It is not surprising that when most people think of franchising that they immediately jump to thoughts of McDonalds, Burger King and Subway. These quick service restaurant, or QSR style franchises have a big footprint in not only the restaurant market, but the franchise market as a whole. Although the QSR industry is slated to rake in over $226 billion dollars in 2020, an increase of over 5.2%, what many prospective franchisees do not realize is that these and other restaurant franchises are not always automatic money makers. They take effort and the right person to make them work.
For years, restaurant franchises have been the number one growing sector within franchising, and for good reason. There is money to be made in quick service restaurants, but there is also a lot of work and energy that must go in to the restaurant to make it a profit center.
QSR franchises require the owner/ operator to have great people skills and a staff with equally excellent abilities to be successful. Any reader can relate to a bad experience at a QSR restaurant where they encountered an employee who was not right for their position. A time when an employee involved in customer service could not make the experience an enjoyable one, and instead ruined what you had hoped would be a good meal out with friends or family.
A QSR franchise owner must also understand that a franchise in the restaurant industry can be costly. With many restaurant franchises being standalone buildings, the costs can be high for the land, build out and architectural fees. In many instances, costs will surpass $800,000. Along with higher fees to start a QSR restaurant, the fees for the food served can be costly as well, depending on the QSR, their vendor’s location and shipping methods, and the availability of closer or less expensive supplier options in a franchises’ location.
One benefit to buying a QSR franchise is that financing can be easier to obtain. Banks and other lending sources are familiar with restaurants, they understand the costs associated and the inventory, furniture, fixtures, and equipment that are available as collateral. This knowledge means that it is easier for them to justify financing for the business over that of many service-based businesses where tangible assets are limited, and intangible assets are harder to justify.
When buying a quick service restaurant, employees are an issue that can be very stressful. The QSR industry accounts for 37% of all employment in the franchise industry. In 2019 there is roughly over 4 million employees in QSR’s, and it is growing every year, quite substantially. Just within the last year, the employment rate grew by 2.2% for owners. Not only must you consider payroll, overtime, and whether to offer paid time off, but you also have to consider health insurance, workers compensation, and scheduling. One of the hardest juggling acts reported by QSR owners and managers is determining work hours for people dealing with family lives and many times school schedules. With most quick service restaurants hiring younger employees who will work for less than some of their older counterparts, the turnover in a QSR can be quite high when school starts or during seasonal changes. Depending on the QSR franchise purchased, employees may be required to attend some level of training with the franchisor. This training can greatly hinder profits if training is constantly be required due to high turnover of various employees. This is why it is imperative to find employees who have long term goals with the restaurant or can be groomed for management positions with higher salaries as incentive to stay within the QSR business longer.
Regardless of whether you are the first franchisee for your particular brand in your city or you are just one of the many franchise owners in the region, remember that you are buying the brand, and the goodwill associated with it. Branding is what has led businesses, not just restaurants, worldwide to experience high profits. Branding teaches people to know what to expect when buying that businesses product or service. This is the crux of what a franchise is all about. When someone walks into a Subway restaurant in Austin, TX they know that they will experience the same smells, flavors, colors, and general atmosphere that they are used to when they go to a Subway in any other city. This branding is what has led many businesses to success because their customers know and rely on the fact that they will have an equally pleasant experience regardless of whether they are at the restaurant near their home or the same restaurant across the country.
The key to owning and operating a QSR franchise is to ensure that you have the skill set to handle multiple employees all housed within a small area, while still maintaining the proper customer service skills to gratify the customer and ensure that they will return. With most variations of quick service food types being saturated in the marketplace, a savvy franchise purchaser must ensure that when buying their QSR they will stand out from the competition. If your restaurant serves hamburgers, then you will have a lot of competition, but if you can differentiate your hamburger or your customer service from that of your competitors, positively, then you can many times overcome the competition and make a name for yourself in the area.
With more and more people on the go and avoiding long lunches and dinners, quick service restaurants are filling a need for consumers everywhere. From 2018 to 2019, the QSR franchise industry grew by 1.7%, which brought their numbers up to over 183 thousand establishments just in the United States. In the last ten years the industry has continually grown and it does not seem to have a plateau planned in the near future. Profits may not come quick for the average franchisee, but for the willing entrepreneur, the long game may well be worth the investment of both time and money.
For more information or to schedule a customized consultation for your business, you can write to franchising@SLA.Law or call (866) 99-FRANCHISE.