Is Now a Good Time to Franchise a Restaurant?

Although the pandemic may not seem like an ideal time to expand through franchising, restaurateurs who are willing to do the necessary preparations have a major opportunity for success. 

As unemployment skyrockets and more people sit at home looking for new opportunities, interest in franchising is positioned to grow. This creates an exciting opportunity for prospective restaurant franchisors. When it comes to the talent pool, there are many high-level restaurant executives who may have recently found themselves unemployed and who would make great franchise partners. There is also an unprecedented number of furloughed restaurant workers. In addition, the pool of qualified prospects may be growing, as funding for franchise buyers is available at historically attractive interest rates. 

Here are three areas that restaurant concept owners in a position to franchise should focus on.

Diversified Revenue Streams

Restaurants preparing to franchise will need to take an in-depth look at the business model and examine sustainable ways to increase current revenue streams or pivot to new ones. Franchisees looking to invest in a franchise will be seeking out a franchisor who deeply understands the segment. For example, off-premises services, such as delivery, carry-out and curbside pickup, have been the saving grace of many restaurants during the pandemic shutdowns. Others have invested heavily in online ordering, loyalty programs or limited menus. A franchisor will need to analyze whether these alternative revenue streams will work at franchised locations.

It is also important to keep in mind that some of the best ideas in franchising come from franchisees — they know their community and their customers best. For example, McDonald’s breakfast was originally started by a franchisee. Although it is important to be careful the franchisee does not go too far and damage the brand, the franchisor needs to keep an open line of communication and encourage franchisees to brainstorm ideas that can contribute to the bottom line.

Financial Responsibility

Restaurateurs looking to franchise need to be hyper-aware of their bottom line in recent months. The harsh reality is that 110,000 restaurants have closed since the start of the pandemic. Prospective franchisors need to assess where they are today and do all that they can now to contain costs while increasing revenue.

In order to trim costs efficiently, a restaurant audit can help restaurant owners analyze where money is being spent and how it can better be contained to increase unit-level economics without impacting the quality of the brand. In addition, vendor partners may be more willing to negotiate right now and potential franchisors should proactively ask about discounts and favorable terms. 

Confidence in Safety

Restaurant franchisors must consider that trust is more important than ever. If you don’t take sanitation and social distancing compliance seriously, your customers will be skeptical about the brand. At the same time, employees will need to trust their employer to keep COVID-19 concerns top of mind while training their coworkers to do the same.

When it comes to establishing a franchise system, consider these factors at the franchisee level. This means updating the franchise operations manual and onboarding process to reflect the COVID-19 response. In addition, the brand’s expectations of employee behavior and training need to be clearly defined by the franchisor from day one.

From both a franchisee and consumer angle, a brand’s social media presence is also a powerful tool in building confidence. Restaurant brands in the franchise space can use their social media presence to showcase their appreciation for community support and their commitment to serve customers safely.

By taking the time to focus on these increasingly important factors, future restaurant franchisors will position themselves for post-COVID-19 success. Along with the ability to cultivate a loyal customer base at a time when it is needed most, there will be an opportunity to tap into the growing number of prospects who want to join a well-positioned restaurant franchise.