Broadly speaking, restaurants can be segmented into a number of categories:
1- Restaurants with chain or independent (indy) and franchises. McDonald's, Union Square Cafe or KFC
2- Quick service (QSR), sandwich. Burger, chicken and so on; convenience store, noodles, pizza
3- Quick casual. Panera Pan, Atlanta Bread Company, Au Bon Pain, etc.
4- Family. Bob Evans, Perkins, Friendly & # 39; s, Steak & # 39; s Shake, Waffle House
5- Casual. Applebee's, Hard Rock Caf'e, Chili's, TGI Friday's
6- Excellent food. Charlie Trotter, Morton & # 39; s The Steakhouse, Flemming & # 39; s, The Palm, Four Seasons
7- Other. Steakhouses, seafood, ethnic, dinner houses, celebrities and so on. Of course, some restaurants fall into several categories. For example, an Italian restaurant might be casual and ethnic. The main restaurant concepts in terms of sales have been pursued by Restaurants and Restaurants for many years
Chain OR INDEPENDENT
The impression that some huge chains of fast service completely dominate the restaurant business is misleading. Chain restaurants have some advantages and some disadvantages over independent restaurants. Benefits include:
1- Market recognition
2- Greater advertising influence
3- Development of sophisticated systems
4- Reduced purchases
In franchising, different types of assistance are available. Independent restaurants are relatively easy to open. All you need is a few thousand dollars, a knowledge of the restaurant's operations and a strong desire to
succeed. The advantage for independent restaurateurs is that they can "do their own thing" in terms of developing concepts, menus, décor and so on. Unless our habits and tastes change drastically, there are plenty of places for independent restaurants in certain locations. Restaurants come and go. Some independent restaurants will turn into small chains, and larger companies will buy small chains.
Once the small chains show growth and popularity, they will likely be bought by a larger company or be able to purchase financing for expansion. A temptation for the restaurateur started is to look at large restaurants in big cities and believe that their success can be duplicated in secondary cities. Reading restaurant reviews in New York, Las Vegas, Los Angeles, Chicago, Washington, D.C. or San Francisco, it may seem that unusual restaurants can be replicated in Des Moines, Kansas City or Main Town, USA. Because of their demographics, these high-quality or ethnic restaurants will not click in small towns and cities.
5- Will go to the training from the bottom up and will cover all the operating areas of the restaurant Franchising involves the least financial risk, because the restaurant's format, including the building design, menu and marketing plans, have already been tested on the market. Franchised restaurants are less likely to fall apart than independent restaurants. The reason is that the concept is proven and the operating procedures are established with all (or most) of the kinks developed. Training is provided and support for marketing and management is available. However, the increased probability of success is not cheap.
There is a franchise fee, a royalty fee, an advertising fee, and substantial personal net worth requirements. For those lacking substantial experience in the restaurant, the franchise can be a way to get into the restaurant business, provided they are ready to start at the bottom and take an accident training course. Restaurant franchisees are entrepreneurs who prefer to own, operate, develop and expand an existing business concept through a form of business contractual arrangement called franchising. Of course, most restaurateur aspirants want to do their own thing – they have a concept in mind and are just waiting to call.
Here are samples of the costs involved in franchising:
1- A traditional Miami Subs restaurant has a fee of $ 30,000, a royalty of 4.5 percent and requires at least five years experience as a multi-unit operator, equity / business of $ 1 million and staff / business
net worth of $ 5 million.
2- Chili's require a monthly fee based on the restaurant's sales performance (currently a 4 percent service charge of monthly sales), plus the highest (a) monthly base rent or (b) ) percentage rent, which is at least 8.5 percent of monthly sales. .
3- McDonald's requires $ 200,000 of unpaid personal resources and an initial fee of $ 45,000, plus a monthly service fee based on the sales performance of the restaurant (approximately 4 percent) and the rent, which is a
monthly base rent or a percentage of monthly sales. Equipment and pre-opening costs range from $ 461,000 to $ 788,500.
4- The Express Pizza Factory units (200 – 999 square meters) require a franchise fee of $ 5,000, a 5 percent royalty and an advertising fee of 2 percent. Equipment costs range from $ 25,000 to $ 90,000, with various costs ranging from $ 3,200 to $ 9,000 and an opening inventory of $ 6,000.
5- Earl of Sandwich has options for a unit with a net worth requirement of $ 750,000 and a liquidity of $ 300,000; for 5 units, a net worth of $ 1 million and a liquidity of $ 500,000 is required; for 10 units, in net worth
of $ 2 million and a liquidity of $ 800,000. The franchise fee is $ 25,000 per location, and the royalty is 6 percent.
What do you get for all this money? Franchisors will ensure:
1- Help with site selection and revision of proposed sites
2- Assistance in designing and preparing the building
3- Help with preparation for opening
4- Training of managers and staff
5- Planning and implementing pre-opening marketing strategies
6- Visits to the unit and consulting of continuous operation
There are hundreds of franchise concepts for restaurants and they are not without risks. The restaurant owned or rented by a franchisee might fail, even if it is part of a well-known chain that is highly successful. Franchisees fail. An example of this is the highly prized Boston market, based in Golden, Colorado. In 1993, when the company's stock was first offered to the public at $ 20 per share, it was eagerly purchased, raising the price to a maximum of $ 50 per share. In 1999, after the company filed for bankruptcy, the share price fell to 75 cents. The contents of many of his stores were auctioned at
part of their cost.7 Forces were made and lost. One group that did not lose were the investment bankers who reunited and sold the stock offer and received a considerable fee for the services.
The bidding group also did well; they were able to sell their shares while stocks were high. Fast-food chains, known as Hardee's and Carl's, have also gone through periods of red ink. Both companies, now owned by a single owner called CKE, have experienced periods of up to four years where the actual earnings, as a company, were negative. (However, individual stores, owned by the company or franchised, may have done well in the downturn.) There is no certainty that a franchise chain will thrive.
At one point in the mid-1970s, A&W Restaurants, Inc., of Farmington Hills, Michigan, had 2,400 units. In 1995, the chain had a few more than 600. After purchasing that year, the chain expanded with 400 stores. Some of the extensions have taken place in non-traditional locations, such as kiosks, truck stops, colleges and convenient stores, where the full-service restaurant experience is not important. A restaurant concept can do well in one region, but not in another. The operating style can be extremely compatible with one operator's personality and not another's.
Most franchised operations require a lot of hard work and long hours, which many people perceive as managers. If the franchisee does not have enough capital and leases a building or land, there is a risk of paying more for the lease than the business can support. Relations between franchisors and franchisees are often strained, even in the largest companies. The goals of each one usually differ; Franchisees want maximum fees, while franchisees want maximum support in marketing and franchised services, such as employee training. Sometimes franchise chains get involved in litigation with their franchisees.
Because franchise companies have set up hundreds of franchises across America, some regions are saturated: more franchise units have been built than the area could support. Current franchise owners complain that adding more franchises only serves to reduce the sales of existing stores. Pizza Hut, for example, has stopped selling
franchises, except well-heeled buyers, who can take over a number of units. Overseas markets are a great source of income for several fast service chains. As you might expect, McDonald's has been a leader in overseas expansion, with units in 119 countries.
With about 30,000 restaurants serving about 50 million customers daily, about half of the company's profits come from outside the United States. Also, a number of other fast service chains have a large number of franchised units abroad. While the original restaurateur is rightly focused on being successful here and now, many bright, ambitious and energetic restaurateurs are thinking about future possibilities abroad. Once a concept is established, the entrepreneur can sell to a franchisor or, with many guidance, take the format abroad through the franchise. (It is crazy to build or buy in a foreign country without a partner who is financially secure and well versed in local laws and culture.)
McDonald's success story in the United States and abroad illustrates the importance of adaptability to local conditions. The company opens units in unlikely locations and closes those that are not performing well. Abroad, menus are tailored to suit local customs. In the crisis in Indonesia, for example, fried potatoes to be imported were removed from the menu and rice was replaced. Reading the life stories of the franchise's big winners may suggest that, once the franchise is well established, the path is clear. Thomas Monaghan, founder of Domino Pizza, tells another story. At one point, the chain had accumulated a debt of $ 500 million. Monaghan, a devout Catholic, said he changed his life by giving up the biggest sin, pride and rededicating his life to "God, family and pizza."
A meeting with Pope John Paul II changed his life and feelings toward good and evil as' & # 39; & # 39; personal and respected. & # 39; & # 39; Fortunately, in the case of Mr. Monaghan, the reissue worked well. Worldwide there are 7,096 Domino Pizza stores, with sales of approximately $ 3.78 billion per year. Monaghan has sold most of his interest in the company for a reported $ 1 billion and has announced that he will use his fortune for additional causes of the Catholic church. In the recent past, most food service millionaires have been franchisors, but a large number of restaurateurs, especially those enrolled in university studies courses in hotel and restaurant management, are not very pleased about being a fast-service franchisee.
They prefer to own or manage a full-service restaurant. Potential franchisees should review their food experience and access to money and decide which franchise is right for them. If they have little or no food experience, they may consider starting a restaurant career with a less expensive franchise, one that offers starter preparation. For those with experience wanting a proven concept, Friendly's chain, which began franchising in 1999, may be a good choice. The chain has over 700 units. The restaurants are considered family meals and have ice cream specialties, sandwiches, soups and service tables.
Let's emphasize this point again: You work in a restaurant you enjoy and may want to imitate in your own restaurant. If you have enough experience and money, you can fail on your own. Better, you work in a successful restaurant where a partnership or property might be possible or the owner is thinking of retiring and, for tax or other reasons, he may be willing to make payments on time.
Franchises are, in fact, entrepreneurs, many of them creating chains in chains.
McDonald's had the largest worldwide sales of a fast service chain, followed by Burger King. Wendy, Taco Bell, Pizza Hut and KFC followed. The subway, as one of hundreds of franchisors, achieved total sales of $ 3.9 billion. There is no doubt that, after 10 years, a list of the companies with the highest sales will be different. Some of the current leaders will see decreases in sales, and others will merge with or be bought by other companies, some of whom might be financial giants who have not previously engaged in the restaurant business.