Proven vs. Potential: The Pros and Cons of Emerging and Established Restaurant Franchises

Every stage of growth presents new and different hurdles for a franchise brand. Emerging franchises may struggle to extend brand awareness, midsize franchises may find that they have to pivot from their original concept in order to maintain growth, and larger, established franchises have to vigilantly stave off market saturation and consumer fatigue.

Likewise, there are benefits unique to each stage of franchise growth. Emerging brands are nimble and can adapt their concept and model to align with modern economic and consumer trends, midsize franchises can leverage strong brand awareness to grow without cannibalizing unit-level sales, and established franchises often enjoy top-of-mind consumer awareness.

To learn more about the advantages and disadvantages of each stage of franchise growth, 1851 reached out to three restaurant franchise brands, each at different stages of their own growth. Here’s what they had to say.

Philip Schram, Chief Development Officer, Buffalo Wings & Rings — 65 units

Smaller brands have a difficult time attracting the most sophisticated franchisees—those who can operate multiple units successfully. The most experienced and talented entrepreneurs are often looking for a large system, something that they can jump into and take over multiple units right off the bat.

Established brands, especially those that have been around for decades, have a much easier time defending their model to prospective franchisees. An older brand has weathered any number of economic conditions, and that’s going to be attractive to investors.

On the other hand, emerging brands have a lot of room to grow, and that can be very exciting for a certain type of investor who wants to get in on the ground floor of a company with a lot of potential. And that potential goes both ways. Younger brands are also more likely to team up with hungry young entrepreneurs who are every bit as talented as those working with established brands but may not yet have the capital to invest in those larger brands.

The most important thing is that the franchise knows exactly what and where they are and exactly what they are looking for in a franchisee. If an emerging brand is trying to grow rapidly, then need to look for candidates who are eager to grow with them. If an established brand is looking for someone who can operate their model perfectly, they should look for candidates who are strong collaborators.

Jordan Duran, Director of Franchise Sales, MOOYAH Burgers Fries & Shakes — 100 units

People are always drawn to what’s shiny and new, and sometimes an unproven franchise is inherently attractive to a prospective buyer. They see the potential, and they think they can take the brand to the next level. So emerging brands are often in a good position to attract enthusiastic investors.

However, established franchises are always going to attract the more risk-averse investors. The combination of a proven business model, high brand awareness, and larger marketing budgets generally make established franchises safer bets for investors.

James Vitrano, General Counsel and Vice President - Global Franchise DevOps, Ruby Tuesday — 612 units

A lot of emerging franchises have actually been in business for a long time, so they may have a strong business model, they’re just new to franchising. Those brands present a good opportunity for savvy investors who are looking for a proven model with a low investment cost.

Still, it can take some time to refine a good franchising model. So an established franchise will always be a safer bet from an investor perspective than an emerging franchise, no matter how long the emerging franchise was in business before it began franchising. There are a lot of advantages to being a franchise veteran. There’s the brand recognition, larger and more experienced corporate support, and more predictable P+L and AUV.

A driven franchisee can certainly find success with an emerging franchise, but it’s going to require a lot of work to achieve the brand equity that comes pre-packaged with an established brand.