Franchise chains are seen as a guarantee of real success, especially in the gastronomy sector. Those who manage to structure their concept in the most transparent way possible and document their knowledge in full can expand their activities almost without limit, they say. But independence within a closed system comes at a price.
When we see certain logos or images, such as the golden arches in the shape of an M or the smiling face with Colonel Sanders, we know immediately where we are and what we can eat. “Successful franchising systems are characterised by tried and tested concepts, whose empirical values can be standardised as part of the know-how documentation and transferred to other locations without loss of quality,” says Jan Schmelzle, Executive Director of the German Franchise Association.
ADVANTAGES AND DISADVANTAGES OF FRANCHISING
It is very important to decide whether a restaurant owner prefers to rely on his own concepts or on the proven system of a franchise chain,„ says Jan Schmelzle. "As a franchise buyer I benefit from an established structure and existing know-how - while operating as an independent contractor on my own account and with my own organisational and staff autonomy.”
In return, franchisees give up considerable freedom. Key decisions are made by corporate headquarters and simply have to be implemented, whether we agree with them or not. Unlike independent restaurateurs, franchised restaurants have no control over the for recipes and the way food is prepared. The service guidelines, on the other hand, are so detailed that they even specify the type of napkins used. „As franchisees, we have to be aware that we cannot be creative,” says Jan Schmelzle.
EUR 500,000 ENTRY INVESTMENT FOR FRANCHISEES
Anyone wishing to open a franchise unit can usually contact the franchisor directly online with the centre of the desired chain. In general, the national franchise associations' websites provide an overview of all the schemes available in the region.
Previous professional experience is not usually necessary, as all the framework conditions are clearly and concisely defined, even for career changers. However, certain financial conditions must be met before the franchisee can contractually obtain the right to use the business concept, name, design and general idea for a specified period. „The cost of this depends on the franchise tax and can vary significantly. McDonald's, for example, currently charges €500,000 as an entry investment.”
In addition, there are monthly fees, which usually amount to ten percent of net sales. In return, the parent company is used to finance joint activities such as marketing or recruitment. „It is important to be informed in advance about these ongoing costs. However, in our experience, an initial ratio of 20 percent equity to 80 percent debt is reasonable. Banks are happy to help with franchise concepts because the business model is tried and tested.”
Is your idea suitable for implementation?
The fact is that the market is still far from saturated, especially in the burger segment, may seem surprising given the wealth of providers. But that is why it continues to offer great opportunities for franchise partners,„ says Jan Schmelzle. "Nevertheless, a new niche market needs to be found. Every concept needs uniqueness, and clearly differentiate yourself from your competitors. This unique selling point - in terms of visibility - needs to be very clearly defined.”
It is also one answer to the question of what a restaurateur should look out for when considering turning their own business into a franchise chain. FIRST, however, there is one very important question that needs to be clarified: „Am I even qualified to franchise? Can my work be systematised in a know-how manual in such a way that all the processes can be accurately repeated? Can my concept be transferred to other cities, perhaps even to other countries?”
A franchise network is more durable than a marriage
If the answer to all the questions is “yes”, it is worth considering the next steps. However, in your enthusiasm for the original idea, you should not overlook the financial burden of turning it into a franchise chain. take care of them on a permanent basis. And this is definitely a complicated administrative and therefore financial process.
The profitability of a new system centre can only be achieved after two or three years, so anyone who decides to become a franchisee must do so with complete conviction and consistency. It is not by chance that commitment and loyalty are important factors for a successful partnership. Franchise partnerships last on average 16 years, which is longer than the average marriage.
Cooperation and resilience
Jan Schmelzle remains positive about the future and potential of gastronomic franchising. Twice a year, feedback from franchise partners is recorded in a Franchise Climate Index and we receive the same feedback as our colleagues in other European countries. The numbers continue to rise, in Germany, for example, total sales increased by 3.8 percent to €147.6 billion.”
This promising development is largely due to the core benefits of franchising. The model offers greater efficiency while minimising economic risk compared to sole proprietorships, thanks to a wide range of synergies. The scaling and standardisation of workflows makes it very easy to transfer experience to franchise partners, while at the same time monitoring the local market and gathering important information. Overall, this can help us to be more resilient to future challenges.
