3 Things to Consider Before Buying a Restaurant Franchise

Published By: Leon Tuberman  -  Saturday, June 23, 2018

Whether you’ve got five locations around the state or you’re in the initial stages of finding your first restaurant supplier, there will eventually come a time when you think of expanding outside of your comfort zone. For many restaurateurs, this means coming up with new concepts to reach a wider audience. For others, however, purchasing a restaurant franchise seems like an easy way to think outside the box. If you’re considering doing this, though, there are a few things you should know.

1. Franchises Aren’t the “Cheap Route”
If you’re trying to figure out whether to create your own restaurant or buy a franchise, don’t fall into the trap of thinking franchises are cheaper. While the décor and restaurant supplier may already be provided for you, there are still substantial costs related to opening such a location. As it turns out, these costs go far beyond real estate and overhead costs.

Most restaurant corporations require a large amount of assets to get started. Dunkin’ Donuts, for instance, wants you to have cash reserves of $750,000 and a total net worth exceeding $1.5 million before letting you purchase the right to use their brand. Sure, you won’t have to go through the process of choosing restaurant furnishings or signage, but that hardly makes up for how much money is required to get started.

2. Be Prepared to Work – All the Time
If you’ve run a restaurant for any amount of time, you know that your work hours seem endless. If you decide to purchase a location for a franchise restaurant, though, expect to have even less time on your hands. In almost all restaurant franchise agreements, there’s a clause that says the majority of your time must be devoted to the restaurant. This includes holidays, weekends and nights.

The great part about owning your own restaurant is that you can delegate responsibilities. This is somewhat true of franchise eateries as well, but the corporation is going to want you around more often than not. Whether it’s family time, consulting on the side or just enjoying your favorite hobby, you should expect to be engaging in this activity far less often after a franchise purchase.

3. You’ll Certainly Need an Attorney
There are various aspects of running an eatery that you can do on your own. This includes speaking with your restaurant supplier, ordering new bistro chairs and interviewing potential employees. When it comes to buying a franchise, however, you would be better served by hiring an attorney to assist.

The main reason behind finding legal help is the contract you’ll be signing with the franchiser. There are likely requirements for employees, accounting records and payment provisions that you need to fully understand before signing. Many franchise restaurants even require you to agree to a non-compete clause saying you won’t open your own restaurant even after your franchise term is up!

Buying a restaurant franchise certainly comes with its own advantages. After all, opening an eatery that immediately has brand recognition is no small feat. Before making this leap, though, you’ll want to consider the downsides as well. While you may end up having to find your own restaurant supplier, come up with your own marketing and create your own menu, the simple fact is that franchises aren’t right for everyone. 

Comments

blog comments powered by Disqus