The restaurant space is tough and only getting tougher for all categories – quick service, fast casual and full service. Reports say the restaurant market is saturated. Franchising will help you grow your concept, but it has to be more than great food and a great price to be successful. To compete for top-tier status in your category, your concept must:
- Take an existing idea to a new level or introduce a brand new idea
- Proven, strong unit economics and profitability
- Be able to stay exciting and unique
New and/or Improved!
Just when we thought there could not possibly be room for another sandwich or pizza concept, Jimmy John’s arrived promising “freaky fast” delivery and pizzeria concepts Blaze and Mod entered the fast casual scene with a make-your-own-pizza concept, changing the lunch time dynamic. These brands collectively opened thousands of locations through franchising.
The demand for convenience drove these brands and others like them. The same principle is most obvious in the increasing number of drive-thrus. In fact, 20 percent of all American meals are eaten in cars, and Americans spend 10 percent of their disposable income on fast food. But, drive-thrus are nothing new, so brands in all categories are trying to make their service more convenient in other ways:
- Traditional casual dining restaurants are exploring home delivery
- Take-and-bake concepts are exploring e-commerce orders and fulfillment
- Convenience is also driving the re-emergence of food trucks
- Fast-fine is trending. This hybrid category is a cross between fast casual and full-service, targeting guests who want more service, a nice atmosphere—but not the full-service wait.
Proof Positive of Profitability
Innovation and food quality are equally important. Those things will certainly catch the attention of potential franchisees. But to be seriously considered for expanding through franchising, you must have more than a single location. You should have multiple locations in different markets to test out your proof of concept.
Most importantly, you have to prove your restaurant is profitable and has staying power by showing the restaurants have strong unit economics over an extended period of time. Just because you have a hot brand, being open less than a year and selling hundreds of franchises does not save you from falling into the “fad” category. Fads last for a relatively short amount of time. You want to be sure your business model can stand the test of time and can prove itself in multiple markets with different consumers before you set off to franchise.
The last thing any franchisor should want is to sell hundreds of franchises (the always dangerous “signed but not open” number in the FDD). Then discover their original locations are trending down in sales, franchisees not opening additional locations, and consumers are over their obsession and are moving on to something else.
If you have a groundbreaking restaurant concept, you should know that copycats will follow and become your competition. It’s not uncommon for a new concept to be caught playing catch-up with competitors because the other brands moved quicker to gain market awareness and share. Ensuring your proof of concept will work well in various demographic areas and regional areas is vitally important.
Changing to Meet Demand
Without sacrificing the uniqueness of your brand, your concept must be flexible to changes in the market.
Concepts that are not adapting quickly enough to ever-changing consumer preferences are in jeopardy of their long-term success. It’s tricky, though, because on one hand you risk losing your core customer base if you change too much. On the other hand, if the restaurant concept does not move swiftly enough, it will be difficult to play catch-up and the consumers will move to the next similar restaurant concept that is satisfying those preferences. Panera Bread and Chipotle have been testing drive-thru service for their guests. This is an example of two strong, long-term brands changing to meet the demands of their consumers.
You need to find that mix where you change enough to keep things interesting and exciting for your guests. Conducting research directly from your core guests and potential new guests is a great opportunity to determine what changes need to be made.
Determining if Your Concept is Franchisable
If your concept is exciting with profitable locations and flexible enough to change to meet new consumer demands, you may want to consider franchising for a shot at becoming that restaurant category king. However, becoming a franchisor brings a whole new set of responsibilities.
Franchise owners will look to you for service and support. You will need operations manuals with detailed instructions for recipes, operational and brand consistency, which is important for the franchise system. You will have to train a general manager to carry out the operational standards if the franchisee is not to be part of the day-to-day activities.
There’s a lot to know about franchising a restaurant concept. Winmark Franchise Partners can help you avoid some of the most common mistakes when it comes to launching a concept. As franchise consultants and advisors, we can help you decide if you should start a franchise. As a franchise incubator, we have the knowledge and capital to get your brand on the right track. If you are interested in franchise growth or starting a franchise business, contact us at (844) 452-4600.