What to Know Before Purchasing a Restaurant Franchise


Franchises have proven to be a lucrative venture for savvy investors, and the restaurant industry continues to remain a popular option for entrepreneurs looking to expand their business sights. While in theory it sounds like an easy venture—buy a pre-existing business that’s proven to be successful and oversee it—in reality, the ins and outs of securing and maintaining a restaurant franchise can be time-and-cost intensive. Consider the following facets of franchise endeavors and determine whether this venture is right for you.

Raise the Funds

While opening a franchise restaurant is generally much cheaper than starting a restaurant from scratch and building it from the ground up, that’s not to say it doesn’t come with its fair share of expenditures. Whether you choose to crowdfund your venture or pursue more traditional loans, you’ll need a huge cache of capital to even get your restaurant idea off the ground. Fortunately, securing the financing for a franchise is often easier than searching for capital for an independent business idea, because the success of the proposed business has already been proven. The cost of opening a restaurant can vary, but it’s easy for entrepreneurs to see themselves spending hundreds of thousands to millions of dollars.

The Struggle to Secure Permits

Restaurants require a bevy of permits and there are many stipulations regarding legality. The food industry faces some strict governing policies, and you’ll need to be knowledgeable about local and state laws to ensure your doors stay open. Always consult restaurant legal counsel to maintain your business and be sure to give yourself enough time before opening to secure the zoning permits and determine local government hurdles you’ll need to jump. The permits you require will depend heavily on the franchise you wish to acquire.

Some franchises may require additional permits, for example, alcohol. Alcohol sales make up a bulk of restaurant profits, and if your franchise is well-known for its bevy of spirits, beer, and wine, you’ll need to keep up by securing the right liquor license depending on your state and local laws. Depending on your geography, you can face some tough competition for alcohol permits. Consider this: Some liquor licenses in California (a highly populous state with fierce competition when it comes to the restaurant and hospitality industries) can cost upwards of hundreds of thousands of dollars. The cost is one thing to consider, but the availability is a concern all on its own. In most states, the limited amount of alcohol permits have already been issued, meaning you’ll have to finagle a license from a pre-existing pool of liquor license owners that are in the market to sell. Keep in mind that you won’t be alone in your efforts; the restaurant business is competitive, and it’s highly likely you’ll need to outbid other willing buyers, so again, accessing the right capital as mentioned above is paramount.

The Personal Responsibility

Beyond hiring the right employees, coming up with sufficient funds to keep your franchise’s doors open, and utilizing the best marketing techniques to harness loyal patrons, you’ll also need to be prepared to dedicate your own time to an extent you might not have expected. Most franchise owners find themselves the first to show up in the morning and the last to leave at night. There’s also a heavy amount of liability that you’ll open yourself up to as the owner of a small business. If you’re not looking for a time-heavy commitment, franchising may be the wrong choice. There are personal benefits in comparison to solo restaurant ventures, however. Franchisees find themselves inundated with a well of knowledge, as the corporate side of the business will send along training manuals, necessary equipment, and customer support options that will help you navigate the process and maintain the company’s success.

Franchising can be a lucrative opportunity so long as you’re prepared with the right funding and the proper education. Keep these tips in mind before you place an offer on the franchise you’ve been eyeing.



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