Thinking of franchising your restaurant or bar?


It amazes me every time I see the numbers. No one I know favors chain pizza, having their own particular favorite independent pizzeria or even a local chain like Pontillo’s, Mark’s or Salvatore’s. Yet, these chains dominate the market in many ways.

Many restaurant and bar owners come to me to discuss the possibility of franchising their business. I begin the discussion with asking them how they would like to spend their day as a franchise owner and what expectations they have for this potential new chapter. Expanding the business is a dream and opportunity to build a legacy. If you can afford the initial investment (usually around $100,000 to create a franchise and legally register it for sale to others), you can potentially be one of America’s iconic brands and a household name. However, it is important to jump in with your eyes wide open to the new world you will love in as a franchisor.

As a restaurant operator, you focus on actual operations and are in the trenches every day. Franchisors spend their day very differently. Franchisors spend their day in meetings with salespeople, lawyers, accountants and potential buyers. They are creating policies and procedures and visiting franchise stores for compliance inspections. They are overseeing a customer service department that answers questions for franchise owners and helps them with business issues they may be having as they launch and operate a new retail store. Franchisors are negotiating large supply contracts and setting up a distribution system for product ingredients that will be used by the franchisees. They are part of an executive team in the corporate offices and boardroom rather than operating a store.

Potential franchisors often see royalty payments as their primary revenue source. However, looking at a chain like Domino’s pizza, its sales of ingredients and restaurant equipment generated 56 percent of its revenue last year while royalty fees only accounted for 12% of overall revenues. Papa John’s reports 40% of its revenues from supply sales to its franchisees.

If you are considering franchising your business model, I recommend you read up a bit on the industry and understand the new job you will be taking on. If you feel this is the right move for you, your next step is to speak to an experienced attorney and accountant about your plans and create an action plan, budget and timeline for moving forward.