The Pros and cons in starting a Fine dine restaurant.
October 23, 2019
Starting a Fine dine restaurantToday, fine dine restaurant franchises are the most popular franchise opportunities in the market, making them great business ventures for popularity and revenue-generating possibilities. Although owning a restaurant franchise may be a financial opportunity, it comes with both pros and cons.
Fine dine restaurant franchisees do not require the owner to necessarily be experienced. With the right amount of knowledge and support, operating an entire fine dine restaurant franchise is manageable. Restaurant franchises have a higher rate of success and economic growth than other start-up businesses. Securing finances for a restaurant franchise requires much less cost than that for an independent business. Casual dine restaurant franchisees have established recognition and reputation, better management and workforce, etc. An amalgamation of all these factors induces positive effects on a business.
Instant Brand Recognition
One of the most significant advantages is the benefit of instant brand recognition and built-in demand that usually takes years to achieve in case of an independent restaurant or café. The familiarity and established reputation of the brand name allows franchisors to instantly take over a franchise, without having to establish a customer database. The more the brand recognition and demand, the more success and ROIs you will generate within a short time span. Business expansion is guaranteed if you are willing to take up risks.
Ease in Financing and in-depth Training
The parent company provides a percentage of investment; thus, it is ensured that you will not have to burn the biggest hole in your pocket. Additionally, a well-recognized restaurant brand is associated with lending sources that are familiar with the real estate and equipment needs of a franchise. This eases difficulties in obtaining funding and loans. Moreover, a brand ensures that new franchisors undergo a comprehensive training program before taking over a franchise. This allows you the owner to learn all the key steps that are most likely to allow you to lead a successful business. These programs provide you with absolutely everything, including classroom work and on-job-training, which needs to be focused on to manage a profitable business.
Owning an independent restaurant requires its owner to start from scratch. The tasks involving finding a perfect location, signing leasing agreements, obtaining legal permits, designing concept and interiors, kitchen and menu designing, hiring chefs and staff, management and marketing, system automation, etc. In contrast, fine dine restaurant franchisees are turnkey or partially turnkey, emphasizing on the ready possession of the place. Such turnkey packages can save an owner a lot of work and aggravation.
However, after a few months, you are expected to pay for the package, which is included in the initial franchise and continuing fees and royalties for the duration of the contract/agreement signed.
Marketing Support and Prestige
Independent restaurants do not usually have any marketing and sales support; however, this is not the case when you own a casual dining restaurant franchise. The brand owners proffer complete sales, marketing, and advertising support initially. You get the benefit of direct access to a wide network of franchise entrepreneurs. Many people tend to associate glamour and a high sense of respect with you as a franchise owner. Valid or not, this degree of status and popularity is important for occupation and maintaining strong customer database and higher ROIs.
Owning a casual dining restaurant franchise means entering the business world. It has been reported that many restaurants shut within the first year of opening. This occurs when restaurants are located where there is already considerable competition. Some restaurants do not serve what customers expect, or constantly changing taste with each new chef leads to inconsistency in the menu and taste. However, apart from location and food, there are many other cons of owning a restaurant franchise. To buy a franchise, a formal agreement with the parent company/brand owner needs to be signed. These agreements dictate how the business would be run and operated, which may restrict bringing creativity in the interior designs, architectures, and restaurant theme. Moreover, the percentage of the profit gained needs to be shared with the brand owners.
Although a considerable percentage of investment comes from the brand owner, you need a large and substantial upfront investment to get started. It is no surprise that owning a fine dining restaurant franchise requires heavy investment. Even before the agreement is signed with the brand, you will require money for lawyers and legal documentation, rent, and utilities, inventory management, landscaping, compliance with local zoning ordinances, royalties, insurance, etc.
Zoning and Code Compliance
The government demands any food business to fulfill many code criteria and guidelines ensuring that the food served is safe for public consumption. Compliance with such guidelines and code conducts can be time-consuming. Nevertheless, many casual dine restaurant franchise brand owners provide guidance and legal aids on this subject.
The growth of any restaurant franchise is limited due to the parent company’s territorial restrictions. According to parent companies, multiple franchise owners should not be competing among each other as it may hamper brand reputation. Thus, the growth of your franchise may be limited in terms of expansion and geography, which may ultimately affect your ROI, business expansion, and overall success.
Most of the fine-dine restaurant franchise brand owners demand to hire low-paid employees. Although it may seem cost-effective initially, the turnover of such employees is very high. Recruiting and retaining a sufficient number of employees and expecting quality work to be delivered requires a lot of investment. Low-paid or less-experienced employees are required to undergo initial training to better understand their job profile, deliver excellence, and achieve client satisfaction. Training and on job experience also require a substantial investment on a regular basis. Labor challenge has thus been reported as one of the major problems faced in any food franchise.
Termination and Renewal
Breaching agreements can severely affect the business. Breaking rules, not abiding by the brand’s standards, and failure to pay royalties may result in your termination as a franchise owner, wherein you can lose the entire investment. Moreover, brand owners decide whether to renew the agreement or contract; they can consider changing the terms and conditions during renewal.
Thus, be cautious while buying a casual dine restaurant franchise, seek the help of restaurant consultant service for proper guidance. Before buying, get in-depth knowledge of the business to ensure higher ROIs and capital gain.