Opening a Franchise vs Starting an Independent Restaurant
There are two major categories of restaurants: independent restaurants and franchises, also called chain restaurants. Independent restaurant owners usually only have one or two restaurants in a small radius, and they manage those restaurants themselves. Franchises are corporate restaurant chains with a board of owners and are found throughout an entire region or nation. When opening a new restaurant, check the pros and cons of each restaurant type to decide which option is best for you.
Independent Restaurants
Independent restaurants are just what their name entails: independent. The owners, whether one person or a group, are in charge of all the financing, marketing, brand design and training involved in running a successful restaurant. Many former chefs or others with vast experience in the restaurant industry are ideal candidates for starting an independent restaurant. Other characteristics shared by independent restaurant owners include:
- Trailblazers. Rather than buying into a franchise and opening another cookie-cutter restaurant, independent restaurant owners use their creativity to design and develop a brand and concept that goes against the mould. Many of the most successful chain restaurants started with one person thinking outside the box. Colonel Sanders, the founder of KFC (Kentucky Fried Chicken), is an example.
- Entrepreneurs. True entrepreneurs not only want to own and operate their own businesses, but they also want it to be their own idea. For example, independent restaurant owners start with a concept idea and work hard to realise their vision.
- Type-A personalities. Independent restaurant owners often have many traits characteristic of a Type-A personality. Many are aggressive, competitive, stress junkies that have to have everything their way. On the other hand, the workaholic attitude of someone with a Type-A personality allows them to do whatever it takes to make their restaurant successful.
Owning an independent restaurant involves much work because you must design everything yourself. However, any profits made are yours to keep because you do not have to pay royalties to the owner of your concept. There are many other pros and cons to owning an independent restaurant.
Franchise Restaurants
In the franchise restaurant system, the owner (franchisor) of a trademarked restaurant brand and logo allows another person (the franchisee) to purchase the rights to use the franchise’s brand and marketing materials for profit. Chain operators pay royalties and sometimes advertising fees to the trademark owner. In exchange, the franchisor provides training, marketing materials and other benefits independent restaurant owners must develop themselves.
Franchise or chain restaurants are ideal for individuals who want to own a restaurant but need more experience operating a commercial kitchen. Characteristics of ideal franchisees include:
- Personal wealth. Most franchisors require a certain amount of start-up capital from private, non-borrowed funds to buy into a franchise system. For example, if you want to open a new McDonald’s restaurant, McDonald’s requires a 40% down payment that “must come from non-borrowed personal resources.”
- Team player. Restaurant franchises already have marketing, training and management systems, which helps make the brand successful. Ideal candidates will know how to follow the rules for the betterment of the whole brand.
- Need for food service knowledge. In some cases, the less knowledge a potential chain operator has about the brand and the restaurant industry, the better. This allows the franchisor to mould the franchisee to fit the brand perfectly.
- Former corporate managers. Many downsized or retired corporate managers are a perfect fit as chain restaurant owners because they have management experience. Often, these people are tired of the rat race associated with corporate life and want to venture out on their own.
Franchise restaurants are only for some. But if you are interested in buying into a proven brand, there are some general guidelines that you will need to be aware of.
