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Fast food franchises account for approximately 25% of all US franchise businesses, making it the largest franchise sector in the country. The fast food industry has an estimated value of $239 billion per year, and one reason franchising is such a popular model for those wanting to own and operate a fast food business is the familiarity of providing an established brand and menu to customers in your area.
Costs of opening a fast food franchise
There are many factors that affect the costs of opening a fast food franchise. These include the franchise fee, the cost of royalties, property rental and licensing, staff salaries, and advertising and marketing, among others.
Generally, a non-traditional franchise that is located in another business and supplements its service will be cheaper to buy into than one that stands alone and offers a range of services such as eat-in, takeaway and drive-thru.
Although the rewards are potentially high, it is recommended that any entrepreneur who is considering entering this competitive marketplace review their figures with a business advisor prior to entering into a franchise agreement.
Benefits of a fast food franchise
Entrepreneurs who want to operate a food business benefit from brand recognition, a familiar menu and an existing reputation for customer satisfaction when they choose to buy into a fast food franchise rather than opening an independent food business.
This can accelerate the timescale for becoming profitable as well as while easing the marketing burden associated with opening a new business. Approximately 60% of independent food businesses fail within the first year, compared to only 20% of franchise businesses, making the choice to establish a fast food franchise less risky.
Risks of a fast food franchise
The fast food market in America is saturated. If you open another branch of a fast food franchise in an area where it is already well represented, you could fail to secure a sufficient customer base to achieve a profitable position.
As with all businesses, entrepreneurs must be prepared to sacrifice their work-life balance while establishing the business. Starting up a new business, even a franchised one, requires absolute commitment and dedication for it to succeed.
Food businesses are well known for being labor intensive and stressful. Even though serving customers a menu they are familiar with is less risky than introducing a totally new cuisine, it is essential that the highest quality and hygiene standards are maintained to avoid risking the reputation of the parent company.
In conclusion, a fast food franchise can offer entrepreneurs impressive profit margins, but the initial investment is often very high. This model will appeal particularly well to those with a genuine passion for food who are able to deliver excellent levels of customer service.