After many years of experience in helping restaurant and bar owners grow and scale, I’ve noticed one key thing: All of those who have used a franchise model can attest that operating one or even several locations is quite different than becoming a successful franchisor, and the two often require distinctly different skill sets.
A common scenario is the passionate bar or restaurant owner wants to scale the business after having found some success locally. They see an opportunity to use a franchising model as a way to grow fast, allowing others to take the heavy lifting off of their shoulders, while raking in franchising fees and simply offering support “behind the scenes.”
While this option can be very enticing to those wanting to cash-in with buyers who are eager to franchise the brand, there are a few things that should be true for you before taking the plunge.
1. Your Existing Locations Are Consistently Profitable
While this may seem obvious, I have seen some operators looking to use franchising to boost their profitability or bring in capital to help a struggling business. Yes, franchising can prove to be a lucrative way to grow and scale, but without a solid foundation of profitability, the concept of scaling can be doomed from the start.
No one goes into business to lose money, including potential franchisees. As the franchisor, you will need to be able to demonstrate how the business will consistently provide a healthy bottom line after it has paid required franchise fees.
2. Your Business Model Can Be Easily Reproduced
Perhaps the biggest challenge I come across for owner/operators wanting to scale is how to duplicate a business that has been so heavily contingent upon the owner’s own efforts. It is impossible for you to clone yourself, so you must do the next best thing. That is to install trainable, repeatable systems that can be used by operators that often have different skill sets than the founder.
The most successful franchisors I know have systematized everything they can to make opening and running an individual store as consistent as possible across the brand. This will not only provide a turnkey solution for franchisees to scale but also provide a consistent experience to guests as they dine at locations across very different markets, both of which are crucial to the success of both franchisees and the franchisor alike.
3. Your Franchise Partners Are Vetted Carefully and Highly Capable of Running the Operation
A regular guest who is loyal to your brand does not necessarily a good operator make. Ask anyone who has any experience in franchising, and they will likely share a horror story or two about a franchisee that has run their business into the ground.
Many franchisees are attracted to opportunity because they are looking for a turnkey solution – one that they can open and then walk away from hoping that the cash will just flow in on its own. Others underestimate what it really takes for a location to be successful, and they burn out far before they are profitable, leaving the store to suffer.
Unless you are dedicated to finding and only working with those who have a proven ability to be successful, you will likely experience a similar situation.
Steve Leonard, who worked as area director/developer for Jersey Mike’s, and has opened more than 100 locations both as a franchisee and a franchisor had this to say: “You are getting into a minimum 10 year ‘business marriage’ with each potential franchisee candidate. Do your due diligence to ensure they don’t just want what you have, but actually believe what you believe.”
4. You Are Able to Provide Key Support to Franchisees
The success of your franchise is largely dependent upon your ability to provide support to franchise owners and operators in several crucial areas:
Training: Consistency of product, guest service standards and operational guidelines should be well documented and well trained to ensure franchisees clearly understand how to execute on a daily basis in keeping with the mission and vision of the company. One of the quickest ways for a franchisee to fail is lack of training on all aspects that essentially make up the experience the brand offers. Having a solid training program that is easily accessible and administered is crucial.
Marketing: The messaging that is sent out to guests through social, online and other channels must be on brand and consistent with the company’s mission and vision. Having different messaging or content that is not aligned can cause confusion and chaos in the marketplace. I recommend having a corporate marketing arm that controls the message and allows franchisees the opportunity to access approved branding collateral and templates to stay consistent across the fleet.
Other Services: Other key areas of support may include HR, legal, real estate, product sourcing and educational opportunities, which can ensure the success of franchisees – especially those who may have less experience in industry operations. The bottom line: The more support franchisees have, the better chance of their success, which is, of course, the goal.
5. You Have Sufficient Capital to Fund the Franchise Operation
One mistake I see franchisors make in the beginning is thinking that the franchise fees they will collect from franchisees is sufficient to actually run the franchise operation. Unless you are charging a large upfront fee, which may not be attractive to would-be buyers, you may come up short.
Setting up the franchise operation itself can be quite costly. Aside from the legal filings and approvals, the support system needed to get stores up and running can have a huge impact and the last thing a franchisor needs is to struggle with being undercapitalized while trying to support franchisees.
Be sure to plan and budget for the worst-case scenario before going through the process and you will surely have an easier time getting your franchise off the ground.
The Bottom Line
To sum it up, franchising your business can be not only incredibly lucrative, but gratifying and affirming. Seeing the brand that you have invested so much effort into flourish on a wider scale is often the holy grail for entrepreneurs.
In my experience, by taking the time to plan strategically and having the right team in place to execute you will likely make the difference between realizing that dream or struggling to accomplish anything close.
Greg Provance is the owner of GP Hospitality Partners LLC, a full-service restaurant and hospitality consulting firm, and the author of Butts in Seats: How to Create Raving Fans Who Come Back Again and Again. In addition to being a consulting partner for Everbowl, Southern California’s fastest growing fast casual chain, Provance owns several restaurants in the San Diego area and serves as a principal consultant and advisor for restaurants across the country. His career has taken him from short-order cook to hosting parties and events for celebrities like Janet Jackson, Madonna, Tom Cruise, Eve, Stevie Wonder and DL Hughley, to name a select few. He’s served food and beverages in atmospheres that range from dive bars to the Oscars, from Suffolk, Virginia, to Beverly Hills, and pretty much everything in between. He lives in San Marcos, Calif. with his wife, two strapping young lads and a cat. And he’s committed his career to serving the bar and restaurant community and businesses of San Diego and beyond. Visit GPHospitalityPartners.com to learn more.
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