When you open up your business, will you open as an independent company or a franchise? Buying a franchise restaurant is a great idea for some, but non-franchise restaurants, or independent options, provides its own benefits.
Franchising Advantages and Disadvantages
Owning a restaurant franchise is a great way to start a business because you're starting with a well-respected name. You already have brand equity, so you'll be able to leverage this to your advantage.
One of the key benefits of franchising is that people will see your name and trust it.
The eateries, well-known franchises, opened their doors in my town and the first night, they were packed with patrons. The advertising was minimal, but owning a franchise restaurant meant that:
- People tried other locations before
- People already trusted and knew the name
You can start a restaurant franchise or buy it to get started. It's important to compare the advantages and disadvantages of opening a business franchise versus starting one on your own.
An established location has the benefit of knowing how the location will perform.
When buying the business, you can:
- View the sales records
- View business trends
- Reduce your risk of failing
You'll have to inquire how to start a franchise restaurant, but first, you will need capital to get started. Training and other perks will be offered to you to help you increase your restaurant's chance of success.
Pros and Cons of Franchising
As a franchisee, you'll have the following franchising advantages:
- Branding and reputation
- Reviews from previous locations
- Training and systems in place
- Large marketing radius and budget
- Menu determined and in place
- Sources for ingredients
The advantages of a franchise are that everything is in place and ready for you to succeed. If you have the skills needed to run a restaurant, you can make a lot of money faster with a franchise. You have a foundation to work on which is one of the biggest advantages of a franchise vs independent restaurant.
But there are also disadvantages:
- Brand reputation can be limiting and even impact the business if a scandal occurs
- You have to pay fees and royalties
- You lose a lot of the control you have as an independent restaurant owner
- Subject to scrutiny from the franchise
Which of the following is a disadvantage of franchising that should be most concerning? For a lot of owners, it is the brand reputation. Let's assume that a location was plagued with salmonella poisoning, leading to every local and possibly national news station picking up the story.
Even if your location wasn't part of the outbreak, you'll have your reputation impacted.
You need to be sure that you examine the franchise pros and cons before deciding whether or not it is a good option for you.
What is a franchise restaurant?
It's a business that has a name, reputation, brand equity, advertising, and a lot of advertising and marketing in place. You'll also have your personal training outlet that can help you promote your business during economic downturns and how to best achieve growth.
While it's easy to learn how to start a restaurant franchise business thanks to training, you may like the challenge of owning an independent restaurant.
Independent Restaurant Advantages and Disadvantages
There's a big difference between a chain or franchise and an independent restaurant. An independent restaurant definition would be your own business. You filed your own incorporation documents, created a name and logo, and you're free from the grips of a franchisor.
That's the main difference of a franchise vs independent restaurant.
But you should also know that owning a restaurant has its pros and cons.
The advantages are:
- Most restaurant owners that start as an independent have experience in the industry
- You're not limited by brand identity and can take full control of your brand
- You have full control over your marketing, menu and operating hours
- You can freely add or remove menu items as you see fit
Of course, there are disadvantages to being an independent owner:
- You're on your own with no training or resources to rely on
- You don't start with brand recognition or a plan
- You start without resources and connections to suppliers or insurers
You have full creative control over your establishment, allowing you to create your own menu, market using your own materials, and build your brand from the ground up. A lot of independent owners go into the process knowing that they're on their own and thrive under the pressure of it all.
Opening a Franchise vs Independent Restaurant
Should you open a franchise or independent location? There are benefits to each restaurant type, and you'll find that opening your independent location requires:
- More upfront capital to create a brand, menu, and market the business
- Creating connections in the industry
- Learning the requirements of permits, licensing, insurance and other fees
If you don't have a lot of capital or are not able to donate enough resources to your marketing campaign, a franchise may be a better option.
When you open a franchise, the franchisor will take on a lot of risks. It will lower the risks by requiring you to go through an intensive application process. You may wait months before your application is approved or denied, so you may feel like you're initially in limbo.
You will also have to have:
- High levels of liquidity
- Pay an initial fee
- Secure a location upfront
- Pay national advertising campaign fees
- Pay royalties on all sales made
What is your experience in the industry? Do you have the practice to start and run a restaurant, or are you flush with cash and think it would be a good fit for you? If you're flush with cash, it's better to open a franchise.
As a franchisee, you supply the initial fees and capital and are able to use an already proven business model. You will have all the protocols in place that can set you up for success. But you will need some business acumen to run a business.
A lot of franchisees are successful business owners, so they may know how to manage a business and delegate tasks in a way that makes the most sense. But you can leverage the training and education the franchise provides to find your own success as a restaurant owner.
Independent owners are usually veterans in the industry and may even seek loans and traditional forms of raising capital. As an independent, you're using your skills and experience in the field to make a run at operating your own restaurant.
The road to success may be more difficult, but you can reap all of the profits and have the final decision on what choices you make for your business.
Executing your business plan and marketing will be done on your own accord. Your success or failure will ride on your own experience and skill.
You'll have to sit down and decide which type of restaurant you want to open. Both have their perks, but ultimate freedom comes from owning a business that you control from start to finish. Risks, on the other hand, are greater controlled by owning a franchise.