Generally, restaurants can be segmented into a number of categories:
1- Chain or independent (indy) and franchise restaurants. McDonald’s, Union Square Cafe, or KFC
2- Quick service (QSR), sandwich. Burger, chicken, and so on; convenience store, noodle, pizza
3- Fast informal. Panera Bread, Atlanta Bread Corporation, Au Bon Pain, and so on
4- Family. Bob Evans, Perkins, Friendly’s, Steak ‘n Shake, Waffle Home
5- Casual. Applebee’s, Hard Rock and roll Caf´e, Chili’s, TGI Friday’s
6- Fine dining. Charlie Trotter’s, Morton’s The Steakhouse, Flemming’s, The Hand, Four Seasons
7- Other. Steakhouses, seafood, ethnic, dinner houses, superstar, and so on. Of course , some restaurants fall under more than one category. For example , an Italian restaurant could be casual and cultural. Leading restaurant concepts in terms of sales have been tracked for years by the journal Restaurants and
CHAIN OR INDEPENDENT
The impression that a few huge quick-service chains completely dominate the restaurant business is misleading. Chain restaurants have some advantages and several disadvantages over independent restaurants. The benefits include:
1- Recognition in the marketplace
2- Greater advertising clout
3- Advanced systems development
4- Discounted purchasing
When franchising, various kinds of assistance can be found. Independent restaurants are relatively easy to spread out. All you need is a few thousand dollars, a knowledge of restaurant operations, along with a strong desire to
succeed. The advantage regarding independent restaurateurs is that they can ”do their own thing” in terms of concept development, menus, decor, and so on. Unless our habits and taste change significantly, there is plenty of room for 3rd party restaurants in certain locations. Restaurants come and go. Some independent restaurants will grow into small stores, and larger companies will buy out small chains.
Once small chains display growth and popularity, they may be likely to be bought out by a larger company or will be able to acquire financing for expansion. A temptation for the beginning restaurateur is to observe big restaurants in big cities and to believe that their success can be copied in secondary cities. Reading the restaurant reviews in New York City, Las Vegas, Los Angeles, Chicago, Washington, D. Chemical., or San Francisco may give the impact that unusual restaurants can be duplicated in Des Moines, Kansas Town, or Main Town, USA. Due to demographics, these high-style or cultural restaurants will not click in small cities and towns.
5- Goes for training from the bottom upward and cover all areas of the restaurant’s operation Franchising involves the least financial risk in that the restaurant structure, including building design, menu, plus marketing plans, already have been tested in the marketplace. Franchise restaurants are more unlikely to go belly up than 3rd party restaurants. The reason is that the concept is definitely proven and the operating procedures are usually established with all (or most) of the kinks worked out. Training is supplied, and marketing and management support are available. The increased likelihood of success does not come cheap, however.
There is a franchising fee, a royalty fee, advertising royalty, and requirements of significant personal net worth. For those deficient substantial restaurant experience, franchising may be a way to get into the restaurant business-providing they are prepared to start at the bottom plus take a crash training course. Restaurant franchisees are entrepreneurs who prefer to personal, operate, develop, and extend an existing business concept through a form of contractual business arrangement called franchising. 1 Several franchises have ended up with several stores and made the big time. Naturally, most aspiring restaurateurs wish to accomplish their own thing-they have a concept in mind and can’t wait to go for it.
Here are samples of the costs involved in franchising:
1- A Miami Subs traditional restaurant has a $30, 000 charge, a royalty of 4. 5 percent, and requires at least five years’ experience as a multi-unit operator, the personal/business equity of $1 million, and also a personal/business
net worth of $5 million.
2- Chili’s requires a month-to-month fee based on the restaurant’s sales performance (currently a service fee of four percent of monthly sales) as well as the greater of (a) monthly bottom rent or (b) percentage rent that is at least 8. 5 percent associated with monthly sales.
3- McDonald’s requires $200, 000 of nonborrowed individual resources and an initial fee associated with $45, 000, plus a monthly support fee based on the restaurant’s sales overall performance (about 4 percent) and rent, which is a
monthly base rent or a percentage of monthly sales. Devices and preopening costs range from $461, 000 to $788, 500.
4- Pizza Factory Express Units (200 to 999 square feet) require a $5, 000 franchise fee, a royalty of 5 percent, and an advertising fee of 2 percent. Equipment costs range from $25, 1000 to $90, 000, with miscellaneous costs of $3, 200 in order to $9, 000 and opening supply of $6, 000.
5- Earl of Sandwich has options for one unit with a net worth requirement of $750, 000 and liquidity of $300, 000; for 5 models, a net worth of $1 million and liquidity of $500, 000 is required; for 10 units, internet worth
of $2 million and liquidity of $800, 000. The franchise fee is $25, 1000 per location, and the royalty can be 6 percent.
What do you get for many this money? Franchisors will provide:
1- Help with site selection and an overview of any proposed sites
2- Help with the design and building preparation
3- Help with preparation for opening
4- Training of managers and staff members
5- Planning and implementation associated with pre-opening marketing strategies
6- Unit visits and ongoing operating guidance
There are hundreds of restaurant franchise ideas, and they are not without risks. The restaurant owned or leased by a franchisee may fail even though it will be part of a well-known chain which is highly successful. Franchisers also fail. A case in point is the highly touted Birkenstock boston Market, which was based in Golden, Co. In 1993, when the company’s stock was first offered to the public at $20 per share, it was eagerly bought, increasing the price to a high of $50 a share. In 1999, after the organization declared bankruptcy, the share price sank to 75 cents. The contents of many of its stores had been auctioned off at
a portion of their cost. 7 Fortunes were made and lost. One team that did not lose was the investment bankers who put together and sold the stock offering and received a sizable fee for services.
The offering group also did nicely; they were able to sell their gives while the stocks were high. Quick-service food chains as well-known as Hardee’s and Carl’s Jr. also have gone through periods of red printer ink. Both companies, now under one particular owner called CKE, experienced intervals as long as four years when actual earnings, as a company, were damaging. (Individual stores, company owned or even franchised, however , may have done well during the down periods. ) There is no assurance that a franchised chain will certainly prosper.
At one time in the mid-1970s, A&W Restaurants, Inc., of Farmington Hillsides, Michigan, had 2, 400 systems. In 1995, the chain designated a few more than 600. After an acquistion that year, the chain expanded by 400 stores. Some of the expansions took place in nontraditional locations, such as kiosks, truck stops, colleges, plus convenience stores, where the full-service restaurant experience is not important. A restaurant concept may do well in one region but not in another. The type of operation may be highly compatible with the particular personality of one operator and not another.
Most franchised operations call for a great deal of hard work and long hours, which lots of people perceive as drudgery. If the franchisee lacks sufficient capital and leases a building or land, you have the risk of paying more for the lease than the business can support. If you cherished this report and you would like to receive additional info pertaining to Gateways Inn & Restaurant kindly go to our own site. Relations between franchisers and the franchisees in many cases are strained, even in the largest companies. The particular goals of each usually differ; franchisers want maximum fees, while franchisees want maximum support in marketing and franchised service such as employee coaching. At times, franchise chains get involved in lawsuit with their franchisees.
As franchise companies have set up hundreds of franchises throughout America, some regions are over loaded: More franchised units were constructed than the area can support. Current business holders complain that adding more franchises serves only to reduce sales of existing stores. Pizza Hut, for example , stopped selling
franchises except in order to well-heeled buyers who can take on a number of units. Overseas markets constitute a large source of the income of several quick-service chains. As might be expected, McDonald’s has been the leader in abroad expansions, with units in 119 countries.
With its roughly 30, 000 restaurants serving some 50 mil customers daily, about half of the company’s profits come from outside the United States. A number of other quick-service chains also have large numbers of franchised units abroad. While the beginning restaurateur quite rightly concentrates on being successful here and now, many bright, ambitious, plus energetic restaurateurs think of future possibilities abroad. Once a concept is established, the particular entrepreneur may sell out to a franchiser or, with a lot of guidance, take the format overseas via the franchise. (It is folly to build or buy in a foreign country without a companion who is financially secure and trained in the local laws and culture. ).
The McDonald’s success story in the usa and abroad illustrates the importance of versatility to local conditions. The company opens units in unlikely locations plus closes those that do not do well. Overseas, menus are tailored to fit local customs. In the Indonesia crisis, for instance , french fries that had to be imported had been taken off the menu, and rice was substituted. Reading the life tales of big franchise winners may suggest that once a franchise is well-established, the way is clear sailing. Thomas Monaghan, founder of Domino Pizza, tells a different story. At one time, the chain had accumulated a debt of $500 million. Monaghan, a sincere Catholic, said that he changed their life by renouncing his finest sin, pride, and rededicating their life to ”God, family, and pizza. ”
A meeting with Pope John Paul II had transformed his life and his feeling about great and evil as ”personal and abiding. ” Fortunately, in Mr. Monaghan’s case, the rededication worked well well. There are 7, 096 Domino Pizza outlets worldwide, with product sales of about $3. 78 billion per year. Monaghan sold most of his interest in the company for a reported $1 billion dollars and announced that he would use their fortune to further Catholic church causes. In the recent past, most food-service millionaires are actually franchisers, yet a large number of would-be restaurateurs, especially those enrolled in university diploma courses in hotel and cafe management, are not very excited about being a quick-service franchisee.
They prefer buying or managing a full-service restaurant. Prospective franchisees should review their food experience and their access to cash and decide which franchise would be appropriate for them. If they have little or no food encounter, they can consider starting their cafe career with a less expensive franchise, one that provides start-up training. For those with some experience who want a proven concept, the particular Friendly’s chain, which began franchising in 1999, may be a good choice. The chain has more than 700 units. The restaurants are considered family dining and feature ice cream specialties, sandwiches, soups, plus quickservice meals.
Let’s emphasize this time again: Work in a restaurant you like and perhaps would like to emulate in your own restaurant. If you have enough experience and money, you can strike out on your own. Even better, work in a successful restaurant where a collaboration or proprietorship might be possible or where the owner is thinking about retiring and, for tax or some other reasons, may be willing to take payments as time passes.
Franchisees are, in effect, entrepreneurs, a lot of whom create chains within stores.
McDonald’s had the highest system-wide product sales of a quick-service chain, followed by White castle. Wendy’s, Taco Bell, Pizza Shelter, and KFC came next. Subway, as one among hundreds of franchisers, obtained total sales of $3. 9 billion. There is no doubt that 10 years from now, a listing of the companies using the highest sales will be different. Some of the present leaders will experience sales declines, and some will merge with or be bought out by other companies-some of which may be financial giants not previously engaged in the cafe business.