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5 tips for franchising a restaurant

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There are all sorts of industries that cater to the franchising of business, from large-scale operations like hotels and hospitals, to more mid-tier operations like gasoline stations and barber shops. Still, one of the most popular -- and often successful -- types of business to franchise is a restaurant. A 2011 feature by Forbes listed eight restaurants among the top-20 franchises to start, based on the money you initially need to invest and the potential value you have to gain: No. 18 Dunkin' Donuts, No. 17 Burger King, No. 14 Panera, No. 12 Papa John's, No. 10 Jimmy John's, No. 5 Papa Murphy's, No. 4 McDonald's and No. 1 Domino's.

Here are five tips from franchising experts that you should consider if you're thinking about opening a franchise:

1) Personalize your decision. "Determine the best restaurant that fits your personality," said Chris Allison, franchise business consultant to Stone Ward and select restaurant chains. "Don't invest in a Dunkin' Donuts if you're not a morning person. If you're a people person, look at casual or fine dining as the owner is a key part of the marketing equation. If capital is scarce, consider kiosk or in-line chains that have lower start-up and network requirements."

2) Ask for help. "Find an accountant familiar with the restaurant industry or restaurant operations consultant to review the financial opportunity," advises Jonathan Raduns, a food-merchandising restaurant consultant. "Restaurants have common industry standards and targets for food costs and profitability. We recommend having an unbiased professional help you ensure the opportunity is viable. Not every franchise is created equal; some flashy looking concepts may not prove themselves financially viable."

3) Strictly follow the franchiser's instructions. "If you're just going into franchising to replace a job, or if you wish to maintain a high degree of control over your business decisions, then franchising isn't the place for you," said Cheryl Babcock, a director of franchise education at a business school in Florida. "You must operate under the franchisor's established system, which allows for less freedom than an independent small business."

4) Secure proper finances. "Financing and credit access are key factors to consider when seeking to franchise a restaurant, as many costs are involved, such as the cost of real estate, equipment, employees and more," said David Nayor, a small business and franchise finance expert. "It is likely that a restaurant owner seeking to franchise may need to secure a bank loan in order to move forward and cover all of these costs, and it is important to prepare an effective financing request to present to banks."

5) Embrace every customer experience. "By getting to know your customers and making friends with them, they become your advocate," said Tom Orbe, vice president of the California-based restaurant chain Wahoo's Fish Taco. "Learn their names and what they like, and lead by example and have your staff do the same. Take a customer's negative feedback and turn it into a positive. You can do something special like give them a hat, a t-shirt, a smile, show them your kitchen, or let them sample a new food item. You are never too busy to give a special acknowledgement to a customer. Do that and the sales will come as word of mouth is 90 percent of the marketing equation."

Last Updated: 02/05/2012 - 3:10 PM

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