Restaurant franchise

Restaurant Franchises: How To Become A Franchisor

Tessa ZuluagaAuthor

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Expansion checklist

The Restaurant Expansion Checklist

Learn how to expand into your second, fifth, or tenth restaurant location.

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If you’re looking to expand your restaurant, launching a franchise can be the best way to do it. Franchising gives aspiring entrepreneurs a simple route into the dining industry, and lots of people are taking advantage. 

In fact, according to WebFX, a new franchise opens every eight minutes, and quick-service restaurant franchise locations generate $276 billion in revenue each year. 

Better yet, the franchising industry is continuing to grow, with Franchise Clues projecting a 1.9% increase in the number of total franchise establishments and a 4.1% increase in franchise revenue in 2024.

However, just like any other business model, launching your own franchise comes with unique challenges. So, in this article, we’ll help you navigate these challenges by exploring all of the key steps in starting a restaurant franchise.

Key takeaways

  • To launch a successful restaurant franchise, it’s crucial to develop a comprehensive business plan. This serves as the blueprint for all of your operations, and is vital for securing funding.

  • Be sure to carefully research franchise locations to ensure your restaurant will thrive based on local competition and target demographics.

  • Develop marketing strategies to appeal to customers, as well as potential franchisees.

  • Stay up to date with industry trends to ensure your franchise remains relevant and provides maximum value to franchisees.

How to start a restaurant franchise

Franchising your restaurant involves careful planning, strategic decision-making, and a commitment to ongoing support and development. Let's dive into the key steps you'll need to take to turn your successful restaurant business into a thriving franchise operation.

1. Develop a business plan

The foundation of any successful franchise is a well-crafted business plan. This document will serve as your roadmap for growth and a tool to attract potential franchisees and investors. Your business plan should include:

  • Executive summary: A brief overview of your restaurant concept and franchise opportunities

  • Company description: Details about your restaurant's history, mission, and unique selling proposition

  • Market analysis: Research on restaurant industry trends, target demographics, and local competition

  • Organization and management structure: An outline of your team and their roles in supporting franchise partners

  • Products and services: A comprehensive list of menu items and any additional offerings

  • Marketing and sales strategies: Plans for promoting both the franchise business and individual locations

  • Financial projections: Detailed forecasts for franchise fees, royalty fees, and potential earnings for franchisees

Remember to update your business plan regularly as your franchise grows and market conditions change. This will be crucial when exploring new markets or considering multi-unit franchise opportunities.

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Restaurant Business Plan Template

No matter where you’re at in your restaurant ownership journey, a business plan will be your north star. Organize your vision and ensure that nothing is overlooked with this free template.

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2. Secure financing for your franchise

Expanding your restaurant into a franchise requires significant capital. Here are some financing options to consider:

  • Traditional bank loans: Approach banks with your business plan and financial history to secure a loan.

  • Small business administration (SBA) loans: These government-backed loans often offer favorable terms for franchisors.

  • Private investors or venture capital: Pitch your franchise concept to individuals or firms interested in the restaurant industry.

  • Crowdfunding: Use crowdfunding platforms to raise funds from a large number of small investors.

  • Franchise fees: As you onboard franchisees, their initial fees can help fund further expansion.

  • Toast Capital:* Toast Capital offers eligible Toast customers loans from $1,000 to $300,000, so you can access the funding you need to accomplish your goals.

*Toast Capital Loans are issued by WebBank. Loans are subject to credit approval and may not be available to borrowers in certain jurisdictions. WebBank reserves the right to change or discontinue this program without notice.

Be prepared to demonstrate the financial viability of your business model and have a clear plan for how you'll use the funds to support growth. Potential franchisees will also need to consider their net worth and startup costs when evaluating your franchise opportunity.

3. Establish a legal structure

Proper legal structuring is crucial for protecting your brand and ensuring compliance with franchise regulations. Take these steps to create a solid legal foundation:

  • Choose a business structure: Consult with a lawyer to determine the best entity type (e.g., LLC, corporation) for your franchise.

  • Register your trademark: Protect your restaurant's name, logo, and other brand elements with the U.S. Patent and Trademark Office.

  • Develop a franchise disclosure document (FDD): This legally-required document outlines all aspects of your franchise offering.

  • Create a franchise agreement: This contract defines the relationship between you (the franchisor) and your franchisees.

  • Obtain necessary licenses and permits: Ensure compliance with federal, state, and local regulations for franchising.

Working with an experienced franchise attorney can help you navigate these complex legal requirements and avoid potential pitfalls. Pay special attention to the FDD, as it's a crucial document for transparency with potential franchisees.

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4. Create an operations manual

A comprehensive operations manual is essential for maintaining consistency across your franchise locations. This document should cover:

  1. Brand standards and guidelines

  2. Kitchen procedures and recipes

  3. Customer service protocols

  4. Employee training programs

  5. Inventory management systems

  6. Marketing and promotional strategies

  7. Financial reporting requirements

  8. Technology and POS system

  9. Health and safety regulations

  10. Franchise support and communication

Your operations manual should be detailed enough to guide franchisees through every aspect of running the restaurant while allowing for some flexibility to adapt to local markets. This is particularly important for maintaining a consistent dining experience across all locations.

To learn more and download a free operation manual template, check out this article.

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Restaurant Operations Manual Template

Use this free template to easily outline all of your operating procedures and make day-to-day operations as consistent as possible.

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How to choose your restaurant franchise locations

Selecting the right locations for your franchise restaurants is critical for success. In fact, Maptive reports that 85% of restaurants’ customers live within three to five miles of its location. 

So, consider these factors when evaluating potential sites:

  • Demographics: Ensure the area's population aligns with your target customer base.

  • Competition: Analyze nearby restaurants and assess market saturation.

  • Accessibility: Look for locations with good visibility and easy access for customers.

  • Lease terms: Negotiate favorable real estate agreements that allow for long-term growth.

  • Local regulations: Research zoning laws and obtain necessary permits for restaurant operation.

  • Growth potential: Consider areas with projected population or economic growth.

  • Proximity to suppliers: Ensure efficient delivery of ingredients and supplies.

  • Labor market: Evaluate the availability of qualified staff in the area.

Develop a site selection process that includes thorough market research and on-site visits to potential locations.

How to market your restaurant franchise

Effective marketing is crucial for attracting both potential franchisees and customers to your restaurants. To appeal to both of them, be sure to consider these strategies:

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  • Attend franchise expos: Showcase your concept at industry events to attract potential franchisees.

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  • Leverage public relations: Seek media coverage to build credibility and awareness.

  • Implement local store marketing: Provide franchisees with tools and strategies for community engagement.

  • Create a referral program: Incentivize existing franchise owners to recommend your brand to potential new owners.

  • Develop Co-op advertising: Pool resources with franchisees for larger-scale marketing efforts.

  • Leverage customer data: Analyze customer behavior to inform targeted marketing campaigns.

  • Develop a strong brand identity: Create a cohesive look and feel across all marketing materials.

Lastly, it’s important to consistently monitor and adjust your marketing efforts based on performance metrics and feedback from franchisees. This will help you build brand recognition and expand your customer base.

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Restaurant Survey Template

Use this template to ask your guests about their experiences in your restaurant. These survey questions will give you the data you need to make informed changes and improve the overall dining experience.

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How to manage your restaurant franchise

Effective franchise management requires a balance of support and oversight, so think about how you can incorporate these management best practices:

  • Establish clear communications: Regular check-ins, newsletters, and an intranet system can keep franchisees informed.

  • Provide ongoing training: Offer initial and continuous education to franchisees and their staff.

  • Conduct regular audits: Ensure compliance with brand standards and identify areas for improvement.

  • Offer field support: Deploy team members to assist franchisees with on-site operations and troubleshooting.

  • Foster a community: Organize annual conferences or regional meetings to facilitate knowledge sharing.

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  • Implement performance tracking: Use key performance indicators (KPIs) to monitor franchise success.

  • Recognize and reward success: Acknowledge high-performing franchisees to motivate the entire network.

  • Address issues promptly: Develop a system for quickly resolving conflicts or concerns.

Remember, success as a franchisor is directly tied to the success of your franchisees. By prioritizing their needs, you can provide the support they need to grow. This is especially important for new franchise owners who may be entering the restaurant industry for the first time.

How to continuously improve your restaurant franchise

The restaurant industry is constantly evolving, and your franchise will need to adapt to stay relevant. Here are strategies for long-term success:

  • Stay on top of industry trends: Regularly attend conferences, read trade publications, and network with other restaurateurs.

  • Continuously improve your menu: Regularly update offerings based on customer preferences and food trends.

  • Prioritize sustainability: Implement eco-friendly practices to appeal to environmentally-conscious consumers.
  • Foster innovation: Encourage franchisees to share ideas for improving operations or menu items.
  • Monitor customer feedback: Use surveys, social media, and review sites to gauge customer satisfaction.
  • Adapt to changing regulations: Stay ahead of health, labor, and franchise laws that may impact your business.
  • Diversify revenue streams: Explore catering, meal kits, or retail products to supplement restaurant sales.

Of course, it’s also key to incorporate technology into your franchising. For example, Abigail Pringle, President of Wendy’s, told Franchise Direct:

“To meet our customers where and how they want to enjoy Wendy’s, we offer a variety of ordering options including through kiosks and the Wendy’s App. For those customers who order ahead, mobile pickup spots and grab-and-go shelves make it quick and easy to retrieve orders. These options allow customers to interact with us using the platform of their choice.”

So, be prepared to pivot your business model when necessary while maintaining the core values that made your restaurant successful in the first place. This flexibility is crucial whether you're running a franchise focusing on American food, Mexican dishes, or any other type of cuisine.

Set your restaurant franchise up for success

Franchising your restaurant can be a lucrative way to expand your business and share your culinary vision with a wider audience. By following the steps outlined in this guide, you'll be well-prepared to navigate the challenges and opportunities of franchise ownership.

Whether you're dreaming of becoming the next McDonald's or you're aiming to create a niche ice cream chain, the principles of successful franchising remain the same.

Of course, to be successful, it’s essential that you have the right tools. Fortunately, a robust point-of-sale (POS) system, like Toast, can help you streamline operations across your franchise network.

Toast offers features specifically designed for multi-location restaurants, including centralized menu management, consolidated reporting, and integrated online ordering.

To discover all the ways Toast can help you launch your franchise, be sure to check out all of the awesome features!

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The Restaurant Expansion Checklist

Learn how to expand into your second, fifth, or tenth restaurant location.

Toast

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