All the information you need to start a Restaurant Franchise
Opening a Restaurant Franchise
Who does not enjoy food? What could possibly be better than using your passion for food as your line of business, you ask? But opening a restaurant is a another matter. A very other challenge is building a brand that people will undoubtedly return to time and time again. Restaurant franchises can help with that.
In India, the restaurant franchise business concept has developed over the past several years and has proven to be a highly lucrative endeavour. It is a business strategy that is currently used all over the world and is regarded as a low-risk, high-profit plan with extraordinary outcomes and a high return on investment (Return on Investment). This model is used by the major companies on the market (McDonald’s, Subway, etc.), and it has been successful over the world.
But this is a universal idea. A pressing question has to be answered before continuing. Is the Indian cuisine franchise a financially successful choice first and foremost? Here is a tale to give you some fuel for thought.
The 53rd richest person in India is Ravi Jaipuria, chairman of RJ Corp. His estimated net worth at the time this phrase was written, according to Forbes, was a staggering USD 2.73 billion. To put it in context, that is almost 20,000. Crore. And via franchises like Pepsi, Costa Coffee, KFC, Pizza Hut, Taco Bell, and Vango, tremendous money has been accumulated.
The Indian franchising market is now valued at over $30 billion USD and is predicted to reach $50 billion USD by 2022.
Franchising can be your best option to start with if you want to enter the booming Indian cuisine business. A few advantages of franchises include the reputation of a brand, a tried-and-true company model, premium items, and fully equipped operational training. Let’s dissect the entire franchising process to learn more about this multibillion dollar industry.
Three crucial terms to remember before we begin:
Franchisee: A person or organisation that purchases the right to use an existing company model. A franchisee can access the business’s goods and/or services by purchasing a franchise.
Franchisees pay a franchise fee to the franchisor, which is the company that grants them access towards its business operations so they can open additional locations or setups.
Franchise Fee: The first sum of money a franchisee must pay after signing a contract. In addition, a franchisee is required to pay additional ongoing costs such advertising fees, royalties, and renewal fees.
How do franchise companies operate?
Although different brands use various franchise models, the fundamental idea remains the same, i.e.
The franchisee investigates many franchise options and chooses the best one for them. Once a potential franchisee has been selected, the franchisee can inquire about the franchisor and determine whether they possess the resources and expertise required to launch the firm. The franchise agreement is signed by both parties once all requirements have been satisfied.
In essence, the franchisor grants a franchisee the right to run as a brand extension. This indicates that the franchisee is granted the authority to market the franchisor’s goods and services. Additionally, it is granted the right to operate under the brand name while using the trademark and according to the franchisor’s procedures. The franchisor offers the franchisee plenty of assistance so that the outlet may function efficiently, but it plays no part in the franchise’s day-to-day operations.
For instance, whilst franchisor may assist in employee training or uniform selection in accordance with brand standards, it cannot be heavily involved in people management. Both parties are required to abide by the SOPs and other terms outlined in the franchise agreement because this is a contractual arrangement.
Models for various Food Franchises
Three categories may be used to broadly classify franchise models.
This is a standard franchise arrangement where the franchisor grants the franchise owner the rights to the brand name and trademarks. It is founded on a legally enforceable agreement and a set of policies agreed upon by the parties. This model is used by the majority of well-known F&B businesses, including Starbucks, Subway, and Kathi Junction. The business structure takes many different shapes.
- The most common type of franchising in India is single-unit franchising, often known as direct franchising. This idea combines the ideas of owner and management. That is, in addition to owning the location, the franchisee serves as the main manager or operator. Due to its effectiveness, most franchise-offering brands favour this approach.
- Multi-Unit Franchising: A franchise arrangement in which the franchisee assumes management of multiple franchise locations from the franchisor or prior owner. The franchisee is then responsible for running and expanding the company for all of these units in addition to owning them. The largest franchise business in the world, Subway, is a well-known example of a restaurant franchise in this model.
- Firm-Owned Franchising: The parent company opens a local representative office and helps the franchisee set up and run their business. Each franchise outlet has a specific crew allocated to it, and both sides cooperate to keep the bar high.
Similar to a supplier-distributor relationship, more so. The product is supplied by the franchisor, and it must be distributed by the franchisee or distributor. The franchise owner has more discretion under this business structure than under the business structure. In respect of reach or product size, comparatively larger brands use this style. For instance, this type of franchise is used by both Ford Motor Company and The Coca-Cola Company.
In this approach, a franchise owner just manages the company in a management franchise as opposed to actively participating in day-to-day operations. Its structure is suitable for someone with prior business expertise due to this key component. B2B businesses typically like this structure.
What is the price of a restaurant franchise?
The cost of starting a food franchise depends on how different the franchise shops are from one another, much like the models do. Let’s examine the many sorts of food establishments.
- Kiosk/Truck/Small Outlet: Usually found in food courts and on the street sides of malls, these are perfect for franchise newcomers who want to start small and gain a feel for the industry before investing more. Investments for tiny stores like this often range from INR 5 to 20 Lacs. This format also has the shortest average break-even time—between six months and two years. Â
Parlor or little store: These mid-sized establishments, which are conveniently situated in or close to a busy region, stand a good chance of becoming your long-term company. A parlour is not just a reliable company but also an expert crowd-puller, which means more profits for you. This structure is most suitable for franchisors with a sizable investment, ranging from INR 15 to 35 Lacs, and an anticipated break-even period of two to three years.
- QSR/Cafe/Casual Dining: Quick Service Restaurants (QSRs) are the most common style of franchise outlet, and they are perhaps the hottest cake in the entire food industry. QSR or fine dining restaurants offer both options—immediate takeout service and sitting down for a short bite—and need an investment of INR 35–50 lacs. The typical break-even time is between three and five years. However, this format itself is where the largest revenues and profits are reported.
- Bar/Lounge/Fine-Dine Restaurant: A fully-fledged bar, lounge, or fine dining restaurant comes with outstanding patronage and a recurrent customer base, in addition to fresh audiences on a regular basis, and requires a substantially bigger investment than any other category. Investment requirements range from INR 50 Lacs to even INR 1 Crore. Five to six years pass before the company reaches break-even.
Royalty fees and other costs are also very typical. The precise amount varies from business to business and ranges from 4% to 30%. Â
Choosing a franchise versus opening a new restaurant
While opening a franchise may seem like an easy way to start a business, success is not always guaranteed by having the support of a well-known brand. The four pillars of successful company management—decision-making, perseverance, time management, and client satisfaction here as well. You may decide for yourself after weighing the advantages and disadvantages of both purchasing a franchise and running your own business. On the one hand, there is franchising.
Advantages of purchasing a restaurant franchise
- The benefits of a large corporate network while yet having the freedom of small business ownership.
- No prior knowledge is necessary. The essential training to operate their business model is provided by franchisors.
- Compared to enterprises, franchising has an established greater success rate.
- Franchises have a higher chance of getting funding.
- Cheaper than opening your own company.
- Rely on a track record of successful management and work procedures.
- Take advantage of extensive advertising that is entirely free.
Drawbacks of franchise acquisition
How the firm is operated is outlined in a legal agreement with the franchisor.
There is little to no room for originality or inspiration.
restriction on the usage of suppliers, goods, and venues. The reputation may be harmed by poor examples shown by other channels.
The franchisor must receive a part of the profits.
However, running your own firm has its own unique set of parallels.
Advantages of becoming your own boss
- Financial Benefits: Avoid dividend splits. increase your profits.
- Independent Way of Life: Set your own hours. Be adaptable in your life.
- Personal Development: Expand your skill set while acquiring leadership qualities.
Cons of starting a business on your own
- The main risk associated with company ownership is financial risk.
- Stress levels are high, which might lead to health problems.
- Flexible about time commitment Yes. Constantly unfettered? Absolute no.
The choice of whether to engage in a franchise or open your own business is entirely up to you after taking the aforementioned considerations into account. You may, however, reflect and ask yourself these queries. Try responding to questions with “Definitely Yes,” “Probably Yes,” “Probably No,” or “Definitely No.”
- Are you prepared to assume a large financial risk?
- Are you willing to wait for a clear profit?
- Do you like to take risks?
- Are you prepared to go above and beyond?
- Do you excel at marketing?
- Are you certain you can create something from nothing?
If all of your responses are “Definitely Yes,” you might want to consider starting your own food company. But if they are more focused on any of the others, getting a restaurant franchise might be a smart move.
Where can I find a food franchise?
The most crucial action to take before deciding on a model or company is to thoroughly research every element. Carefully consider your selections, balance the advantages and disadvantages of each, and take a close look at their data and market performance. Analyze your spending plan, your projected return on investment, and the turnaround time. Visit franchise locations and speak to people. Speak with other restaurant owners or franchisees. You may begin executing your strategy after you are completely familiar with everything.
A franchise can be purchased in one of two ways. One way is to get in touch with the company directly, while another is to look for listings on websites run by franchise consultants. It is often advised to hire a consultant help you out, particularly if this is your first business venture. As skilled specialists, consultants can help you with a variety of tasks, including reaching out to different franchisors, developing and implementing a company plan, identifying potential markets or investments, and assisting with legal nuances. Â
Franchise opportunities in India’s food and beverage sector may prove to be the proverbial “pot of gold” for you. It is hardly a bed of flowers, but, at the same time. Go for it if you feel prepared to do so. Happy New Year! Please contact us if you would like more information about restaurant franchise possibilities in India.