Food franchises are some of the most popular businesses for franchise investment, with everything from fast-food franchises to startup healthy eating restaurants seeing continuous success all over the world. This can be down to a variety of factors, including the strong brand recognition of popular American food chains, the exciting business opportunities found in the food industry, as well as the modest initial investment for some concepts.
As part of this comprehensive guide, we’ll cover the appeal of restaurant franchises, how to open your own franchised restaurant, as well as some of the big franchise brands that are worth your investment.
Put simply, franchises within this tasty sector are popular among franchise owners because of the legacy created by brands such as McDonald’s, KFC, Burger King, and the many other huge American restaurant franchises that now exist and are successful worldwide.
Why choose to open a food franchise?
In 2020, the quick-service restaurant (QSR) segment of the American franchise industry brought in over $250bn to the U.S., which dwarfed even the second-largest segment, business services (which generated around $100bn).
In addition, business owners that open a food franchise are often among lots of knowledgeable peers. McDonald’s, for example, is made up of around 90 per cent franchisees, compared to corporate-owned restaurants. That’s not to say that opening this kind of business is the easiest franchise to open – more on that in a moment – but if you come up against challenges or roadblocks, there are often lots of people who can help you to overcome them.
Which food franchise is best?
The kind of franchise concept that you should open can depend entirely upon the kind of initial investment you’re looking to make (including the initial franchise fee and ongoing royalty payments), the area you’d like your franchise location to be, and what kind of food franchise you would actually like to open.
Perhaps you’re looking to run one of many Italian food franchises based in the suburbs, or an American restaurant brand situated in the city. Only you can know the answers to these questions, and they’re important to consider long before you get your hands on a franchise disclosure document (FDD).
Also, be aware that franchisors will be on the lookout for specific personality traits and experience when selecting partners that they want to open new restaurant locations with.
“We are very selective. Firstly, the basics have to be there. They have to have the finances to open the store, without that we can’t proceed,” said Mustafa Ismail, co-director of tea franchise Chaiiwala, when explaining his franchisee selection process.
Ismail also explains how potential franchisees for a Chaiiwala food franchise in the U.K. don’t necessarily need to have experience in running a fast food operation, but it can be beneficial so that the candidate knows what is expected of them.
Additionally, Chaiiwala is only looking to partner with multi-unit franchisees that can open a minimum of three stores. This requirement is found amidst many business opportunities in the food industry, so it’s something to consider as part of the process when reviewing all possible fast food franchise opportunities.
Not all restaurant chains will be looking for entrepreneurs that have extensive hospitality experience, as many will provide comprehensive training as part of the franchisee onboarding process. What will be required, though, is a passion for food and a strong understanding of things like real estate, food industry trends, and possible experience of multi-unit ownership.
Before site selection/real estate or staffing come onto your radar, you first need to ensure that you have the financial capabilities to open your own food chain and become a thriving member of the restaurant industry.
How to open a fast food franchise
Franchisors will often charge an initial franchise fee, and will also examine your liquid assets and net worth when assessing whether you are a suitable candidate to open a leading restaurant brand. McDonald’s, for example, requires at least $750,000 in liquid assets, while KFC will be looking for a net worth of at least $1.5m.
Once this initial cost has been established, you’ll need to find a suitable location to open your restaurant. As mentioned previously, big restaurant franchises will often assist with site selection and sometimes even the funding of this initial opening. Experience and knowledge of real estate and market trends are a bonus, but not always necessary in your franchising journey.
Some restaurant franchises will also be looking for investors who can sign up to open multiple franchise units as part of their franchising agreement. While this naturally comes with a higher initial investment, having a portfolio of multiple restaurant locations or fast food brands is a proven way to strengthen your own franchise network.
When deciding on what kind of food franchise you should open, it’s important to consider the current market trends and popular brands that may impact your success.
Keep an eye on food industry trends
Sustainability and responsible consumption are important factors for many consumers at the moment, for example, and some brands are built entirely around the concept of making the world a better, greener place to live.
Healthy eating is also seeing a huge uptake in popularity; especially in light of the global pandemic. In fact, market insight firm FMCG Gurus found out that 73 per cent of consumers plan to eat and drink more healthily after the pandemic, with 35 per cent paying closer attention to brand’s sustainability claims.
This doesn’t necessarily mean that you have to open a vegan burger franchise, but it’s important to consider the market when planning which of the many franchise opportunities you’d like to partner with. Keep an eye out for timely, healthy food franchise opportunities such as juice bars, unique retail offerings within the food sector, or popular bakery brands that bring a European flair to the global food franchising market.
So whether you’re going to go with the most popular franchise or a more niche offering, do your own due diligence and you could see strong financial returns in no time!