising a restaurant, there are also several decisions that you should carefully consider before doing so. You need to decide if it’s the right time to branch out, navigate the legal waters, establish guidelines for all your locations, and find franchisees to invest in your concept. Thinking of taking on the challenge? Read on to discover how to franchise a restaurant successfully.

H2: 1. Decide If the Time Is Right

Before you franchise your restaurant, you should have a good understanding of what franchising is and whether it is right for your business. To help you make this decision you should take a close look at your business to determine whether franchising is the right decision for long-term profitability. Is your business easy to replicate? If your restaurant depends on its uniqueness for success — a special location, local ingredients, or your personal touch in the kitchen — then it may be difficult for a franchisee to recreate.

Is your business profitable? This seems like a basic concept, but it’s important that your current business model is making money before you consider expanding. Are you already supporting more than one location? A good test for whether your restaurant concept is ready to be franchised is if you have already found success in more than one location. If your answers to all these questions are yes, then now may be the right time to franchise your restaurant.

2. Research the Legal Requirements

A franchise creates a contractual relationship between the franchisor and franchisee that can last for years. The two documents that formalize the relationship are the Franchise Disclosure Document (FDD) and the Franchise Agreement. Let’s take a look at the key differences: 

  • The FDD is presented to prospective franchisees to disclose details about the franchise and is a required document in many states.
  • The Franchise Agreement is the document that governs the relationship between the franchisor and the franchisee and is much more detailed than the FDD.

The International Franchise Association offers many resources so you can educate yourself about the franchise process. Then you might need to hire a franchise attorney or franchise consultant to help you navigate the requirements.

3. Build Your Franchise Model

You need to decide how your franchise will operate. Geographic areas that you want to target, qualifications for franchisees, royalty percentages for franchisees, and marketing concepts are only a few of the things that you will need to consider. 

You may need to alter certain things that you’re currently doing to accommodate a franchise concept and make operations more realistic for franchisees.

4. Find Franchisees

Franchisees will be representing your brand, so you’ll want to screen them carefully to ensure they are a good fit. Previous experience running similar types of restaurants, as well as net worth, are both strong indicators of whether a franchisee can help you grow your business.

At the same time, you need to be prepared to convince potential franchisees to invest in your concept. A clear business plan and thorough FDD can go a long way towards attracting the best franchisees. Franchise fairs and franchise marketing firms are another way to help you locate potential investors.

5. Develop a Franchise Restaurant Business Plan

As with starting any new business, putting together a business plan for your franchise is a critical step in the franchising process. The plan should outline the expectations and goals for your new business venture and prepare for any challenges you may face. You can find a host of useful resources online to help you develop a business plan, but to give you a general idea, here are some of the fundamental sections that should be included:

  • Executive Summary – Business name, target market, product and services, short and long-term goals.
  • Business Overview – Company history/milestones, employees, legal and business practices.
  • Industry Overview – Industry growth and projected forecasts, seasonal trends, market research, and any influencing external factors.
  • Consumer Profiling – Customer demographics/target audience and purchasing behaviours.
  • Competitor Analysis – Local/ indirect competitors, key differentiations, breakdown of the services and products they sell and potential threats they impose.
  • Sales & Marketing Plan – Marketing platforms, marketing strategies, customer acquisition and retention.
  • Operations & Management Plan – Staff qualifications, technology and equipment, training, employee expansion.
  • Financial Plan – funding requirements, probability margins and ratios, and unforeseen expenses.

Last but by no means any less important, the final thing that should be considered is a risk assessment. No matter how thorough your business plan is, if you don’t plan for unexpected events, you may face potential drawbacks. A good contingency plan can help prevent your business from taking a hit if an unexpected event occurs or forecasted projections fail to deliver. 

Franchising can be a valuable business investment; however, the key to growing a successful franchise is to learn how to franchise a restaurant the right way. By taking the time to carefully plan, ask questions and do your research you have a greater chance of expanding your restaurant to new markets and customers.

For more tips and tricks on how to grow your business into a successful franchise, sign up to become a Groupon Merchant today. 

  1. https://www.statista.com/topics/5048/franchising-in-the-us/#dossierKeyfiguressta
  2. https://www.franchisedirect.com/foodfranchises/14

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