Pros and Cons of Buying a Food Franchise

Indeed, food franchises are noted as one of the most popular franchise opportunities on the market today, and a good number of willing entrepreneurs are looking to cash in on their popularity and revenue-generating possibilities. While acquiring a food franchise may seem like a “get rich quick” scheme to some, have it in mind it takes hard work, dedication, and funding to thrive in this business.

According to predictions, 2022 will stand out as one of the best years to invest in a food franchise. Note that this isn’t mere speculation or an attempt to undermine the raging effects of the COVID-19 pandemic. There are numerous evidence to support this industry prediction.

According to experts, nothing beats a good recession, especially for franchise businesses. Every franchise salesperson understands that unemployment is going to drive franchise sales since the tried-and-trusted methodology of a successful franchise brand is something to bank on in uncertain times.

Truth be told, there are fewer risks associated with buying a franchise when compared to starting a new business from scratch. Everything you need to succeed has already been arranged for you, including effective branding, a marketing strategy, a popular menu, training resources, and more.

What are the Pros and Cons of Buying a Food Franchise?

If you are considering going the franchise route when starting a food business, you need to take time to analyze the various advantages and disadvantages of franchise ownership to know if it is the right choice for you. Nonetheless, here are the top pros and cons of buying a food franchise:

Pros

1. People Always Need to Eat

Note that one major reason why food franchises are quite successful is that people will always need food and comfort. Even if there is an economic recession and people are watching what they spend, they will still go out to eat.

And when you think about it, it is tough to find breakfast or lunch for less than $8-$10 in most food-service establishments, with dinners most often costing even more. Note that as long as you have a steady stream of customers consistently, there is a high probability of a good return.

2. Better Brand Recognition

Anyone looking to invest in a franchise will often consider food franchises first. Note that this popularity can benefit your franchise when starting. With a franchise, you benefit from a well-oiled customer base and a reputation that took years to build up.

In the food industry, a sense of familiarity is what drives customers to a particular brand. They love the fact that they know what to expect from the food and the quality of service of the restaurant.

3. New Food Establishments Create A Lot Of Local Buzz

Indeed, there is a sort of vibe that comes with a new eatery or restaurant opening up in town, especially if the Grand Opening was a memorable one.

Have it in mind when you buy a franchise, marketing assistance is included in the upfront and ongoing fees. And most food franchisors understand the importance of coming up with a memorable grand opening. If yours goes well, you won’t have to wait long before customers start trooping into your restaurant.

4. Food Businesses are Fast-paced

Starting and managing a food business is, without a doubt, a unique and exciting endeavor. This is quite true especially when your take-out phones are buzzing off the hook, people are waiting in line to order, and your cash register is filled with cash. Always remember that a food franchise is more suited to individuals who enjoy working in a high-energy, fast-paced environment. Don’t expect to have a dull moment in this line of business.

5. In-depth Training

Almost every Franchise offers some sort of training to get you ready for the job ahead. Before launching the food franchise, franchisees benefit from well-arranged training programs that teach everything necessary to succeed in the business.

Your franchisor will provide comprehensive training starting from systems and manuals, brand standards, marketing, quality control, equipment costs to leadership and further development. A reliable franchisor understands that these will guarantee customer satisfaction and a successful business.

6. Startup financing

Most startup businesses find it very challenging to secure funding from banks as they are often expected to provide detailed data concerning their bank history and professional background. Banks are known to be more relaxed in funding franchise food businesses because of the existing knowledge they have about the franchise’s product or service.

Cons

1. Cost of Opening a Franchise

Truth be told, food franchises most often come with very heavy price tags. Note that there is no “average cost” of acquiring a franchise because investment costs will vary based on certain factors, but owners should expect to pay $20,000 and above for the initial franchise acquisition. Even before the contract is signed, owners will still need substantial funds to cater to the following costs:

• Attorney
• Accountants
• Rent and Utilities
• Building maintenance
• Product inventory
• Kitchen equipment
• Landscaping
• Compliance with local zoning ordinances
• Advertising and signage- (Sometimes a franchisor will set up the advertising program, but expects the owner to then pay the bill)
• Insurance
• Promotional expenses
• Ongoing interest if money was borrowed
• Employee uniforms, salaries, and benefits
• Annual royalties

2. Price Sensitive

In this line of business, there is a very thin line between food costs and labor and making a profit. Include that with the possible cost of food spoilage and other unanticipated setbacks such as theft which are more likely with employees at restaurants and fast-food chains.

Also, do not forget the “additional costs” you may have to incur when acquiring “proprietary” and “non-proprietary” products from the franchisor’s approved vendors. As a food franchisee, expect increased costs associated with “approved vendors” to always impact your profitability.

3. High Employee Turnover Rate

It is challenging to find reliable employees in the food industry. According to reports, workers in the food industry are often momentary, which may be due to low pay and a high rate of work burnouts; therefore, turnover is normally quite high. If you become the owner of a food franchise, you will have to keep going through a lot of employees.

Turnover rates in the hospitality industry are noted to be around 70 percent and it can be quite frustrating to train a new employee only to have him leave six months later. However, to help with employee retention, pay close attention to your training and consider an incentive system.

4. Food Franchise Ownership Requires Long Hours

Coupled with the long hours associated with running a food business, food franchise owners will need a whole lot of energy, especially during peak times, where they may have to help out where necessary. Whether it is cleaning tables, aiding to prepare the food, or manning the phones, you’ll be the needed help in the middle of the anarchy almost all busy food franchises experience. 

5. Food Franchises Need A Physical Location

Most food franchises need a physical location, and this could mean a whole lot of things. When compared to an office-based or home-based Franchise, real estate costs tend to be higher for food franchises, as you’ll be paying for things like the build-out, signage, rent, utilities, and more.

Most often, food franchises are expected to sign a multi-year commercial lease. These leases can be quite complicated and are very much landlord-friendly. Nevertheless, before signing the dotted lines of any lease, work with an attorney who has a lot of experience with commercial leases.

6. Zoning Issues

Since you will most often need a physical location, you should also expect certain zoning issues. Aside from the fact that zoning and code issues are sure to drive up costs and also be time-consuming, you may have to comply with certain city, county, and state codes.

You may find food franchisors willing to help you scale through zoning issues, permits, and code compliance. They understand you are probably unfamiliar with it and are there to ensure you become successful. If your food franchisor doesn’t offer this assistance, you should consider another food franchise.

Conclusion

Starting a food business is genuinely an exciting endeavor, and for many people, a food franchise is the best bet. While it comes with its challenges, note that if you can afford to own several units of a high-performing food franchise, your business can end up being quite profitable.

Going down the franchise route is not really for everyone, however, having a good understanding of the advantages, rewards, and setbacks of a Food franchise will surely help you decide whether or not to open a food franchise.