Buying into a restaurant concept? Don’t sign on the dotted line without asking these crucial questions, says Andy Moore
So you think you’re ready to sign a franchise agreement. You’re text buddies with your franchise broker. You’ve read all the company’s literature. You’ve even travelled to the corporate office and received the grand pitch.
But, dear reader, I’m here to say that you’re not, in fact, ready to sign a franchise agreement until you have all these questions answered.
Am I up-to-date on industry news?
You’re reading Global Franchise, so you’re clearly an informed — nay, brilliant — observer of industry news. But how deeply have you dived into the industry you’re entering? Do you know the big players and the up-and-comers? Do you know if your sector is growing or showing signs of over-saturation? And do you know of any impending legislation that may drive up costs or threaten your competitive advantage?
Make sure you’re informed by signing up for daily email blasts, checking the headlines, and attending conferences. And, of course, by continuing to read Global Franchise.
Is their IT from the 21st century?
Take good notes of what IT your chosen restaurant franchise uses, then Google the brand names and read the reviews. Remember that few things are as bad as the most hysterical one-star review makes it out to be. Instead, look for the more thoughtful critiques found in 3 or 4-star reviews: They’ll help you truly understand the technology your staff will be using on a daily basis. If the franchise is missing crucial IT components – i.e. they don’t have a loyalty program, or their POS is actually a 1920s adding machine – you may be asked to help invest in upgrades soon.
You can even secret shop some of the franchise’s stores and watch for signs of faulty tech. If a cashier seems visibly flustered when ringing up a complex transaction, the ramifications are obvious: You’ll be investing a lot of time training the system to your staff.
Are they offering real estate expertise?
Want to open your first location steps from backyard, and you have a city council buddy who’ll let that zoning violation slide? A good franchisor is not going to let you do that. The decision on where to place your location should be made in conjunction with the franchisor. It should be a data-driven decision, based on a robust understanding of where your franchise’s fans are living and working. And you should make sure your store doesn’t sit on an island. It should be part of a broader growth strategy in your territory. Hey, speaking of territory…
Is my territory protected?
A no-brainer, but there are franchisees who open a store at 202 Main Street, only to see the rights to 203 Main Street sold to another franchisee (a slight exaggeration, but only slight.) Make sure that you have clear language in your franchisee agreement that lays out the exact boundaries and exclusivity of your territory. Otherwise, sales cannibalization is likely to follow.
Does the brand have a proven menu?
You’d be forgiven if you can no longer tell restaurant concepts apart. Menus are becoming homogenized in item and description. You can play a thrilling game of restaurant Bingo with the words ‘artisanal,’ ‘house-made’ and ‘locally raised’.
Look for concepts with menus that have some staying power – a track record of success that’s longer than just a few months. And look for concepts that can truly lay claim to a few signature items. Those franchises are able to stand out from the pack.
Does the brand have proven systems, especially training programs?
Your restaurant is only as good as its people. And those people are only as good as their training. It’s vital that the franchisor have proven systems that make sure you, and your people, are trained well.
Do I understand the franchise disclosure documents?
Most of these documents will be written in plain English. In which case: great, you have no excuse to not read through the materials. You’ll undoubtedly learn something useful. If the document happens to be written in legalese, make sure you have an attorney properly vet what you’re about to sign (preferably one who is experienced in franchise law.)
Does the franchisor share my expectations?
Are you looking for a passive investment in which to park your money? Or a family business, where every family member helps in some way? Or a profit-driving machine, where you man the ship and keep costs as lean as you can? Each franchise has its own unique culture, and being upfront about the type of franchisee you’ll be will save headache for both sides in the future.
Will they take my money, pat me on the back, and say “good luck”?
If so, well, you might as well save your hard-earned cash and open your own concept. Because buying into a franchise should mean joining an active support network, with the franchisor and fellow franchisees looking out for your best interests. Talk to other franchisees. And not just the successful ones. Try to get a well-rounded understanding of their experience with the home office.
There will be surprises when you begin your franchising journey. It’s your job to make sure there aren’t too many.
ABOUT THE AUTHOR
Andy Moore serves as the Area Developer for the state of Texas for Hwy 55 Burgers, Shakes & Fries — a 140-unit, retro-themed diner that features fresh, never-frozen burgers, house-made frozen custard, and other favorites in an open-kitchen setting. Moore previously served as Director of Communications for the brand. hwy55.com.
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