Managing Partner
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.
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.
Contact us today to meet with one of our business law attorneys in NYC.