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Is Franchising the Right Growth Model for Your Business?
By Law Offices of Wayne P. Bunch, Jr.
So, you think your restaurant concept may be the next major franchise to become a household name. Visions of Subway and McDonald’s come to mind. You may ask  yourself - to what extent is this possible? Take a look at Quizno’s. Conventional wisdom held that, prior to their expansion, the sandwich market was already over-saturated. Obviously, in this case, conventional wisdom was wrong. Quizno’s grew from an emerging concept in 1994 to opening its 3000th store in 2004. In that time it went from a start-up franchise company to a company valued at over a billion dollars. Clearly this is a best-case scenario, however, it does show that under the right circumstances franchising is a very powerful growth model.
Generally speaking, franchising is a way of distributing products and services. It provides for aggressive growth while allocating risks and spreading the expansion costs. A franchisor typically provides the franchisee with training and on-going support for opening and operating a business that utilizes the franchisor’s business systems and trademark(s) or service mark(s), i.e. names and logo(s). A franchisee typically supplies the start-up capital and manages the day-to-day operation. The franchisee will usually pay an initial franchise fee and on-going royalties for the right to use the franchisor’s marks and business systems, and ongoing support.
Under federal law franchising is defined as having three elements:
1. The franchisor has given the right to a franchisee to distribute goods and services under franchisor’s trademark, service mark or other commercial symbol.
2. The franchisor has significant control over or provides significant assistance to the franchisee’s method of operation. Examples include: location approval, requirements of site design, training programs, operational manuals, designated hours of operation.
3. Franchisee is required to pay at least $500 before or within 6 months of opening for business.
Assuming your business fits this definition, you must comply with the Federal Trade Commission Franchise Rule, which regulates the offering of a franchise business opportunity. Generally speaking, this Rule requires that a prospective franchisee be provided with specific information about the franchisor, provided in a specific document called a Franchise Disclosure Document or FDD. This document will disclose pertinent information regarding your company to a prospective franchisee and also includes all form franchise agreements used by the franchisor.
Certain states have their own franchise regulations. In order to sell franchises in these state, you not only have to comply with the federal guidelines, but you also have to comply with the state guidelines.
Once you have a general idea of what franchising entails, the next step involves a review of your business to determine if growth through franchising is a viable option. In other words, answering the question - can the restaurant or food service business successfully expand utilizing the franchise model?
To be successful, a franchisor must sell franchises, and its franchisees must sell the products or services. The franchised
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Developing a Restaurant Prototype
By Aaron Allen
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Every major restaurant chain launched with a single store. That single store served as a prototype for the hundreds and thousands of other stores that would follow the concept’s success. Developing a restaurant prototype, then, is a critical ingredient in the recipe for success.
Developing a restaurant prototype can also be a component in revitalizing an existing brand. Indeed, sometimes menu changes are not enough to keep a concept fresh in the minds of consumers. Sometimes marketing and advertising campaigns alone are not sufficient to draw diners back to a familiar brand. No, sometimes competing with the scads of new restaurants entering the market means developing a restaurant prototype that reflects the changing needs of fickle diners.
Whether you are developing a restaurant prototype for the first time or developing a restaurant prototype for the second or third time, it is important to approach the process as one that can have a major impact on your eatery’s ability to survive and thrive in a cutthroat landscape. Developing a restaurant prototype that keeps the consumer market in mind can increase same-store sales and average unit volume growth. Of course, developing a restaurant prototype demands strategic planning as part of the overall branding and marketing effort.
Señor Frogs understood the value of strategic planning in the process of developing a restaurant prototype. When Señor Frogs opened its first Myrtle Beach store in 2004, the company sought a novel approach that reflected its re-branding effort, complete with a new logo, new signage and a streamlined look.
Señor Frogs’ location in sunny Myrtle Beach inspired designers to develop a
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out” — paired with good franchisor-franchisee relations — are the keys to franchise growth.