Why Restaurants are the Toughest Franchise Business in the World


July 30, 2013

big hamburger isolated on whiteBy Bob Coleman
Editor, Coleman Report

Next time you have some downsized corporate type with wanderlust in their eyes talking why you should risk your shareholder’s hard fought equity to fund their start-up franchise, whip out this article and give it to them.

Franchise expert Joel Libava has penned a great article about the realities of being your own boss.

In the restaurant arena Joel reminds everyone of the flip side of owning a franchise. His top five challenges:

1)   You’ll be Spending a Lot of Time Recruiting, Hiring, and Firing Employees
Turnover rates in food service can be as much as 50% annually. So, be prepared to go through a lot of employees.

2)   You’re Going to Have a Total Lack of Control When it Comes to Food Costs
They vary tremendously. A lot of things can affect your food costs. Things like fuel prices (which affect delivery costs), natural disasters (which can wipe out crops) and other assorted maladies can and do affect food costs – your food costs.
Translation: your profit margins can drop quickly.

3)   Your Restaurant Equipment Can Go on the Fritz
In my experience, this tends to happen on your business’s busiest days and times.
For example, if you own a full service restaurant and the dishwasher breaks, plan on experiencing one of the grossest jobs imaginable in food service; washing dirty dishes by hand. If you don’t have clean dishes available, you can’t serve your food.

4)   Websites like Yelp Can Sometimes Make or Break Things for Your Franchise
On a positive note, a series of lousy reviews can help you figure out what’s wrong quickly so you can address it. And, if you can’t your franchisor can. Of course great reviews are just that; great.

5)   You’ll be Working Harder Than You Ever Have in Your Life
It was true for me during the many years that I was in the food business. Of course there’s nothing wrong with hard work, but talking about having to work really hard and doing it 15 hours a day, 7 days a week, are two vastly different things.

He ends with great advice, “If you want to become the owner of a food franchise, start your search for the right one with your eyes wide-open. There are great opportunities in food service these days. You should be able to find one that suits you. Just talk to a lot of existing franchisees before you become one yourself.

“That way, you’ll know what to expect as an owner.”

Read More