You don’t have to be Starbucks or Mcdonald’s to win at franchising, but you have to get the basics right.
We’ve studied small and midsize restaurant groups and found ten essential elements for running a successful restaurant franchise business.
Managing a chain of company-owned restaurants is very different from working with franchisees. Your goal as a restaurant business owner is to deliver the best possible guest experience.
As a franchisor, things are different.
You aren’t involved in the day-to-day operations of the franchised locations, so the keys to success in restaurant franchising are different from those of corporate sites.
In this article, we’ll cover:
- Intellectual property
- Business plan
- Manual for franchisees
- Franchise agreement
- Marketing strategy
- Partnership with franchisees
- The right technology
- Feedback loops
- Franchise support team
We start with what’s most important: your brand.
#1 Protect Your Company’s Intellectual Property
Everything begins with protecting your intellectual property.
While it may seem like a trivial task, registering your trademark and the brand logo is crucial in franchising.
Your brand and confidential methods are among your most valuable assets as a franchisor. If you fail to protect these assets, you devalue the system that supports your business.
That’s why registering your trademark is essential. You’ll secure your exclusive right to use the trademark to promote your brand in specific territories and for particular goods and services.
Taking this step can also help you settle potential disagreements with franchisees if they use your trademark beyond the goods approved in the franchise agreement.
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#2 Cover All Bases In A Detailed Business Plan
Your business plan should lay out your entire franchising strategy, answering questions like:
- How many restaurants do I want to sell, and at what rate?
- Where will my franchises be located?
- Which staff structure will I use?
- What kind of support will I provide to franchisees?
- How will I market your franchise?
- How will I ensure consistency and carry out quality control?
- Devote enough time to training
A crucial part of your business plan is the financial section, where you show that you have laid the groundwork to prove that your franchise can work.
The cost estimation segment describes franchisees’ estimated expenditure, from their initial start-up investment to infrastructure, licenses, and royalty fees.
Don’t make the mistake of underestimating the investment your franchisees will need to make. You might be tempted to show low estimates to attract investors, but doing so will lead to dissatisfied business partners and a lack of funds (and trust!).
Besides cost estimates, audited financial statements and projections should be included, like:
- the expected growth rate for (at least) the first year;
- the estimated restaurant cash flow;
- the expected payback period.
Don’t hesitate to bring in a good accountant with franchising experience to prepare and empower your financial projection models and ensure sufficient returns on investment.
#3 Develop A Comprehensive Manual For Franchisees
Consistency is crucial for a successful franchise.
Franchisors should first and foremost ensure their concept is easy to replicate. The next step is to help franchisees reproduce your dishes, restaurant look and feel, and dining experience.
That’s where your operations manual comes in.
In a nutshell, this document should include every single thing business owners need to know to set up and run their restaurants according to your brand guidelines.
We’re talking, among other things, about topics like:
- general workplace requirements;
- the restaurant concept, your vision, and mission;
- opening and closing procedures;
- uniform and equipment requirements;
- info about suppliers and sourcing;
- Food regulations, from preparation and service, to storage and sanitisation;
- safety and hygiene guidelines;
- service procedures;
- food production requirements, including recipes, portion sizes, and presentation guidelines;
- pricing information;
- interior design and appropriate furnishings.
Your restaurant operations manual ensures consistent quality over time, especially if you plan to grow your brand in multiple locations.
#4 Write A Bulletproof Franchise Agreement
Your business plan and your operations manual are ready to go. Amazing! However, one more document can make or break your entire franchising operation: the franchise agreement.
A franchise agreement is a legally binding contract between you and your franchisees. It protects the rights of both parties entering the restaurant franchise and describes the scope of your franchising operations.
The agreement should include:
- the names of both franchisor and franchisee;
- the duration of the franchise collaboration (and renewal options);
- your franchise model: how it will operate, geographies, marketing strategy, etc.;
- fee structure of licensing fees, royalties, and any additional fees;
- a Franchise Disclosure Document (FDD) that outlines your company details, legal history, corporate structure, etc.;
- your operations manual;
- a list of supporting activities and resources you will provide to your franchisees for the entire duration of the agreement;
- legal responsibilities and tax regulations for both parties;
- rules for selling the franchise;
- procedures to be followed when franchisees violate the contract or upon termination.
We recommend hiring a franchising legal expert or business attorney to ensure the agreement covers everything legally required.
#5 Create A Marketing Strategy No Investor Can Resist
Once you’ve ironed out all the details of your franchise business model, it’s time to market and sell it.
Develop marketing materials like leaflets, brochures, and (online) advertisements that outline your unique selling points and show potential business owners why your franchise is a great business opportunity.
Capitalise on your brand’s strengths, rock-solid financial history, and future (growth) potential.
Create a dedicated franchise program page on your website, include it in your social media strategy, and attend relevant tradeshows and networking events.
Last but not least, don’t forget you can (and should!) also use your franchisee network to do word-of-mouth marketing and sell your program. Organic marketing is priceless!
#6 Invest In The Partnership With Your Franchisees
You’ve sold your franchise program, and your franchisees have opened their restaurant. So you’re off to a good start! But your responsibility doesn’t end there.
You’ll have to keep investing in your franchisees as long as the partnership lasts. All too often, franchisors enjoy the revenue their franchisees provide without delivering value in return. And if your franchisees don’t feel valued and satisfied, the relationship will go sour, along with your business.
Offer continuous value in exchange for the royalty fees you receive by setting up training sessions and retraining courses, providing ongoing support and business advice, and treating your franchisees like valued business partners.
Open and honest communication will take you and your franchise farther than you can imagine.
#7 Training Is The Cornerstone Of A Successful Restaurant Franchise
Every franchise operation should be offering training to give franchisees the tools they need to succeed.
Your training program’s “Holy Grail” is your operations manual because it documents every step in developing the new restaurant. But the manual alone won’t cut it: you have to build a robust training program available to franchisees on an ongoing basis.
The program should contain at least three elements:
1. Onboarding and initial training
During the initial training, new franchisees learn everything there is to know about the business they’ve invested in. Typically, this training takes place at the franchisor’s headquarters and lasts at least a few days.
Onboarding usually starts with a tour of the facility, so new franchisees can see the parent company in action and get to know some of its staff.
After the tour, it’s time for the initial training session, which generally covers dozens of topics, including:
- the corporate history,
- the company mission, values, and culture,
- opening procedures,
- daily operations,
- KPIs and reporting requirements,
- and many more.
Try to make the sessions as interactive as possible by using different training formats and methodologies. If you get the initial training right, you’ll create brand ambassadors from the start!
2. On-site training
With initial training completed, many franchisors will move to the new franchise location for the next part of the training.
During on-site training, franchisees get familiar with the day-to-day operation of the business.
Depending on their prior experience and skill set, some franchisees may need more or less training than others. That’s why it is essential to be flexible in your approach and cater your on-site training to the needs of each franchisee. It’s up to the on-site trainer to identify these needs and tailor the training schedule to best meet them accordingly.
3. Ongoing training
In our post about the most common pitfalls of franchising, we talked about how much franchisees depend on the support they get from their franchisors to succeed. But unfortunately, one of the biggest mistakes a franchisor can make is forgetting about ongoing training and refresher courses.
Provide training through:
- field training,
- on-site visits,
- conferences, and
- classroom refresher sessions.
Including periodic training in your training program will ensure your franchisees stay up-to-date with the latest business and product information. In turn, it prevents standards from slipping over time.
#8 Use Technology To Scale More Efficiently
To enable smooth day-to-day operations in each franchise restaurant, you must invest in restaurant management technology. Selecting the right tech will ensure BOH and FOH efficiency for years to come, but it will also help your business scale faster and more efficiently.
Today, all-in-one restaurant platform solutions offer plenty of features that will become your franchise’s backbone in no time.
- Product development software, for example, allows franchisors to create a scalable recipe database that can be rolled out to all locations, boosting product consistency and cutting food costs.
- And inventory management tools can help you keep track of inventory at each location to keep food and beverage stock accurate down to the raw ingredients.
- A central production kitchen allows you to buy ingredients in bulk and prepare batches to distribute to your locations. Since most of the cooking gets done in the central production unit, your outlets require less staff. Central kitchen software will streamline logistics, keep track of internal orders and automate stock.
- Another asset to franchise restaurants is production planning software, which enables you to set up fully calculated production plans in one place for all your outlets. These help you ensure consistency across locations while saving kitchen staff time.
- Other valuable features of innovative restaurant management solutions include centralised HACCP task management that helps you monitor food safety procedures in one workflow.
- Procurement automation eliminates purchasing mistakes in your corporate and concession outlets.
Finally, the right technology allows you to manage online orders across delivery platforms and locations from a single device and then analyse your top-selling dishes and restaurants.
#9 Be Open To Feedback
As a thriving restaurant operator ready to extend your business beyond your first corporate locations, you’re probably used to making all the decisions by yourself or with a small management team.
However, as a franchisor, you will still have decision-making power, but you will have to collaborate with the independent investors that run your franchise.
Not all franchisees will have a ton of experience running a restaurant, but others will bring years of know-how to the table. It would be foolish not to listen to what they have to say. Being open to feedback, input, and change will help you adapt your franchise to keep up with evolving consumer trends and competitors.
#10 Put Together Your A-Class Franchise Support Team
By now, you probably realise there is just no way that you can do all of the above, all by yourself. You’re right, of course!
Surrounding yourself with a dedicated franchise team is essential. Their expertise will help you take your business farther than your existing in-house team can. They will help you build and execute a winning franchise strategy while adding credibility to your brand.
We recommend hiring the following roles:
1. Franchise lawyer
A franchise lawyer or legal expert can help you write your business plan and franchise agreement and register your trademark. Additionally, they can develop various legal documents to support the business in the long run (confidentiality agreements, disclosure documents, employment agreements, etc.).
2. Franchise consultant
Typically, franchisors will also hire a franchise consultant right from the start. As an expert in franchising companies, your consultant evaluates whether you are an excellent franchising candidate.
Additionally, consultants assist with (or even lead) market research to determine how to differentiate yourself from competitors. They can also help you develop the strategic aspects of your business model. More importantly, they use their expertise to create a profile of the ideal franchisee you should be looking to attract.
Finally, a franchise consultant will also help you with your operations manual, training program, and quality-control system. As a bonus, franchise consultants can usually rely on an extensive network of other experts ready to jump on board.
3. Franchise accountant
An accountant with franchising experience can help you develop a solid business plan you feel confident moving forward with. In addition, they can prepare financial models to determine royalty fees and investment capital and see that your business makes sense from an economic point of view.
As your franchise system grows, your accountant can also build a financial control system to ensure payment.
4. Training specialist
A training manager may not be necessary for the franchise’s early days, but they’ll be indispensable when your operation grows.
Your training specialist can help design, develop, and deliver your franchisee training program. They will play a crucial role in ensuring your franchisees have the proper knowledge and tools to succeed and represent your brand well.
5. Other team members
Depending on the size of your franchise operation, you might also want to hire:
- an operational franchise manager
- marketing and sales professionals
- a real-estate expert
- additional HR support
- a public relations expert
By surrounding yourself with franchise experts, it will be easier to determine when it is the right time to expand and start thinking about opening another franchise outlet.
Look Before You Leap
This post requires a disclaimer (an appendix, to be exact).
Before you delve into the habits of leading franchisors (that you can adopt to emulate their success), make sure you put in the groundwork first.
There is no point in doing all of the above when the foundations of your F&B operation and business model are shaky.
Before you ask yourself how to run a successful restaurant franchise, assess whether your restaurant concept is a viable candidate for franchising or not.
Ask yourself four questions:
- Do I have a unique and well-defined business concept that is attractive to budding restaurant entrepreneurs?
- Can a new (and potentially inexperienced) team consistently replicate my brand, menu, and overall guest experience?
- Can I demonstrate a strong record of profitability and success in multiple locations?
- Will franchisees be able to get a good ROI from their restaurant?
If you can’t answer these questions with an astounding YES, continue to perfect the concept first.
A well-developed and profitable concept is the springboard for a sustainable restaurant franchise.
Take Out The Guesswork Of Running Successful Franchise Restaurants
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