5 Steps To Franchise Your Restaurant
Do you operate a restaurant and wish to expand? Do you want to become part of a distinct brand? Then franchising is definitely the way to go! Starting a franchise restaurant is a means to expand a business by allowing independent owners (franchisees) to sell or provide services under a specific brand name using a trademark, business strategy, and most importantly, a process.
According to the most recent data from the United States Census Bureau, franchises accounted for almost 54 percent of fast-food and fast-casual restaurants in America. And trends suggest these numbers are only going to increase in the coming years.
Franchising may appear to be complex due to the extensive planning and paperwork required, but the process is easier than meets the eye.
We’ll break down this topic into two parts: the first will focus on the operational steps that you need to take to franchise your restaurant. In the second part, we will cover the marketing & development for franchises.
Step 1- Assess your situation- Are you ready?
Before you rush into franchising, there are a few aspects you should consider. Your role when running your restaurant independently was drastically different from what it will be when you become a franchisor. Always start with asking yourself a few questions-
- Is your business scalable?
Is your restaurant concept different? What sets you apart from other pizza places? Why would people choose your pizza place over the other mom-and-pop diner right across the street? Execution also must be flawless. If you are planning to open ten similar restaurants, then the replication process should be easy to execute.
- Are your finances in place?
Once you have decided whether franchising is the ideal path, you need a robust financial plan. There are numerous expenses that you’ll have to bear, so plan strategically. Divide the early setup fees according to your restaurant’s business plan.
- Do you know your competition?
Yes, optimism is a nice thing, but at the end of the day, numbers mean everything. Always conduct market research prior to establishing a business to determine who are the competitors, how you are superior to them, and how you may outgrow them. This must be prioritized before beginning the franchising process.
Step 2- Legal Requirements
Below are the legal documents you are required to fill out before being able to franchise your restaurant:
FDD- Franchise Disclosure Document:
The Franchise Disclosure Document (FDD) is designed to inform potential franchisees about the franchisor, the franchise system, and the agreements they will be required to sign so that they may make an informed decision. The FDD is divided into 23 sections, each of which the prospective franchisee must read before signing.
According to the Federal Trade Commission, franchisors must present the franchisee with the FDD at least 14 days before it is due to be signed or any money is exchanged. After the franchisor has received the application and agreed to consider it, the franchisee has the right to a copy of the FDD.
Check out the detailed requirements for the FDD here- https://bit.ly/3LTTsza
Franchise Operations Manual:
A franchise system’s DNA – the basis that regulates franchise unit performance, processes, and conduct – is a franchise operations handbook. It details the requirements, rules, and procedures that franchisees must follow in order to operate their franchised businesses and deliver on the franchisor’s brand promise consistently.
The length and substance of franchise operating manuals vary. In general, a well-prepared franchise operations handbook will cover at a minimum, the following categories below:
- The objectives of the franchise system;
- The day-to-day procedures that the franchisee must follow
- Customer service, which includes things like welcoming customers and dealing with complaints, as well as personnel issues like training.
While working on your franchise legal paperwork, prepare notes on important things like how your franchise will run. Geographical areas to target, franchisee qualifications, royalty percentages for franchisees, and marketing strategies are just a few of the other details to iron out. To accommodate a franchise concept and make operations more practical for franchisees, you may need to change some of your current practices.
Trademark and Logo Registration:
When you franchise your restaurant, you grant another person the right to use “your” logo and trademark. As a result, registering your brand’s logo and obtaining a trademark is the most important, yet frequently overlooked, step in franchising your restaurant. To protect their intellectual property, franchisors should register everything to avoid being duped by a fraudulent Franchise party.
Step 3-Issue FDD And Register As a Franchisor
Once all your important decisions are made, it’s time to complete all the legal paperwork. Issue your FDD and register it inside the franchise registration states.
After receiving an FDD, you can begin offering and selling franchises in non-registration states (i.e., states that do not require a special filing or registration) while filing your FDD for registration in registration states.
Step 4- Make Hires And Work On Training
As you prepare to become a franchisor, you’ll usually need to hire several people who will be solely responsible for assisting franchisees. Staff training is essential in order to maintain the same product standards as the original franchise restaurants. The franchisor should train the entire staff, from the Head Chef down to the busboy’s wait staff. The induction and training of new employees should begin well in advance of the opening of the Franchise Outlet.
Step 5- Support And Grow Your Franchises
It is here, at the point where you start supporting your franchisee network. To minimize any future misinterpretation, support should be included in the agreement. Some Franchisors provide solely infrastructure development, operations, training, and software support, while others also provide raw materials.
You must accomplish a few things in order to expand your restaurant franchise business to many locations. You must develop an ecosystem in which you must collaborate with people from the real estate, produce, and point-of-sale vendors, as well as other aspects that we will address in future blogs.
Running a franchise can be a terrific way to get started in business, but you need to know why you’re doing it, what you’re getting into, who you’re getting into it with, and, of course, what you have to gain. The better you are able to answer these questions, the more likely you have the chance to excel.