Opening a Franchise vs. Starting an Independent Restaurant
There are two major categories of restaurants: independent restaurants and franchises, which are also called chain restaurants. Independent restaurant owners usually only have one or two restaurants within 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, be sure to check into the pros and cons of each restaurant type to decide which option is best for you.
Independent restaurants are just what their name suggests: independent. The owners, whether one person or a group of people, are in charge of all the financing, marketing, brand design and training involved with running a successful restaurant. Many former chefs or others with vast experience in the restaurant industry are ideal candidates for starting an independent restaurant. Independent restaurant owners are also frequently:
- Trail blazers. 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 mold. Many of the most successful chain restaurants started out with one person thinking outside the box. Colonel Sanders, founder of Kentucky Fried Chicken, is an example.
- Entrepreneurs. True entrepreneurs not only want to own and operate their own business, they want it to be their own idea, too. Independent restaurant owners start with a concept idea and work hard to make their idea a reality.
- Type-A personalities. Independent restaurant owners often have many traits characteristic a Type-A personality. Many are aggressive, competitive stress-junkies that have to have everything their way. The workaholic attitude of someone with a Type-A personality allows them to do whatever it takes to make his or her restaurant a success.
Owning an independent restaurant involves a lot of work, because you have to 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.
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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 that independent restaurant owners have to develop themselves.
Franchise or chain restaurants are ideal for individuals that want to own a restaurant, but do not necessarily have a lot of experience operating a commercial kitchen. Characteristics of ideal franchisees include:
- Personal wealth. In order to buy into a franchise system, most franchisors require a certain amount of startup capital to come from personal, non-borrowed funds. 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 have marketing, training and management systems already in place, which is what helps make the brand successful. Ideal candidates will know how to follow the rules for the betterment of the whole brand.
- Little 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 mold 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 Oftentimes, these people are tired of the rat-race associated with corporate life and want to venture out on their own.
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