How Do You Start a Restaurant Franchise?

A restaurateur can start a franchise by filing a Franchise Disclosure Document, which allows the company to sell the restaurant concept to qualified entrepreneurs, who replicate the established business model and follow the guidelines in exchange for the payment of fees and royalties to the franchisor.

Before franchising, a restaurant needs to first-and-foremost have strong and consistent sales — franchisees want to see a restaurant that is continuously making money over a period of several years.

Additionally, the restaurant concept needs to be replicable — customers of franchised restaurants expect the food quality, interior design and overall atmosphere to be consistent regardless of location. An operations manual with recipes, pricing, employee handbooks, vendor tips, storefront appearance guidelines and more will need to be provided to each franchisee.

Step three is to create a business plan. A business plan forces prospective franchisors to think about the number of restaurant franchises they want to sell, which markets they are targeting for growth, how fast they want to expand and more. Prospective franchisors will also need to evaluate the amount of staffing and financial capital required to successfully sell those licenses and onboard incoming franchisees.

Then, it’s time to create a Franchise Agreement and Franchise Disclosure Document. These documents outline the responsibilities of franchise owners, fees and tax responsibilities, financial performance history, rules pertaining to trademarking and much, much more.

All of these steps are complex and require a great deal of care, which is why prospective franchisors should seek the assistance of expert franchise consultants, accountants and attorneys who can help create these business plans, operational manuals, FDDs and training systems. There are also several books that can provide prospective franchisors with valuable insight, such as “Franchise Your Business: The Guide to Employing the Greatest Growth Strategy Ever.”

If all goes according to plan, franchising a restaurant will increase a company’s revenue through franchise fees and royalty payments paid by the franchisee, as well as expand brand recognition as the restaurant reaches new markets and customers.