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What Do I Need to Know to Become a Food Franchisee?

  • April 20, 2016

Most everyone who is considering the benefits of buying into a franchise has looked at the fast food industry, and with good reason. Fast food franchises are what revolutionized the restaurant industry and have undoubtedly changed the way Americans serve and eat food.

However, while fast food restaurants dominate the franchise world, they also are among the most challenging to operate. You’ll want to do a fair amount of research before you invest too much time, money and energy into the franchise name of your choice. Additionally, consider the following need-to-know things about becoming a fast food franchisee in general.

What You Need to Know About the Fast Food Industry

Low-Wage Labor

The majority of fast food businesses (and sit-down restaurants) rely on a large amount of employees making low hourly wages. While this industry standard of low staffing costs certainly has benefits relating to your bottom line, there are some drawbacks.

Relying too heavily on low wages often results in high turnover, forcing your company in a constant state of hiring and training. However, you can help mitigate this by providing slightly more competitive wages and benefits for workers meeting given thresholds. These small costs will make you more competitive by keeping trained and skilled workers longer, which has been shown to increase productivity.

Building Restrictions and Health Codes

Building restrictions and health codes were established to keep the consumer safe and the owner secure from liabilities. However, while such stipulations are a net positive, complying with them can be time-consuming and expensive for the new fast food franchisee. Most franchisors will provide their new franchise owners with extensive assistance in overcoming initial regulatory hurdles concerning zoning, permitting and code compliance.

In fact, if the franchise you’re looking into doesn’t offer such assistance, it’s often in your best interest to walk away and go with another option. If you are new to the industry, consider hiring an attorney to ensure all of your bases are covered, as some of your local regulations may differ from the state and municipal codes experienced by the franchisor.

High Volume is Key

The success of any fast food franchise is dependent on high-volume sales. That’s because the costs for operating a fast food restaurant can be high; there’s training and associated labor costs, food spoilage, cost of goods and the competitive nature of fast food pricing to consider.

In general, food markup will be low and you’ll want to focus on selling a high volume to enjoy high success. Work with your franchisor to develop marketing campaigns to further achieve this goal.

Initial Investment

While the franchise costs for fast food franchises can be relatively low compared to other industries, there are other costs to consider before becoming an investor in the market. Such initial costs may include renovating the business location, and purchasing and installing new food equipment and items like interior seating. Talk to your local banks and credit unions for special franchise financing to assist with these initial investments.

Your Own Skill Set

If this is your first time as a fast food franchisee, it’s important to consider your own skillset and whether you’re well suited for the industry. While you’ll likely hire managers to assist in overseeing operations, it’s a good idea to plan on being hands-on during at least the first year. Consider shadowing another owner of the same franchise to become more acquainted with the fast-paced nature of the fast food industry.

For more information on franchising and what you can expect in becoming a business owner, or about how you can start your own hot dog franchise this year, contact us today at Hot Dog on a Stick.