What You Need to Know Before Investing in a Fast Food Franchise

To be an entrepreneur is a dream of many. With many fast food chains offering opportunities for franchise, owning a business was somehow made easier. For one thing, you don't have to enter the industry as an unknown brand, so that means fewer risks for you. 

But opening a fast food franchise business doesn't mean success is guaranteed automatically. You still need a good management team, a strategic location, and operational skills to bring your business to success.

This guide can equip you with important information you need to know before buying a food business franchise.

Not Every Popular Restaurant is Open for Franchising

You may have one particular favorite restaurant that you'd love to own a franchise of, but before you put your heart into it, ask the company first if they offer franchise opportunities. For fast food chains, they'd have higher chances of being open for franchise. As of 2018, fast food chains accounted for 25% of all American franchise establishments. 

The Price

The amount of money you need to prepare should cover the purchase price, opening inventory costs, and the required amount of working capital to break even. Some fast food restaurants would require you to have a net worth of at least $1-1.5 million before they sell a franchise to you. In addition to that, they may also require cash reserves of no less than $750,000. Other fast food restaurants may need you to have liquid assets worth $500,000, apart from your million-dollar net worth. 

You also need to know how you're going to fund your franchise business. You have at least 6 financing options. Your franchisor is one, so find out if they have a financing program exclusively for franchisees. Many of these programs will not only fund the purchase price but the costs for equipment and other resources the business needs as well. 

Commercial bank loans, Small Business Administration (SBA) loans, and alternative lenders are your other three options. Make sure to meet all their requirements so you can avail financing from any of the three. You can also finance your franchise through crowdfunding or with the help of your family and friends. 

What It Takes To Run A Successful Franchise

Woman running franchise business

Because the business you own is already widely known, your customers would expect the same food, service, and atmosphere. Follow all the rules your franchisor would set to maintain the business's consistency. Know what you're passionate about because this would determine if you'd be a good franchise owner or not. If you're passionate about cooking and inventing your own recipes, then a fast food franchise may not be for you.

Learn from other franchisees as well. Ask them about the key success factors they found, what are the risks they faced, how did they handle failures, how long did it take for them before making a profit, etc. Learning from your own and others' experiences will naturally develop your skills. If you have failed or made a mistake at one point, take it as a lesson to improve as you move forward.

The franchisor should also be your source of learning. Know what kind of help can you expect from them. They know the business's strengths and weaknesses, so you can base your business plans on those. However, despite their support being readily available, remember that your franchise business is all yours. You are responsible for running it successfully.

Most importantly, know the requirements of your franchisor. Adhere to the contract terms, listen to their advice, and be highly active in operating the business. A famous fast food restaurant may not need to be promoted like new restaurants, but still, you need a solid plan to maintain its quality and market standing.

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