Franchising your café or restaurant: what you need to know

By Jake Martin

3 min read

If you’re looking to grow your cafe or restaurant business quickly but only have limited capital to invest, franchising may hold the key. Do you want to grow your restaurant or cafe business? If so, there are some common obstacles to overcome – lack of time, lack of people or lack of funding can all hamper expansion. But franchising may offer the solution to overcoming all three…

Franchising lets you scale quickly

Franchising happens when the franchisee pays a fee for the opportunity to use your business name, branding and processes. In return, they usually get to keep a percentage of the profits they make. They will also have to pay a portion of their profits to you.

Franchising offers small businesses, including cafes and restaurants, the chance to scale quickly with limited upfront capital. That’s because it places much of the responsibility – and the risk – of setting up a new restaurant or cafe onto the franchisee. It also makes the franchisee responsible for scouting for new locations, hiring staff and getting set up, saving you time.

Franchising lets you get the most out of your people

One of the most difficult jobs for any small business owner, including cafe and restaurant owners, is finding quality managers and other senior staff who are committed to helping the business grow.  Franchising lets you get around this because the franchisees effectively also become managers of their franchise.

Because there’s a direct link between the amount the franchisee turns over and the amount they take home, franchisees also tend to work harder to ensure their business’s success than a manager might.

How to make franchising work

For franchising to work there has to be something in it for the franchisee as well as the franchisor.

You will only ever attract franchisees if you have a proven business model.

You’ll also have to be able to point to an obvious difference from competitors, as well as a compelling reason why franchisees are better off going with you rather than attempting to go it alone.

So before you consider franchising, think about what your restaurant or cafe can offer that a franchisee can’t do themselves. This should be made obvious in any marketing material you produce.

The importance of quality control

Many – if not most – cafe and restaurant owners start out running their business instinctively. This won’t cut it if you want to attract franchisees. They’ll need to know everything about running the business: from where and how to source ingredients, to presenting their outlet and how to hire staff. So your processes need to be documented.

That means knowing your business inside and out and converting this knowledge into a franchise manual: a series of policies, procedures, instruction manuals or videos that can be learned and taught.

You’ll also need to hold any franchisees to account when it comes to these standards, because anything they do will reflect on your brand.

Getting the legalities right

Before you franchise, you should seek legal advice and develop a well-drafted franchise agreement.

Your franchise agreement should state the rights and responsibilities of both parties. It should cover such things as:

  • From whom the franchisee must buy stock
  • What happens when a franchisee wants to sell their business
  • The use of intellectual property and confidential information
  • The ways a franchisee can use your business’s name and identity
  • How staff should present themselves when representing your brand

Your franchise agreement should also cover how profits will be split, including what accounting methods will be used and when fees will become payable to you.

And finally…

Franchising appeals to many small business owners because it lets them expand without investing too much time or money. Whether it’s right for you will depend on your overall business objectives.

For more information on franchising, check out our guide to one franchisor’s successful journey.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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