How to franchise a restaurant

“Even with today’s economic headwinds, franchised businesses continue to grow, providing more good-paying jobs for their employees, and serving their local communities,” said International Franchise Association (IFA) president and CEO Matt Haller. “After a historic year of growth during the post-pandemic recovery, the size of the franchise economy in 2023 will exceed pre-pandemic levels—demonstrating the power of the business model for prospective business owners when franchisors and franchisees work together.”

Opening a franchise restaurant can be a great way to get into the restaurant business without the usual startup risks. What’s more, franchising a restaurant can be a good option for existing restaurant owners who want to expand to new locations.

In this guide, we’ll break down the ins and outs of restaurant franchising to help you learn whether this model is right for you.

How do restaurant franchises work?

A franchise is a business that uses branding and rules created by a parent company but runs largely independently of that parent organization.

Restaurant franchises operate through a collaborative business model between two entities: the franchisor (for example, McDonald’s) and the franchisee (for example, a business owner in Springfield, Massachusetts). In this model, the franchisor gets to expand its brand to new locations and bring in additional revenue. The franchisee gains access to the parent company’s resources, knowledge, and brand equity.

Franchisee vs. franchisor: What are their responsibilities?

The franchisor, or parent company, develops the restaurant concept, licenses the established brand to franchisees, and provides ongoing support to ensure they succeed. The franchisor will create core assets such as the restaurant menu, recipes, logo and marketing strategies, and operational procedures. To support consistency among the franchisees and parent company, the franchisor will also provide ongoing training, marketing assistance, quality control, and supply chain connections.

The franchisee is responsible for the day-to-day operations of the restaurant. The franchisee purchases the right to operate under the parent company’s brand, which involves a franchise fee and potentially a location fee. Once they get up and running, they follow the franchisor’s operating manual and pay ongoing royalty fees, which are typically a percentage of gross sales.

The advantage of becoming a restaurant franchisee is that you can hit the ground running with a tested and approved menu, a playbook for successfully running a restaurant, and a list of vetted suppliers. You can also build off the name recognition an existing restaurant has already earned. A restaurant franchise can be an appealing way to enter the competitive industry.

How to open a franchise restaurant

As a franchisee, opening a restaurant franchise requires research, completing an application, paying fees, and following the parent company’s directions to get up and running. Here’s an overview of the basic steps for how to open a franchise restaurant from an existing brand.

1. Research restaurant franchise opportunities

There are dozens of restaurants that offer franchise opportunities, and not only QSR restaurants, either. Websites like Franchise Direct and Franchising.com have lists of hundreds of different restaurant franchises for you to explore. Special interest groups (such as military veterans) may be able to access franchise opportunities set aside for them.

Do your research to understand which option best aligns with your interests, budget, and risk tolerance. Consider factors like brand reputation, target market, and growth potential, as well as existing competition in your area.

2. Meet the franchisor’s requirements

Each restaurant franchise has specific requirements, often including minimum net worth, liquid assets, and relevant business experience. Review the Franchise Disclosure Document (FDD) to learn more about the franchise opportunity, including financial requirements, fees, and potential risks.

3. Submit an application

Once you’ve chosen a franchise partner, gather the information you need to submit a formal application. Each restaurant franchise will have a slightly different application process, but expect to submit financial information, undergo an interview, and prepare a business plan that describes how you will fund your restaurant.

Once approved, you will collaborate with the franchisor to identify a suitable location for your restaurant and negotiate lease terms. Expect to pay franchise fees. Franchise fees for restaurants vary: Subway, for instance, charges $10,000 to $15,000, whereas Dunkin’ charges $40,000 to $90,000.

4. Get ready to launch

With a site selected, you can move on to the ins and outs of opening a restaurant. Our guide, How to open a restaurant, can give you a preview of what will need to happen before opening day. The franchisor will also have training and support to make sure your first day is a success.

How to franchise a restaurant

Wondering how to franchise a restaurant to others? If you have an existing establishment, assess whether it’s feasible to license your brand to others. Consider if there’s sufficient demand, resources, and liquidity to justify taking on new partners. If you feel ready, here’s what to do next.

1. Systematize everything

Preparing to franchise your restaurant starts with standardizing your operations to make them easily replicable in different contexts. Trademark all your branding to protect your intellectual property rights. Then, document every aspect of your restaurant’s operations, including recipes, menu items, training procedures, marketing strategies, and quality control measures. Create a training program and comprehensive manual to share with franchise partners.

2. Prepare a Franchise Disclosure Document (FDD)

An FDD is a legally mandated document that details comprehensive information about your franchise offering, including financial statements, franchise fees, territory restrictions, and ongoing royalties. Consult with legal counsel to ensure your FDD adheres to all regulations. In addition, you will also need to register a separate business entity for your franchise.

3. Create and open applications

Identify your ideal franchisee profile and launch a campaign to attract qualified candidates who possess the necessary skills, experience, and financial resources. Implement a thorough selection process to assess candidates’ financial standing, business acumen, and alignment with your brand values. These people will be carrying your brand to new markets, so you want to make sure you have a good working relationship based on trust.

4. Manage your network

Franchising isn’t a one-and-done deal. As you bring on new partners, you’ll need to manage the entire network to make sure your restaurants are consistently offering the same menu, the same promos, and the same customer service.

Clover is here to make managing a restaurant franchise simpler. Our restaurant POS makes it easy to monitor sales across different locations, accept all payment types, and manage operations within each location, making life more manageable for the franchisee and franchisor alike. Learn more about Clover’s POS solutions as you embark on your restaurant franchise journey. Speak with a Clover Business Consultant today.

SPEAK TO AN EXPERT

This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

Editorial Team

Topics: Full Service Restaurants (FSR), Quick Service Restaurants (QSR), Run your business, Start a small business, Strategy

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How to franchise a restaurant

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How do restaurant franchises work?

Franchisee vs. franchisor: What are their responsibilities?

How to open a franchise restaurant