Franchising is a dream that often lurks at the back of a successful restaurateur’s mind. There are many great examples of how popular food and beverage brands have become national, or even global, successes using the franchising model, so they quite rightly ask themselves why they couldn’t be the next one.
Research confirms that franchising is an established way of expanding a business. It turns over US$300 billion in Europe, US$850 billion in the US and US$130 billion in Australia and is the preferred form of international expansion for many successful restaurant and leisure brands.
Franchising is considered a good option for any company that wants to expand but lacks capital, the right people or the time to make it happen. By allowing others to share in their successful brand, in return for a royalty, savvy franchisors remove these three potential obstacles.
Franchise consultant Mark Siebert, writing in Entrepreneur magazine, says the main barrier to expansion for entrepreneurs is a lack of money. He explains that franchising allows companies to expand without the risk of debt or the cost of equity, as franchisees provide the initial investment. And, as the franchisee is the one who signs the lease and commits to service contracts, this reduces the risks to the franchisor significantly.
Siebert says the second barrier to expansion is finding and retaining good managers. Often, a business owner spends months looking for and training a new manager only to see that manager leave, or – even worse – get lured away by a competitor. Franchising overcomes this problem by substituting a motivated franchisee for a manager. And, because the franchisee has an investment in the business and a stake in the profits, performance will often improve.
Finally, opening another location takes time – particularly in the food and beverage industry, where positioning is critical and fit-out is time-consuming. For those with too little time, but a great ‘formula’ to take to the world, franchising often provides a great solution, as the franchisee performs most of these growth tasks.
6 tips for franchising success
Here are six tips on how to make sure your foray into franchising is a success:
1. Due diligence. When selecting a potential franchisee, it’s important to make sure there’s a good match with your business approach, operational standards, and general expectations. For example, a franchisee should be open to your appropriate input on things like menu, alcohol policy and opening hours, and also be prepared to follow your franchise system closely.
2. Legal. Your F&B brand and system need to be well protected before you enter into any franchise arrangements. This includes trademark registration, duration of the franchise agreement, franchise fees or royalties and franchisor step-in rights when the agreement ends. This process needs to be started early, as trademark registration in some countries can take several years.
3. Franchise system. This is a critical component of launching any successful franchise and is the ‘nuts and bolts’ for getting it off the ground and making it successful. It includes factors like franchise territory, support, compliance, quality control, and reporting. This is particularly important as the franchise grows and you start managing multiple locations. A successful system lays down the blueprint for a successful and ongoing franchise business.
4. Management team. This becomes increasingly important as your franchise grows. A good team will support you while you continue to market and grow your business, while also making sure that existing franchisees continue to meet required standards.
5. Finance. While much of the upfront and day-to-day financial risk is absorbed by franchisees, there are nevertheless obligations for the franchisor, including marketing and support. It’s essential to make sure that your business cash flow is healthy and can sustain your current holdings while you expand.
6. IT infrastructure. While the dining experience is, of course, critical in the F&B industry, this is underpinned by a strong technology platform. Particularly as a franchise grows, it’s essential to have a robust system that is up-to-date and provides detailed insights and analytics so business performance can be measured. This is particularly true for the QSR sector, where a fast, seamless customer experience needs to be supported by your technology.
How TabSquare boosts franchise profitability
This is where a solution like TabSquare’s cloud ordering platform can give your franchise aspirations a huge boost. The food and beverage software company have been in on the ground floor of artificial intelligence (AI)-driven F&B solutions since 2012, solving many of the challenges faced by the QSR industry, in particular.
Using AI, TabSquare helps drive restaurants’ profitability by creating seamless operations, saving labour costs, boosting average cover values and speeding up table turns. It works with existing payment systems to give F&B chains, bars, bistros, cafés, and full-service restaurants an edge in their highly competitive market.
Of particular relevance to the franchising world, TabSquare maintains a consistent brand and communications experience. Because its solutions are technology-based, any changes or updates can be communicated in real-time across every channel in every franchise. This means that any specials, promotions or marketing messages are unified and consistent.
TabSquare’s SmartKiosk, SmartTab, and SmartWeb deliver analytics and insights in an easy-to-understand dashboard that tracks the interaction of all products, including item placement and pricing. Its AI engine – nicknamed Aiden – combines data from previous customer visits with deep learning algorithms to identify customers and analyse their dining patterns and preferences.
This helps any venue get a better understanding of a guest’s behaviour and offer more satisfying personalised meal recommendations. This enriched dining experience proactively targets each individual, no matter which outlet they’re visiting. Based on these insights, Aiden suggests items that the customer will enjoy and which provide the highest profitability for the franchise.
For example, TabSquare’s SmartKiosk instantly recognises each customer, no matter which outlet they are visiting, remembers their previous orders and offers smart menu recommendations based on their preferences.
AI-powered ordering a unique offering
This focus on the individual customer, paired with a seamless dining experience, is a unique offering which most franchise systems neglect. They typically focus around the system – menu, machinery, process, supply chain, etc. – and then demand around 2% in royalties for marketing, which often comprises low-cost, ineffective signage. The big hitters of menu engineering and customer insights mostly don’t existent in current F&B franchise opportunities.
On top of this, TabSquare offers a 10am-10pm helpline, to coincide with peak dining times, as well as a WhatsApp support group where customers can escalate issues where necessary to next-level management for action and resolution.
Real-life examples of the success of this franchise-technology combination are TabSquare customers Sushi Tei and Seoul Garden. Sushi Tei, a Japanese franchise, had their Indonesian franchise implement TabSquare solutions at their outlets to offer Indonesian Sushi Tei customers the same dining experience as they would in Singapore.
And Seoul Garden, a Korean franchise, had their Malaysian franchise implement TabSquare solutions too, ensuring that branded communications with their Malaysian customers were the same as those experienced by Singapore diners.
If you want to provide a seamless and consistent dining experience across your franchises and outlets, join other F&B businesses that are seeing significant benefits from the latest that technology has to offer. Download our white paper to find out how to move your venue into the digital age.