What’s On the Menu for Restaurants? Tips for Franchise Success

22/03/2018 08:00 | Start a business

Tips for restaurant franchise success

Recently the news has been dominated by stories of well-known restaurants experiencing difficulties throughout the UK. A succession of big names including Jamie’s Italian and Byron have closed restaurants due to financial problems. Pizza chain Prezzo has also made cuts and are closing 94 restaurants. Barbecoa, a lesser known chain also owned by Jamie Oliver, has recently gone into administration, while Carluccio's has taken action to cut costs.

But what has led to the challenges that these famous restaurant brands are facing? Well, it appears that the ‘perfect storm’ has hit the industry. Increased business rates, growing employment costs and inflation caused by Brexit has undoubtedly made for tough trading conditions.

Consumers also have more choice of where they eat out. With little loyalty in the food industry, social media has also played a part in increasing awareness of restaurants to visit. The increased competition has meant that restaurants have to work harder to get people to spend their money with them, often resulting in discounts and promotions which impact the bottom line.

With so many restaurants struggling at the moment, how can you ensure that opening a franchise in such a crowded marketplace leads to success and profit? The first point to make is to set realistic expectations. Restaurant franchises are notoriously tough to run and so they should only really be taken on by investors with experience in the restaurant trade.

Here are some tips to make sure that you become one of the popular franchises, rather than succumbing to the pitfalls that are common with restaurant franchises.

Location, location, location

As with any franchise that relies on customer footfall, the location of a restaurant is key to its success. The site of a restaurant should be easily accessible, have a good flow of potential customers passing by, have excellent transport links and sufficient parking facilities available.

Prospective franchisees should also research the demographics of the area they have chosen for their new venture. It's essential that the theme, service, price and menu of the restaurant will cater to the needs and preferences of the local community. Although other restaurants in the area may initially be viewed as competition, it's also a good sign that people who live locally eat out regularly.

When signing the lease for the restaurant, you should ask several critical questions before you sign the contract. You need to understand if you'll be able to afford the rent, particularly in the early days when you're building a customer base, what hours you're allowed to trade, and if the premises have an alcohol licence. You don't want to get tied into a lengthy lease only to find that the premises don't enable you to run your business efficiently.

Write a business plan

One of the key tasks that a franchisee should undertake when opening a franchise is to develop a robust business plan. Writing the business plan makes you think about what challenges and obstacles you may face and how you can overcome these before they even occur.

The creation of your business plan is also crucial if you require financing from any third-party source to fund the purchase of your franchise. In fact, it's unlikely that any lender will agree to release the necessary funds without first reviewing your business plan. After all, they need assurance that they are investing their money in a business that is likely to succeed.

Also, it’s important to remember that a business plan should be a living document and updated regularly. Regardless of how much research and due diligence you perform before becoming a franchisee, you’ll be learning every day on the job. Not only will you have a far greater understanding of things like operational and marketing plans, but you’ll also need to amend the plan as your competition and the economic environment evolves.

Hire a great team

Popular franchises may have a strong franchisee at the helm, but they also require a great team to run a restaurant successfully. As a franchisee, you must have an awareness of your strengths and weaknesses so that you can hire a team that complements your skill set.

Quality employees are often a franchisee’s greatest asset, and this is especially true for restaurant franchises. The staff you hire are essentially an extension of you, and they should represent the brand and your company culture so that customers always receive a consistent experience. They are also crucial in helping you to manage your restaurant so that everything runs smoothly, even in your absence.

Don’t underestimate the cost of opening a franchise.

The most significant issue for restaurant franchisees to overcome is cash flow. For any business, cash is king and being undercapitalised can result in many popular franchises having to close their restaurant doors. Ensure that you consult an accountant who specialises in franchising before you sign the franchise agreement so that you don’t fall into the trap of underestimating the costs involved in running a restaurant.

Understand your responsibilities

As a franchisee, you have a responsibility to protect your customers, employees and your investment. Make sure that you address any health and safety issues immediately and invest in training for your staff to remain up to date with the latest food safety regulations.

It's also essential that you don't overlook purchasing adequate insurance to protect your business. Consult an insurance specialist and ensure you have the right type and level of cover in place. It's a common misconception that business insurance is complicated and expensive, but it will cost you much more in money, inconvenience and stress if you need to make a claim and you don't have adequate insurance to get your franchise back on track.

Be prepared to work hard.

There’s no doubt about it; a restaurant franchisee needs to be prepared to work hard and make many sacrifices while establishing the business. As well as having previous experience in the restaurant sector and a passion for the industry, a successful franchisee needs to be tenacious, patient and positive; and a little bit of luck goes a long way too.

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