All restaurant franchises have common traits that made them successful, and part of your due diligence is to gather information prior to taking your first steps of investing capital and minimize the risk. My goal in these blogs is not only to help you minimize your risk, but also place your restaurant business in a position to increase revenue and experience success.
Again looking at the “Top 5 Questions” to ask when considering becoming a restaurant franchisee. In our last blog, we looked at Question #1: “When working with franchisees, what is a common mistake your business partners made?”
Today, in this blog we will look at;
Question #2: When working with successful restaurant franchisees, what are three common traits that you see in these business partners that made them successful?
Trait 1 – Choosing a restaurant franchise that is right for me? There are many choices. You can choose the types of cuisines, service styles and food specialties.
Trait 2 – Chose the Right Market/Area. What market (territory) gives me the best opportunity of being financially successful? In an article by Bob Richman, he says “Opening your restaurant business in an area where there is a lot of passing traffic. Out-of-town visitors are more likely to eat some place with a recognizable name than to try a local restaurant”.
Trait 3 – Building a Strong Professional Team. What professionals do I select to be on my team? In the classic book Good to Great, Jim Collins says, “…to build a successful organization and team you must get the right people on the bus.” His research shows that great companies and organizations do this. They get the right people and put them in the right seats.
Let’s review each one of these;
The First Question: What is the right franchise for me?
The worst thing you can do is, invest in a business that you don’t enjoy. However, enjoyment is not the only factor to consider. Logic may dictate that, the one you enjoy the most, might not be the best venture for me.
Allow me to explain. You may enjoy raising turtles. Turtles may be your thing, and since you love these creatures, you may decide to open up a business raising and selling turtles. Here’s a question you have to ask yourself, because I enjoy raising turtles, is it the most profitable business venture for me? If the answer is no, then you need to step back, be honest with yourself, and ask several questions before moving forward.
If your objective is to open a business that allows you to be financially free. You have to decide, not only which ones do I enjoy, but also, which ones do I enjoy that provide me the best opportunity to attain financial freedom. Once you establish that, then you begin you search.
The Second Question: What market (territory) gives me the best opportunity of being financially successful?
You’ve probably heard the phrase, when opening a business the most important thing is, “Location, Location, Location”. Which is very true; however, there is something else just as important. You may think you’ve found a great location with a “Low-cost” lease and a nice-looking facility, which might make the bottom line (on your P&L) look great. However, you must also consider this, a “Low-Cost” lease may not necessarily translate to “High End” revenue/sales. It may be just as important to find that right location, with a more expensive lease; that gives optimum exposure. I’ve seen all too many times, investors bypassing “Great Locations” because of higher cost leases. Only to lose out on the very sales/ revenues that would help increase their success and fund that higher lease they were concerned about, as well as miss the opportunity to driving even more profits to the bottom line.
Now that we’ve identified that location and leases are extremely important! Next, you need to consider, not only the proper location in a city, but also, it’s important to think through what city. What market and what region that best fits your business, and provides you the best opportunity for success.
Below is an overstatement but, will help make my point. Example, you might consider opening a business selling lobsters in Kansas. But here’s the question, as a business owner, is the cost to purchase lobster less expensive in Kansas? Or is it more profitable in a region where costs are low, supply and demand is high? Possibly, somewhere near a coastal market?
Later, on my website, I’ll help point you in the direction (depending on the type of franchise you’re looking at) with the territory that gives you the best degree of success.
The Third Question: What professionals do I select to be on my team?
You don’t have to have all the answers to achieve financial success in your business. You may be a visionary with an ability to see the big picture, however, lack the skills in running the day to day business. Or, lack accounting skills, etc. Instead of taking on duies where you lack expertise, you may need to outsourse those responsibilites to other trained professionals.
Interview the following professionals that will give you optimal success
1. Operating Partners/Managers
4. If you’re looking to invest your profits and diversify, seek out Wealth Managers/Investment Firms
Next blog; When you receive a business plan from prospective franchisees what do you often find missing?