By Carlos White, Franchise Attorney, Founder of The Impactor, and the first Franchise Impactor Ambassador in the U.S.
While franchising is a regulated business model, if properly developed and implemented, franchising can accelerate revenues and increase brand recognition. Published reports indicate that franchises tend to earn higher revenue than small, independent businesses (U.S. Census Report) and more likely to succeed than independent businesses (SMB CEO Report).
Not surprisingly, franchising is becoming a popular way to scale a business, and the largest industry sector to franchise has consistently been restaurants. Accordingly, restaurant concepts should take a closer look at franchising their brands.
Why Restaurant Concepts Should Consider Franchising
There are many benefits associated with franchising, including:
- Helping a restaurant concept systematize and implement scalable business systems, while protecting the restaurant’s brand, goodwill, processes, systems, networks, and operational support.
- Allowing a concept to grow, with minimum – or no – equity dilution and less self-funding liability.
- Incentivizing growth by delegating entrepreneurship opportunities instead of increasing employment expenses. Each of the restaurant brand’s franchisees will be an entrepreneur/investor – not an employee. As a result, each franchisee will be more motivated and financially incentivized than a restaurant manager to maximize sales at their location(s).
- Allowing the restaurant owner to still operate corporate units. This gives the restaurant brand the flexibility to analyze the costs/benefits between operating an additional unit themselves versus having its franchisees run a location.
- Mitigating legal risks associated with scaling. Many people don’t realize that, due to the broad scope of franchise distribution laws, many licensing, supplier, and distribution arrangements are illegal franchise arrangements. This means, without a legally compliant franchise program in place, the restaurant brand and its owners may be subject to regulatory actions, criminal penalties, and lawsuits. Having a franchise program helps to reduce adverse legal exposure while also helping to defend against misrepresentation and fraud claims.
How to Successfully Franchise a Restaurant Concept
If you want to build and scale a restaurant franchise, you should, at a minimum:
- Make a franchise-specific business plan. This plan should outline your franchise startup costs, operational and marketing goals, real estate and technology strategies, revenue and sales goals, as well as costs and projections, including potential revenue projections and initial investment costs for prospective franchisees. Additionally, that plan must provide the infrastructure, training, systems, tools, technologies, and support necessary for your franchisees to be successful. Depending on your location, existing systems, and infrastructure, you could spend between $15,000 to $100,000 in one-time fees and expenses to develop a franchise program. Please note: if you have solid existing business and operational systems, you may only need the legal documents and agreements to franchise, so your fees and expenses should be on the lower end of that spectrum.
- Develop a scalable model. A scalable business model ensures that you’ll maintain consistency and excellence as you grow. Create and maintain business systems that can be easily learned and replicated. Carefully document all elements of the business systems – including your recipes as well as protocols for hiring, customer service, training, etc. – so they can be properly replicated across all locations. Additionally, be certain that your business systems are consistent across your brand, so that guests receive the same excellent food, service, and experience across your franchise network.
- Scale thoughtfully. Analyze demographics, competition, and demand in the areas you’re considering. What other restaurant brands are located in these areas? Are there direct competitors with similar concepts? Is there a need – and demand – in these markets? Make informed, data-driven decisions about when, where, and how to scale.
- Build a strong brand identity through consistency and franchisee recruitment. Think about the most successful restaurant franchises – like Wingstop, Raising Cane’s, and Taco Bell – and consider what they do well. At the top of that list: they’ve created strong brand identities that increased their visibility and credibility, they offer consistent experiences that guests can rely on, and they recruit franchisees that align with – and can execute on – their mission.
- Work with the right experts. Surround yourself with smart, experienced experts that specialize in franchising, including franchise attorneys and financial advisors. These experts will be instrumental to your efforts, providing advice, identifying risks, negotiating deals, and overseeing contracts. Work with experts that will guide you through transactional solutions and business strategies, helping you create a sustainable, scalable business. Having proper advisors – and protections – in place will help you scale strategically, minimize risks, avoid obstacles, align with the right partners and, ultimately, thrive.
Franchising can be a lucrative proposition, allowing you to expand into new markets, secure additional revenue streams, and grow your brand. Reports and statistics have shown that franchising can be a great investment vehicle – assuming you develop and implement a franchise-specific business plan, create a replicable business model, and build the right infrastructure. Given the scope of franchising, it’s imperative that you work with qualified and experienced franchise professionals who can help you develop the right strategies, scale wisely, avoid common pitfalls, protect your assets, and create a successful franchise for long-term wealth.
About Carlos White
Carlos White, Founder of The Impactor, is a leading franchise attorney in Dallas and the first Franchise Impactor Ambassador in the U.S., appointed by Dallas Mayor Eric Johnson. Mayor Johnson also nominated White to the Workforce Solutions Board of Greater Dallas, which was recently approved by the Texas Workforce Commission.
White has been recognized four times by D Magazine as one of the city’s best lawyers. A graduate of the University of Pennsylvania’s Carey Law School, he has worked as a Partner at leading law firms and has experience working with top franchise concepts, including Wingstop, Pizza Hut, Dunkin Donuts, and Little Ceasar’s. For more information, please visit The-Impactor.com, set up a call with Carlos here, or email Carlos at carlos@the-impactor.com.
