Should I Make My Restaurant a Franchise?

Restaurant owners often consider growing their business through franchising. Franchising can be intimidating, but for many, taking the leap is worth it.

If you’re a restaurant owner interested in franchising your restaurant, consider the following. When you’re ready to take the next step, seek top-quality legal guidance from Woods Lonergan.

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What does it mean to franchise a restaurant?

When you franchise your restaurant, you’re granting third parties the right to use everything about your business, including the name, branding, and business model. In return, you get fees or royalties from each franchisee.

Generally, buying into a restaurant franchise requires paying a franchising fee and start-up costs. The new restaurant then offers the same menu, uses the same branding, and runs the same advertisements.

What It Takes to Franchise Your Restaurant

Before you consider franchising your restaurant, it’s beneficial to have certain details in place.

A Successful Restaurant

The word “success” has a different definition for everyone.

Technically, your restaurant doesn’t need to be profitable to begin franchising. However, it is ideal that your restaurant generates some income before franchising.

Business Plan

Business plans are beneficial for you as the restaurant owner, but they are also helpful for franchisees.

Creating a business plan is worthwhile, as it forces you to think about your business and the future you’re aiming for. A plan can provide a road map for you and your restaurant.

Financial Statements

Financial statements give you insight into the financial health of your restaurant and show franchisees a good idea of what to expect.

Operations Manual

A manual is crucial if you want to franchise your restaurant.

The manual lays everything out for franchisees — from how the interior of the restaurant must look to how the food should be cooked.

Additionally, once a restaurant franchise grows, many owners choose to use the operations manual as the basis for training for franchisees.

Why It’s Wise to Franchise a Restaurant

For some restaurant owners, franchising a restaurant is a wise business move for the following reasons.

Franchising Allows You to Grow Your Brand

Franchising grows your brand while costing you little.

Franchisees pay fees for access to your restaurant brand. They usually use their own money to secure a location for the restaurant and take financial responsibility for their franchise, while you receive monthly royalties.

It’s a win-win situation: your brand grows on your franchisees’ dimes, while franchisees profit from your established brand.

Franchising Is Profitable

When you become a franchisor, much of your profits will come from royalties paid by your franchisees.

As a franchisor, your primary concern is helping your franchisees have the resources they need to grow their own businesses. When your franchisees’ restaurants grow, you reap the monetary benefits.

Franchising Allows for Quicker Growth

If you want to grow your business but don’t wish to franchise, you’ll likely be limited in your ability to finance your growth. Building and operating a new restaurant requires plenty of capital.

When you franchise, you allow your restaurant brand to grow more rapidly. Once a franchisor gains momentum, they could open dozens of new franchise restaurants every year. More restaurants mean more profits and brand growth.

When You Should Wait to Franchise

In some situations, it is best to wait on franchising your restaurant.

If, for example, your menu is lengthy or the recipes are complicated, your food could be difficult for franchisees to replicate. Franchising might also be a tough sell if you do not have a solid brand concept. Franchisees often buy a franchise exclusively for the brand itself.

If you’re interested in franchising your restaurant, it’s not out of reach — speak to a knowledgeable business attorney in New York.

Consult with a Business Attorney in New York

For almost 30 years, Woods Lonergan has been helping New York clients with their business needs. We take our time getting to know our clients and their businesses to better serve and reach important goals. Our team of seasoned attorneys and excellent support staff is ready to meet you.

About the Author

James F. Woods is Founder and Managing Partner of Woods Lonergan. He has tried more than 60 jury cases to verdict as first-chair trial counsel, beginning his career as a prosecutor, and resolves complex commercial and real estate disputes valued at $1M to $100M+ for business owners, principals, and middle-market enterprises across the New York metro area. He appears regularly in the New York Commercial Division and in the federal district courts for the Southern and Eastern Districts of New York, and has argued appeals in the Appellate Division and the Second Circuit.

His practice covers complex commercial litigation, real estate and asset litigation, partnership and shareholder disputes, fiduciary breach and corporate fraud, and cooperative and condominium governance. He counsels corporate and cooperative boards throughout New York.

The Legal 500 United States ranks James in its New York Elite rankings for Commercial Disputes, and his peers have recognized him with Martindale-Hubbell's AV Preeminent rating. Woods Lonergan is ranked in Chambers USA: Spotlight New York for Litigation: General Commercial and Real Estate. James serves on the Commercial & Business Litigation Committee and the Business Torts & Unfair Competition Committee of the American Bar Association Section of Litigation, and on the Cooperative & Condominium Law Committee of the New York City Bar Association. His commentary on New York commercial and real estate disputes has been quoted in The New York Times, The Washington Post, Bloomberg Law, Law360, and Forbes.