Opening a restaurant franchise is an exciting opportunity and there are many benefits to investing in a franchise, as opposed to starting a new restaurant from scratch. But that doesn’t mean the road to restaurant franchise profitability is a direct path. New franchise owners should beware the following missteps when getting started.
The 5 Most Common Mistakes First-time Restaurant Franchise Owners Make
- Accepting the very first loan offer extended. New franchise owners are excited and want to get their new venture infused with capital as quickly as possible. But that doesn’t mean you should bite at the first loan offered. You need to have a firm understanding of what terms will work best for your expected revenue timeline. Many tools available online can help you figure out how much money you will need to avoid overextension and which payment schedule will make the most sense.
- Trying to do it all on their own. Even wildly successful entrepreneurs don’t know how to do everything. In fact, one of the most valuable skills for successful restaurant owners is understanding their limitations. When you understand your strengths, you can outsource your weaknesses. Those tasks can include legal services, accounting, marketing, management and more.
- Overlooking – and underestimating – the competition. Early planning and competitive analysis are crucial to the success of a new restaurant franchise. That means taking a hard look at your competition and evaluating the service gaps that actually exist – not just the ones you want to see. Drop into the restaurants located in the area you’re interested in and ask the owners if anyone has tried offering what you are considering. Take their advice with a grain of salt, but take it nonetheless.
- Committing to a long-term lease. Unless you have enough capital reserves to withstand the early, unpredictable bumps in the road that often occur with new ventures, then it’s usually wise to play it safe and avoid a long-term lease. Begin with a short-term lease, and you’ll be able to reassess your revenue models before renegotiating with your landlord.
- Evaluating only one franchise. There are so many factors that go into the decision to open a franchise that you can’t limit yourself to one franchise option. Objectively assess the market demand, and of course consider the relationships you establish with potential franchisors. At the end of the day, the most promising option might not be the one you were originally expecting.
If you’re looking for a free and informative resource for opening a new restaurant franchise, you can download our new whitepaper, “The (Aspiring) Restaurateur’s Guide to Opening a Franchise,” by clicking here.