Food Franchises – What to Know

Schuyler "Rocky" Reidel

Schuyler "Rocky" Reidel

Schuyler is the founder and managing attorney for Reidel Law Firm.

Reidellawfirm.com | Food Franchises - What to Know

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The statistics on hunger are quite telling. For example, 1 out of every 1 person must eat each day.

Okay, that number isn’t too surprising. But it does illustrate the lucrative nature of the food franchise industry.

Despite its potential, you can still benefit from a guide for selecting the best fit.  You’re in the right place.

Learn why quick-service restaurants like Dairy Queen will remain popular. And how this trend can secure your financial future.

Facts About Food Franchises

Here’s an interesting fact. McDonald’s considered adding broccoli that tasted like bubblegum to its Happy Meals.

Is your mouth watering too?

We’ll start with some data about the overall food industry. Then narrow our focus to fast food restaurants.

As the most recognizable global franchise model, they provide a straightforward example.

Other food franchises:

  • Coffee shops
  • Food trucks

Many coffee franchises provide baked goods and small bites. Operating within the food segment, this proven business model could be an option.

And don’t limit yourself to a physical storefront right away. You can decrease operating costs by delivering the meal to customers directly. Via your restaurant on wheels.

  1. Fast-food franchises employ 60% of all employees across the diverse franchise system
  2. They also make up 30% of total franchise locations across the United States

Over full-service restaurants, the fast food industry holds a “secret ingredient.”

Limited menu offerings can help a franchise owner attract more business. It makes sense considering our convenience-driven society.

New franchisees like yourself can enjoy a pleasant grand opening in your area under this proven system.

Because customers will be drawn to the logo. And the reputation behind it.

Franchise owners should also provide extensive training. Allowing you to build off of any previous management experience.

Now that we’ve planted that happy picture in your mind, you’ll need to know the steps involved.

Next, we’ll instruct you in the selection of a franchise opportunity.

How to Choose the Best Franchise to Set Up Your Fast Food Restaurant Business

Your franchise business review will look different from other prospective franchisees.

As will your level of prior experience in entrepreneurship. That’s to be expected.

But the following advice applies to anyone wanting to start their own business. Including food franchise opportunities.

Create a Realistic Budget

First, determine if you’re financially able to invest in service food franchises. Outside financing could fill in the numerical gaps, but weigh that decision carefully.

You won’t know the total initial investment at this stage. But you can estimate it using a simple online search.

Beyond startup costs, you’ll have ongoing franchise fees. Once again, an educated guess should suffice.

Bringing on a franchise lawyer will provide an even better evaluation. Their true value will be touched on in a bit.

Study Your Competition

This doesn’t involve sitting outside their fast food franchises with binoculars.

Rather, look for gaps in the local market. 

If the ideal customer prefers a unique take on traditional offerings, provide it. With approval from your eventual parent company, a competitive advantage could be waiting.

Some franchise establishments will be less flexible with change. But earning the trust of your franchisor over time will boost your pitch success.

Conduct Thoughtful Research

Not all food franchise opportunities are worth taking.

From the outside, they may appear inviting. However, you may discover a lack of support or another shortcoming during your evaluation.

From a list of top food businesses that you select, reach out to a handful. Ask to review their Franchise Disclosure Document (FDD).

As we alluded to earlier, add a legal expert at this point to inspect it with you.

Other factors to analyze:

  • Success rate of franchisees
  • Track record of the franchisor
  • Level of offered support

The right mentorship can help you streamline operations sooner.

Find out how much training is offered by the franchise founder. And whether or not there are chances for additional professional development.

Such as conferences or educational assistance.

Get Face Time With Prospects

Networking with franchise owners currently in your desired system will save time and money.

Time, because you’ll be able to get information from primary sources. Money, because you’ll only move forward with vetted fast food franchises.

Remember to offer value in return. Take them out to coffee or a meal when you do meet.

Avoid questions whose answers may deal with proprietary information. You want this helpful franchisee to feel comfortable.

Doing so may lead to a level of transparency normally reserved for insiders.

On paper, you may have hesitations about a particular food franchise. However, after speaking to an owner its potential may improve dramatically.

One final note. Don’t sign a franchise agreement before having your lawyer look it over.

Moving on, let’s look at costs and profit potential.

How Much Does It Cost to Open a Fast Food Franchise?

Costs in the food franchise industry will depend on:

  1. How recognizable the brand is
  2. Property value of the location
  3. Size of the desired operation

Dealing with averages, the initial investment could range from $300,000 to $500,000. This doesn’t include any ongoing royalties or fees as outlined in the franchise agreement.

Startup costs that are included:

  • Initial franchise fee
  • First inventory
  • Equipment and other supplies

Now, it’s time for your favorite subject. A return on your total initial investment.

Is Owning a Fast Food Franchise Profitable?

Your quick-service business will probably generate some fresh ideas. Like mixing ice cream and hot mini donuts to create a mouthwatering menu item. 

Cha-ching.

Compared to a full-service restaurant, fast food is profitable more often. With a lower total initial investment, you start on better footing.

Although not guaranteed, a profit margin of 5-10% is realistic.

It will require hard work, an ability to adapt, and effective leadership. But you can secure a positive financial future as a franchise owner.

To conclude, let’s set a sturdy foundation together and extend your franchise for over a decade. At least.

Reidel Law Firm Safeguarding Food Franchises

As experts in franchise law, we can help you handle the legal aspects of any issues as a new franchisee.  

In addition, our legal team can advise you on ways to shore up gaps in the following areas:

  • Review personal guaranty and real estate control docs
  • Franchisee formation, guidance, and asset protection
  • Franchise operating compliance audit and coaching

By effectively managing risk and maximizing opportunities for businesses we answer the needs of our clients wherever and whenever they arise.

Call Reidel Law Firm today at (832) 510-3292 or fill out our contact form.  And see how our advice can turn you into a case study for franchisees.

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