What is the food and restaurant franchise industry?
The McDonalds golden arches are among the most quintessential symbols of American fast food franchising. But, did you know that many of your favorite restaurants and fast food places may be franchises, too? Bringing in hundreds of thousands of customers, Subway, Dunkin’ Donuts, and Domino’s Pizza are among some of the most popular food franchises today. But, the restaurant franchise industry doesn’t stop at fast food.
According to an economic outlook report conducted by IHS Markit Economics in 2017, the food franchise industry is divided into three primary parts:
Quick Service Restaurants
There are many other franchise subdivisions within the food industry. These categories include bakeries, cafes, juice or smoothie joints, pizza restaurants, ice cream shops, and vending machine retailers. All of these subcategories fall within the top three listed above and comprise the food franchise industry.
One of the biggest franchise industries, the food franchise industry comprises almost half of all franchise establishments in America. Not to mention, this industry produces roughly 65 percent of all franchise employment jobs. Let’s take a look into the three individual sectors and where they stand in comparison to one another.
the food franchise industry comprises almost half of all franchise establishments in America.
Food and Restaurant Franchises – Trends in Dine-in and Fast Food
Sit down restaurants serving up sales
Although family spending at table service restaurants continues to contribute to household spending on services, full-service restaurants—wherein food is served as sit down style and served directly to the customer by a waiter—comprise the smallest portion of the food franchise industry.
Nevertheless, the number of full-service restaurant locations was expected to grow and experience a 6.8 percent growth in sales in 2017. As a result, this growth in sales would translate to a growth in productivity and therefore a projected 3.9 percent growth in employment.
Fast food still a top dog
Quick service restaurants are more commonly known as fast-food restaurants. As predicted with full-service restaurants, the fast-food sector was also expected to experience a growth in employment, however, slower than in the past. The IHS report additionally predicted to see boosted wages, which hadn’t budged for years in the past. Continuing with the popular trend of the past, quick-service restaurants are likely to remain the leaders of the franchise sector in overall employment growth.
The quick-service sector has many of its own subdivisions according to goods being produced. Chief among these subdivisions are coffee franchises, ice cream or frozen yogurt franchises, pizza franchises, and juice or smoothie franchises. The growth in popularity of healthy, quick food options has been reflected in many of these subdivisions. For instance, franchises in the juice subdivision have seen a big jump due to the public’s lean towards healthier options.
More people dining in
Despite that the restaurant industry was anticipated to see growth, prices of restaurant food were also expected to grow, leading more people to prepare food at home. For this reason, the retail food franchise industry was expected to grow roughly 1.2 percent. Nevertheless, this rate remains lower than the other sectors of the industry. Employment in the sector was anticipated to grow by about 2.7 percent.
Mergers and Acquisitions in the Restaurant Franchises Industry
According to data from 2017, mergers and acquisitions within the food industry are anticipated to keep growing, increasing 86 percent between 2004 and 2016, according to AaronAllen & Associates. Specifically, there has been a large number of deals between fast food/casual dining and restaurant franchises.
One of the biggest restaurant mergers in 2017 occurred when Post Holding Inc. (maker of Honey Bunches of Oats) bought Bob Evans Farms for approximately $1.5 billion.
In September 2017, Global Franchise Group, parent of Great American Cookies, acquired Round Table Pizza, which included more than 1,500 locations and nearly $1 billion.
JAB, a German-based conglomerate that has also acquired Keurig and Peet’s Coffee & Tea, acquired Panera Bread in a $7.5 billion deal in July 2017.
In 2014, Burger King acquired Tim Hortons and built Restaurant Brands International, now a fast-food empire. In February 2017, Restaurant Brands International also acquired Popeyes.
Food and Restaurant Franchise Trends for 2020: Mindful Choices
As mentioned earlier, the public is beginning to look for healthier options when it comes to food. According to Innova Market Insights, two in five US and UK consumers have increased their intake of “healthy foods,” and seven in ten want to understand the ingredient list on the foods they consume. For this reason, the food franchise industry will likely continue to experience growth in healthy food options.
“Today’s consumer displays a high level of mindfulness about well-being and the environment,” wrote Lu Ann Williams, Director of Innovation at Innova Market Insights. For this reason, “Mindful Choices” is among the top food trends.
Fast Food chains optimizing to increase sales.
Many fast-food chains have begun to enhance their brand and operational systems to increase their sales. Chains like McDonald’s and Domi
no’s have researched photography, advertising, décor, among other factors in order to attract new customers and keep customers coming.
Many preexisting customers may not have noticed these changes, as restaurants have been implementing enhancements and changes gradually to avoid alienating their loyal clientele.
McDonald’s, specifically, has also taken measures to minimize its menu in order to speed up service. Large amounts of menu options slowed down the quick service that customers enjoyed with the franchise, resulting in dissatisfied customers and employees. Once the menu was cut down, McDonald’s reported positive traffic growth for the first time in five years.
Is the Restaurant Franchise Industry Right for You?
The number of restaurants in the country grew by more than 2% from 2017 to 2018, reaching 660,755. The food franchise industry can be extremely successful, depending on your commitment to your business. Food franchises that come out the most successful both follow trends of the time and stay consistent with their overall brand and customer base.
Luckily, customers are always going to need food and therefore, picking a location is relatively simple. Restaurant franchise units can be solitary, where they are the only business operating in a building. Additionally, food franchises can be located within a mall, airport, or sports stadium surrounded by other businesses. The location that you select plays a big role in determining the total initial investment, construction costs, rent costs, equipment needs, among other factors.
Another factor that a prospective franchisee must consider is the equipment purchased for their location. A large part of the costs associated with opening a food franchise includes the equipment necessary to run the business. This is absolutely essential, as the quality of equipment is a key determinant in the future quality and efficiency of your business. This can help ensure customer satisfaction. If things are running smoothly and quickly, customers will keep coming. Often, the franchisor provides their preferred vendors and brands, eliminating the need for trial and error.
The final thing to consider when opening a food franchise is the initial investment and ongoing royalty fee. This information can shift depending on the location of your franchise. The FDD, provided by the company’s franchisor, gives a relative estimate of the fees that are associated with opening a food franchise.
Why Should I Consider Food and Restaurant Franchises?
Restaurants are a viable business option at any given time, considering that people will always be looking for good dining and takeout options. If you’re considering opening a restaurant, you have two choices: build an independent restaurant from the ground up or align with a trusted brand to leverage its established business model and brand.
When it comes to serving food, there’s no secret formula for success as one can never tell what will or won’t work. Fortunately, restaurant franchises have a ready and tried-and-tested formula that has succeeded over the years. They also have a reputable brand, a database of trusted vendors to source reliable, high-quality ingredients, and a proven business model, all of which contribute towards profitability.
In addition the success of any restaurant depends on the food reparation process, which like the brand and other business information, is passed down to the franchisee. Moreover franchisors offer support and training to ensure that quality and service standards are upheld, which is a sure factor for success in the food industry.
Some of the Best Food and Restaurant Franchises
To help you explore the available food franchises, here’s a close look at some of the best restaurant franchise opportunities:
Dickey’s Barbecue Pit Franchise
Founded in 1941, Dickey’s Barbecue Pit is a family-owned restaurant chain that uses a unique combination of modern barbeque cooking technology and several proprietary concepts and recipes passed down from generations.
The Dickey’s Barbecue Pit franchise is a great option for entrepreneurs as it has little to no risk, thanks to the six revenue streams in its business model: dine-in, catering, retail items (sauces, rubs, gift cards, and their cookbook), holiday meals, online ordering, and outside delivery. The low risk factor is further reduced by the established brand.
It requires an initial franchise fee of only $20,000 and start up costs that range between $122,079 and $398,508.
Firehouse Subs Franchise
Founded in 1995, Firehouse Subs is dedicated to producing all the components necessary for creating the perfect, flavorful sandwich including the best meats, cheeses, toppings, and toasted sub rolls. The restaurant franchise has an initial fee of $20,000 and start up costs that fall between $160, 583 and $843,390. It produces revenues ranging from $3,019 and $44,537.
The Firehouse Subs franchise is a great option for entrepreneurs who value good quality ingredients and everything that goes into making the perfect sandwich. And if you believe in giving back to first responders and their dedication to saving lives, it offers an even closer fit.
Beef O Brady’s Franchise
Founded in 1985, Beef O Brady prides itself on being a family-friendly restaurant as well as a sports pub. It’s the perfect location where friends and family can get together to enjoy a meal and socialize and hang out with friends to watch the big game.
Purchasing the Beef O Brady franchise would require a one-time, upfront investment of $37,500 and startup costs ranging from $791,967 to $1,327,475. The most suitable entrepreneur for the franchise is ideally someone who is great at connecting with others and capable of carving out their own success path while making a positive impact on customers.
LemonShark Poke Franchise
The LemonShark Poke is a ‘fine casual’ restaurant with a difference. It utilizes the freshest, ethically-sourced, highest quality ingredients to prepare a traditional Hawaiian dish known as ‘poke’ – a variety of fish options. It also provides alternatives such as tofu and lemongrass chicken for customers who don’t enjoy fish.
To purchase a LemonShark Poke franchise, you would require an initial Franchise Fee of $40,000 and startup costs between $341,950 and $866,400. In addition it offers great support and training through the whole process. Entrepreneurs who love poke and believe that passion is the most important ingredient are encouraged to apply for a franchise with them.
Teriyaki Madness Franchise
Founded in 2003, Teriyaki Madness is a Japanese fast-food restaurant that offers teriyaki bowls, appetizers, sides, and sauces alongside other specialty food and beverage items.
A Teriyaki Madness franchise would require an initial fee of $45,000 and startup costs that fall anywhere between $313,500 and $653,860. It offers high revenues, in the range of $631,431 – $1,430,790. It’s a great fit for entrepreneurs looking for a low risk, high reward business opportunity.
For more alternatives, explore other food franchise opportunitiesexplore food and restaurant franchises and pick the one that best meets your personal, professional, and budgetary requirements.
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