You’ve decided you’ve got what it takes to open an Alberta restaurant, now you need to determine if you’re going to open a franchise or an independent restaurant. Either way, the risk of failure looms with approximately 60% of new restaurants failing in their first year; however, the risks and rewards for each option vary substantially. Regardless of the variations, success in the restaurant industry requires a thorough business plan that includes financials, location and construction, market analysis, licenses and permitting, POS system and technological software and equipment, how you’re going to differentiate your business from other Alberta restaurants, staffing and training requirements, who your ideal client is, and your equipment and supply needs. Whether you choose an independent or franchise restaurant will impact every aspect of your business plan, so doing your homework is essential.
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Independent Restaurant Pros and Cons
Independent restaurants tend to work well for entrepreneurs with experience in the food service industry. Usually, they are passion projects for talented chefs and enthusiastic restaurant managers and servers. While independent restaurants have free reign over creativity, niche, and vision, this route demands a detailed, well organized business plan that emphasizes design and décor, marketing, and brand recognition. Independent restaurants are faced with the challenge of creating a brand, an ambiance, and an atmosphere from scratch and must work tirelessly to build a reputation and respect from the local food community. Between food critics and bloggers, independent restaurants endure much more intense scrutiny than franchises because the food community expects more from them. As a result, independents have total control over the menu and the look, feel, style, and operation of their restaurant, but for those looking for an investment, or who have no restaurant experience, this can be a daunting challenge to take on.
Start up and operational costs tend to be higher for independent business owners than franchises, but, again, they have more control over timing and decisions. The advantage of this control is that owners can make financial decisions based on the current state of the restaurant. For example, they can choose to add a food truck to the business if it’s going well or they can delay expansion if money is tight. Independent owners are completely free from the burdens of a franchisor/franchisee contract – they are beholden to no one. Ultimately, choosing an independent restaurant is the best choice for entrepreneurs who need control, who thrive on independent decision making, and who have established ties to the food community. The most successful independent restaurants are owned and operated by food obsessed trail blazers.
Franchise Restaurant Pros and Cons
As an entrepreneur looking for a turnkey business to invest in, franchises are a lower risk investment. Franchises offer an established, recognized brand and streamlined business model; set menus and guidelines for food preparation; outlined training, procurement, and support programs; and lower startup costs. In general, franchises are a safer investment with significantly decreased financial risk because “95% of franchised businesses overall are still in business 5 years after they are started versus independently owned businesses that only experience a 5 percent survival rate after five years.” Because franchisees must run their businesses according to the system’s operational guidelines, you don’t need to create policies or procedures or marketing strategies – it’s already in place, providing support, expertise, and experience. Brand and reputation are two of the primary advantages of buying into a franchise, but it can be tricky if you’re bringing a chain to a new market or investing in a newer franchise. Thus, you need to really investigate and research the franchise you decide upon to ensure it’s a good fit for you, your values, your goals, and your market. A franchise restaurant investment is great for entrepreneurs who like clearly defined rules and regulations, a distinct plan to follow without deviation. For some, a set, unalterable menu and restaurant design are a relief, where for others, it’s a nightmare – so franchise restaurants tend to work best for entrepreneurs without a creative flair for food or décor. While startup costs are lower and financing for franchises tends to be easier to secure, franchisees are required to pay royalties and marketing fees. All in all, franchises make excellent investments for Alberta entrepreneurs with corporate experience looking for an established and successful business model.
Cormode & Dickson specializes in restaurant construction, expansion, and renovation – particularly with franchises, contact us today to discuss your Alberta business project.