IS YOUR RESTAURANT READY TO FRANCHISE?

John Balian, expert in business development and franchise operations, pinpoints the key questions to ask before you take the plunge

As you run and operate a successful restaurant, you will soon have the ambitions that most restaurant businesses seek to fulfill: franchising. Many hospitality businesses expand into multi-outlet operations, some through franchising, some through multi-branching and others through a mix of franchised and self-operated outlets. Ultimately, the processes enable you to become a franchisor or multi-chain business owner.

However, several good restaurants in the market fail to accomplish their mission. Some have gone bankrupt and some have closed down their outlets, eventually returning to a one-outlet operation as they were before expanding. So how do you know when it's the right time to franchise?

Franchising your brand or concept is not as easy as many entrepreneurs might think; it requires a lot of hard work, is stressful and requires financing. However, if you successfully franchise your restaurant, the returns are potentially very promising.

WHY WOULD ANYONE CONSIDER FRANCHISING?

• Faster expansion • Less investment and financing • Minimized risks on the franchisor • Greater brand awareness • Higher revenues

The setbacks of failing in franchising or multi branching are: less market share, lower customer retention and, thus, less confidence in the brand.

WHAT ARE THE EIGHT MUST-HAVE REQUIREMENTS TO FRANCHISE YOUR HOSPITALITY BUSINESS?

1. Don't franchise your business unless you can show successful records for at least two years. These numbers should be justified in your financial statements.

2. You need to run at least two to three outlets under your direct management at different locations. This will enable you to review and finetune all possible issues that could cause the project to fail, such as a location’s unique characteristics, quality consistency and other issues related to cost efficiency.

3. You should have documented at least two-thirds of the business’ main Standard Operation Procedures (SOPS) and created all forms and checklists to maintain your brand promise throughout your outlets.

4. You have a non-temporary, trend-driven concept with high gross-profit margins on 50 percent of your menu.

5. You have built an effective measuring and portioning of the ingredients and sub-recipes of the top-selling items on your menu.

6. You have a good point of sale (POS) and enterprise resource planning (ERP) software that anticipates the growth and the control of your outlets.

7. You have built a good staff training structure and guidelines.

8. You have a skilled management team aligned with the company's vision, mission and values.

If your answers to the above points were ‘Yes’ then you can start considering franchising. Ninety percent of franchisees have zero knowledge in the franchised business. It’s your role to provide them with the know-how on how to operate, run, manage a successful franchise of your brand and build an effective quality control system that evaluates and maintains the core values of your company.

During the early stages of your first successful store, you may get approached by friends, customers or investors to open your next franchised outlet. My advice to you is: don’t get too excited and accept franchise applicants before building a strong system that will accompany your growth! Sticking to your plan and timeline makes your brand more valuable and gives the potential franchisees more confidence in your entrepreneurship skills. Remember that fast expansion with no grounded experience is a killer.