From fast food outlets to restaurant businesses, here’s what you need to know
In 2021, the food and beverage market has shifted beyond imagination in literally a matter of months.
From traditional bricks and mortar sites to the development of virtual ones, food brands seem to have been fairly resilient of late. But which type should you opt for if you’re considering a franchise in this sector?
Which F&B brand is best?
You will be used to the terminology fast food or QSR (quick service restaurants) and there continues to be no shortage of these types of establishments to cater for our need for speed and convenience.
Then, there’s the full blown sit down restaurant format, often specialising in country specific cuisine such as America, Italy, Japan.
You would expect food costs to be higher in a restaurant, as they have to incorporate their fixed costs into the overall package to ensure a repeatable and scalable business.
As we move more towards a need for greater customer experiences, the businesses that can cater to this need will survive and continue to push up average spend.
What to expect from buying a food franchise
As a franchisee of a franchised food brand, you’ll enter into an agreement that gives you the rights to operate as that brand name and trade at a certain location.
Often, you’ll be provided with initial and ongoing training, as well as ongoing support as part of your franchise fee.
Moving on to trading, part of your ongoing revenue will be shared by way of royalty payments to the franchisor (or head office). This is often calculated as a percentage of sales; in other cases, it can be a fixed fee.
You’ll also be required to commit to ongoing marketing or advertising costs, which will not only help your own site develop, but will assist the brand develop a national presence, which you might have already benefited from.
The shift to online ordering
Food brands have always had to fulfil the need for customers to get access to their preference when they want, at a time that they want and where they want it, often at home. The last 18 months has seen an increased rise in demand for this.
Where some establishments might have seen a 20-30 per cent rise in online orders historically, many were 100 per cent reliant on them to be able to continue to trade during the pandemic.
Whilst this trend might drop off as we return to some sort of normality, we can be sure demand will continue to remain strong for some time if current statistics are anything to go by.
In fact, many food brands are now shifting their entire modelling to capitalise on this now as they see it to be the way forward.
Not all premises are franchised owned
The average customer would barely know one location from another and, indeed, whether the store they visited is company owned or a franchised site, unless they researched who owned the business. Even then, it wouldn’t necessarily be apparent, unless their receipt indicated as such, which gives franchisees a significant advantage.
Because the brand is already established, franchisees are more likely to generate revenue much quicker than an independent start-up and continue to grow at a faster rate than they would do otherwise. This is one of the reasons you’ll often see some fairly heavy initial and ongoing investment levels.
Why now could be the best time to invest in a food franchise
The past year or so has created more opportunities for food brands - many have had to flip their model to survive.
Being creative and offering a positive customer experience will no doubt mean that some stores will want to increase the square footage of sites, especially if landlords become more willing to negotiate on how they calculate the value of their units.
More conversion opportunities are appearing today than at any other time in history, as often viable sites, where businesses had had to close purely because of cash flow issues, have left fully kitted out units that can be remodelled at nominal cost.
The rise of virtual or dark kitchens, either as an add-on or new entity in a secondary location, has further fuelled the opportunities in this sector.
Let’s also not forget about the growth of in-store or concession options. These might become increasingly popular as the economy bounces back and we once again get back to our old shopping habits.
Franchisors want to help you enter the food sector
Let’s not forget too that a franchisor wants to sell you a franchise, ideally understanding that there’s the need to ensure the correct fit for both parties.
This could mean they create incentives for a multi-site operation and, in some instances, might even suggest you become the equivalent of them (if you have the right background) and offer you a way of achieving an amazing return on investment.
Food businesses have seemed to have fared quite well during the latest economic reset and there’s no reason to believe they will not continue to do so.
Especially as they adapt, expect to see many new brands enter the franchise market. As always, perform your own due diligence before you enter into any agreement.
Richard Pakey is a franchising expert and regional director for the award winning Lime Licensing Group.