Running a successful restaurant is no simple task, considering the intense competition that exists within the industry. If you’ve managed to make your operation profitable, you’ve accomplished something remarkable. That may naturally raise questions about what your next steps should be, including whether to franchise your restaurant.
Franchising can be arduous and challenging, but the potential payoff could be well worth it. The New York business law attorneys of Rosenbaum & Taylor can walk you through the legal aspects of doing so.
What Does It Mean to Franchise a Restaurant?
A franchise simply means you give third parties the right to use everything about your business. The franchisee gets to use your business name, branding, and model to sell the food you sell. In exchange, you – the franchisor – receive royalties from each franchisee.
A franchisee generally had to pay a franchise fee and certain start-up costs. A new restaurant is created with the same menu, branding, advertisements, etc. It’s almost like cloning your restaurant, except it’s run by third parties.
The Essentials of Franchising
You should have all of these before agreeing to franchise your restaurant.
You Must Have a Successful Business
What “success” looks like will vary from one establishment to another. While your restaurant doesn’t actually have to be profitable before franchising, it’s generally a good idea to wait until it is. Potential franchisees are more drawn to restaurants with a proven, successful business model.
You Need Financial Statements
These provide evidence that your restaurant really is successful. You will want to be able to back up your claims that the model you’ve created works. Providing these statements is also a great way to show potential franchisees you’re serious about your restaurant’s reputation. In other words, since you’ve done well, you expect the franchisee to do well, too.
A Business Plan Is Essential
Our New York business lawyers can assist with this step. You want to have some idea of where your existing restaurant will be in the next few years. And that includes any franchises you may wish to have. For instance, how many franchises should you have? How much geographical area should they cover?
Create a Franchise Manual
This is an operations manual that explains in detail what franchisees need to know and do. It should cover everything from what the interior of the restaurant’s design will be to how the food must be cooked. This document is critical to ensuring your restaurant maintains its reputation for high-quality dining.
Have an experienced New York business lawyer assist with developing it.
Have a Lawyer Draft a Franchise Agreement
This contract will spell out the terms of the franchisor-franchisee business relationship. It will set forth the respective duties and obligations of both parties, including required royalties. Perhaps one of the most important roles of the agreement is to bind the franchisee to the franchise manual. It should also contain penalties for franchisees who violate the terms of the contract.
You’ll want to have a New York business attorney help in creating the franchise agreement.
Should You Franchise Your Restaurant or Not?
What are the benefits of franchising your restaurant? Why should you consider waiting until later to do so? These are some considerations.
Franchising allows you to:
- Grow and expand your brand and reputation, while costing you little
- Receive fees for the franchisee to have access to your brand
- Shift upfront costs to the franchisee, who is usually responsible for much of the initial work in launching a franchise
- Take as much of a role as you want (and agree to) in helping the franchise be successful
- Grow your restaurant more quickly than by using other means
But consider waiting to franchise if these apply to you:
- You’ve just opened your restaurant and can’t yet gauge its potential.
- The business isn’t profitable or is just profitable enough to survive.
- You cannot yet present a competent, proven business model to franchisees.
- Your brand concept is weak or needs more development.
- The food you make is unique and difficult for someone else to replicate.
If You’re Ready to Learn More, Consult a New York Business Law Attorney
Do you have questions about the franchising process and how to best protect your rights and interests? Are you interested in franchising your New York restaurant but want to know if it’s the right time to do so? Talk to the team at Rosenbaum & Taylor. We’re ready to advise you.
