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Franchise Prospector » Franchise Trends
Restaurant Franchise Opportunities
A Satisfying Business Investment
by Amy Covington
Everybody eats - it's one of those necessary acts that most of us, pardon the pun, relish. The possibilities for a good meal are endless - from juicy burgers, crispy, golden french fries, to low-carb wraps, soups and salads, fruit smoothies, and piping hot pancakes with gooey syrup. From one coast to another, restaurant franchises serve up tried and true favorites to a receptive public. Whether you're on the go or want a sit-down meal, there is something for every taste bud, budget and time table.
What better way to make a living than to combine business with one of our favorite pastimes? Buying a top restaurant franchise is a great way to get involved in the world of franchising. "With many systems in place they offer security," said Todd Peterson, Vice President Development for Sizzler USA. "They've done the legwork, research, created brand awareness - everything is already in place."
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"Franchises are proven identities," Jim Treliving, President and CEO of Boston Pizza Restaurants, LP. "The support system that a corporation can provide to its franchises helps in the success."
Aside from logistics, it's not hard to figure out why restaurant franchises are hot. Go into any Denny's on a Saturday morning or a Subway Sandwich Shop during lunch time and you may see green too. "Our society is aligned with fast food services and casual dining," said Reginald Heard of CIT Group Inc, the largest SBA lender in the US. "There certainly is a need and franchising is there to meet the demand."
Are Restaurant Franchises Profitable?
Restaurants can be profitable, but it takes more than a good idea to run a successful restaurant operation. Like any business, making a profit is predicated upon a winning combination of demand, location, marketing, and the skills of the operator. "The critical key to a success operation is experience and training," Peterson said. "Some franchisees fail even with a franchise system."
A comprehensive grasp of the restaurant industry and your targeted market is essential when determining whether or not a restaurant franchise is the right choice for you. "When people think of franchises they generally think of restaurants," said Kevin Hein of Snell & Wilmer L.L.C. who works extensively within the restaurant industry as an attorney and speaker on franchise issues. "People can go into a restaurant during a busy time and do a head count, they can see the line is out the door but this could be off the mark."
"A lot of people think you can put up a sign of a well-known business and they will be profitable," said Dean McPhail, co-founder of Cafe Hawaii Partners and owner of several Jamba Juice and Starbucks stores. "That's not the case. We look at a 1-3 mile radius around our stores that we consider to be our market. We build a brand within each community where our stores are located."
Product demand goes hand-in-hand with location; even if you have primo real estate, without a demand for your product, you aren't making money. Likewise, even if there is a demand for your product within your community, if you have an out of the way location where people can't find you or if your property is inconveniently located, you're out of luck - and out of business.
Location Matters
"Never underestimate the value of demand or taste for a product," said Hein. Consider local food customs when analyzing an opportunity; what may attract crowds in one part of the country may not go over well in another part. Nontraditional concepts tend to do better in metropolitan, urban centers but not necessarily in Middle America. That's not to say that change can't happen, but it tends to happen at a slower pace in less densely populated areas. Also, tastes vary wildly from community to community. Case in point: Hein recounted a story about Cincinnati Chili, which according to him is in a category of its own, meaning it doesn't resemble what many consider to be chili - it contains noodles. An acquaintance purchased the rights to the company in order to open a store in Colorado. Upon opening, patrons were confused by what was being touted as chili and the business floundered. Now, that's not to say that Cincinnati Chili is bad - it is successful in certain parts of the Midwest but what works in one community does not guarantee its success elsewhere. Some cuisines may never transition into other markets and it's important to understand which ones have market viability and which ones do not.
Not only do you need to be concerned with regional tastes, factoring in dining preferences also is important. Today, people want to save the suit for the office. When they go out to eat people want to go casual. "It started in the 70s with people wanting 'a lot of food' when they went out, then they wanted 'great food,'" said Treliving. "It progressed to customers wanting 'service with good food. Now we are where people want to feel comfortable when they go out. They want to be treated well and served good food. Service and feeling welcome in our restaurants is what I pride ours on."
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