Food & Beverage Franchises: Which is best, Fast Food Outlets or a Restaurant?

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The market in 2021 has shifted in a way beyond imagination in literally a matter of months. From traditional bricks and mortar sites to now the development of virtual ones has been an eye-opener.

Food brands seem to have been fairly resilient of late, but which type should you opt for if you are 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). There is no shortage of these establishments to cater to our need for speed and convenience, whether it is a burger, pizza, coffee, cake, or dessert.

Then, there is the full-blown sit-down restaurant format, often specialising in country-specific cuisine such as America, Italian, Japanese, and so much more compared to decades ago.

You would expect food costs to be higher in a restaurant as they have to balance their fixed costs into the overall package to ensure a repeatable and scalable business.

As we move towards a need for customer experiences, the businesses that can literally cater to this need will survive and continue to push up average spending to thrive.

What To Expect From Buying A Food Franchise

As a franchisee of a franchised food brand, you will enter into an agreement giving you the rights to operate as that brand name and trade at a certain location; often gaining initial and ongoing training, as well as ongoing support as part of your franchise fee.

Moving on to your trading, part of your ongoing revenue will be shared by way of royalty payments to the franchisor (or head office), often calculated as a percentage of sales or a fixed cost, and you will also be required to commit to ongoing marketing or advertising costs, which will not only help your own site development but will continue to assist the brand in developing a national presence, where you might have already benefitted from by joining the brand in the first instance.

The Shift To Online Ordering

Food brands have always been reliant on 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, and the last 18 months has seen a further rise and demand for this.

Where some establishments might have seen a twenty to thirty per cent result in online orders historically, many were 100% reliant on being able to continue to trade during the pandemic. Whilst this trend might drop as we return to some sort of normality, we can be sure that the demand will continue to remain strong for some considerable 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 forwards!

Not All Premises Are Franchised Owned

The average customer would barely know one location from another. Indeed, whether the actual store they visited one week would be a company-owned or franchised site unless they delved into the ownership. Even then, it wouldn’t necessarily be apparent unless their receipt indicated as such.

Here there is a clear advantage, not only to the brand but also to you as the franchisee, as you get to operate under these conditions from day one, meaning you will most likely start to generate revenue much quicker than a start-up and continue to grow at a faster rate than you would do otherwise.

This is one of the reasons you will often see some fairly heavy initial and ongoing investment as the franchised brands realise this and understands that it can capitalise on it to continually develop.

Why Now Could Be The Best Time To Take A Food Franchise

The past year, or more, has created more opportunities for food brands. Many have had to flip their model to survive.

Being creative and offering a customer experience will no doubt mean that some stores will be looking to actually increase the square footage of sites, especially if landlords become more willing and able to negotiate on how they calculate the value of their units in the market.

Many more conversion opportunities are appearing today; more than at any other time in history, as often, very viable sites where businesses that purely through the unavailability of cashflow have had to close down, but left established and fully kitted out units which can be remodelled at a nominal cost for a new owner to open very quickly.

The rise and rise of virtual or dark kitchens, either as an add-on or new entity in a secondary location, have further fuelled this sector’s opportunity.

Have You Heard About The Mysterious ‘Ghost’ Kitchen?

Let us not forget about the growth of in-store or concession options, maybe in a shopping centre, mid-aisle concept. These might become increasingly popular as the economy bounces back.

We once again get back to our old shopping habits; in fact, this is predicted to boom as there will be pent-up demand and our own appreciation of what we have missed becomes available to us.

Who knows, we might even see more food vans and trailers at food events and festivals, now who looks forward to going back to one of those!

The Franchisor’s Shift To Helping You Get Into The Food Sector

Let us not forget too that any franchisor wants to sell you a franchise, ideally understanding that there is the need to ensure the correct fit for both parties, and today, as a direct result of this, will often be more creative on your options.

This could mean they create incentives for a multi-site operation, and in some instances might even make a suggestion of you becoming the equivalent of them (if you have the right background) and offering you an unbelievable way of achieving an amazing return on investment!

Food businesses have seen to faired quite well during the latest economic reset, and there is 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 and, as always, perform all your own due diligence before you enter into any agreement!

This article was written by Richard Pakey, who is a franchising expert and Regional Director for the award-winning Lime Licensing Group.

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