Restaurant Franchises

A couple of years ago a Quizno’s franchise set up shop in my hometown of Farmington, Maine. The owner completely renovated a former gas station into a trendy little sandwich shop, located at the busiest intersection in town. Within six months the shop had closed. Despite having a nationally recognized name, a great location and college campus full of students right around the corner, it didn’t even make it to the one year mark. So what went wrong? Well, I can’t say for certain, since I didn’t know the owner, but I am willing to guess (and maybe I am wrong) that franchise fees had something to do the premature closing.

Opening a franchise restaurant may seem like an easy way to do business. After all, the corporate headquarters write the menu, design the restaurant layout and take care of all advertising. However, franchising, especially a larger, well-known name, costs a lot of money to open and costs a lot of money to maintain. Franchisees not only have to follow a stringent set of guidelines, from the color of the walls to the items on the menu, they have to invest money in new concepts as well. Take McDonalds latest move, for example.

In an effort to garner more business from the growing gourmet coffee trend, McDonalds has rolled out plans to introduce new coffee drinks, as well as specialty teas and energy drinks. The estimated cost to individual franchisees? Up to $100,000! Franchisees will have to have new equipment to make gourmet coffee drinks, such as lattes and mochas and the front counter will have to be reconfigured to accommodate a new beverage station. None of these renovations will come free to franchise owners.

Of course, the rational behind this new concept is profit. McDonalds predicts that individual franchises will make as much as $125,000 per year, once the specialty drink concept is solidly in place. Still, the initial investment comes as quite a sting to many franchisees. The fact that minimum wage went up earlier this year and the price of oil and gas continues to climb, makes some franchisees wonder if this is the best timing for a new concept.

If you are thinking of opening a franchise, there are many pros and cons of franchising to consider. While opening a franchise restaurant comes with many benefits, it is important to remember that it also has a lot of uncertainties, just like any independent restaurant. Still interested in owning a restaurant franchise? Check out Restaurant & Institutions annual Top 400 Chains, to find out how popular restaurant chains rank against one another.