Food Franchise Business: Challenges and Solutions

Owning a franchise food outlet may seem like a straightforward way to start a restaurant business. You get a ready-to-use marketing plan, brand legacy, goodwill, and an existing customer base. But franchise business owners still face real challenges. From a franchisor's perspective, two things hold true:

• Franchise owners will run into challenges.
• Franchisors must support them and help them navigate those challenges.

This guide looks at some of the problems food franchise owners face and the solutions that work. Let's get started.

Solving the common franchise business challenges

1. High operating costs

A brand legacy and a well-established name come at a price. Initial franchise fees, opening expenses, licenses, and permits run into the thousands and, in many cases, millions of dollars. Beyond those initial costs, there is a recurring franchise royalty paid quarterly, half-yearly, or annually, often a percentage of monthly sales that varies by brand.

Solution: As a franchisee, there is little you can do about recurring royalty charges. But controlling initial expenses and negotiating reasonable supplier rates keeps day-to-day operating costs in check. Investing in technology such as a POS system or restaurant management software gives you a granular view of expenses and ROI, which helps you cut wasteful spending.

2. Time-consuming and lengthy approval processes

A franchise is a partnership between the franchisor and the franchisee. A franchisee cannot make decisions about a single unit independently. Changes to the menu, pricing, staffing, or decor need franchisor approval, and that process is often tedious and slow. Most franchise agreements are long-term commitments spanning 10 to 15 years or more.

Solution: Keep your documentation, data, and facts ready to expedite approvals. Invest time in understanding the work style, work culture, and the legalities involved in a franchisor-franchisee relationship.

3. Lack of adequate support

When investing in a franchise, the franchisor may be great at selling the franchise while the after-sales support is only average. A lack of adequate support leads to many minor and, at times, major issues.

Solution: Thorough research and feedback from existing franchisees gives you a fair idea of how well a franchisor supports its franchisees. This extra step can keep you from investing in a franchise that lacks adequate support.

4. Too many rules to follow

In your own business, you have complete autonomy. In a franchise, you follow the framework, rules, and policies the franchisor lays down. Store layout, interiors, and the way food is prepared all have to match the franchisor's standards. Franchisors essentially look for operators willing to follow the rules, not reinvent them.

Solution: Do thorough market research of your local area and keep the facts ready. While you cannot change the existing menu, you may suggest an add-on that suits the local taste, or propose special seasonal menus alongside the regular lineup. This gives you a window to innovate and can earn additional revenue during the holiday and festive season. Present ideas to improve operations to your head office, backed by a survey report and numbers, and you may earn that approval. Ideas from local franchisees have contributed to the success of many large brands.

5. Different state regulations

Franchises in different cities operate under different regulations. Alongside the standard rules, opening a location in the following cities means adhering to an additional set of rules known as Fair Workweek Laws:

• New York
• San Francisco
• San Jose, CA
• Seattle, WA
• State of Oregon
• Chicago, IL
• Emeryville, CA
• Philadelphia, PA

These added rules significantly affect how restaurants manage and schedule employees.

Solution: Educating yourself about the laws and regulations that apply in your area is a great starting point. Franchisors expanding into these cities and states often provide added support, such as centralized employee scheduling software that helps locations schedule with ease and avoid breaking Fair Workweek Laws. Lean on the support and technical expertise of your franchisor.

6. Employee attrition

Much of the quick service restaurant (QSR) workforce is made up of college and high-school students. Given the pressure and long hours, the restaurant industry is known for high employee attrition, and franchise food outlets tend to see it run even higher because most are QSRs where work pressure is intense. If you plan to enter the restaurant business, be prepared to manage high turnover.

Solution: Retaining employees requires better hiring and better retention strategies. Food franchise outlets appeal to undergrads, not just for side money but as a resume credential given the brand value of these places. In a hurry to fill positions, owners often hire under-qualified people. Keep a pool of quality candidates to choose from, be aggressive with your hiring plan, and, most important, ask interview questions that help you assess whether the person aligns with your values and work culture.

7. Mindset and mental health

The pandemic pushed boundaries hard, especially for those working in food and hospitality. Many franchise business owners and their teams have struggled with the shift in consumer expectations. Those changing expectations pushed restaurant owners out of their comfort zone and demanded a change in mindset, and all of it has had a direct impact on employee mental health.

Solution: Franchisors can take the lead by building a community for their franchisees, a forum and sounding board where franchisees share challenges and exchange ideas on how they are tackling them. Franchisees, in turn, can support employees by creating an environment where they can openly discuss mental health and get professional counseling.

Like any business, you can find success and overcome the challenges of running a franchise with the right attitude, mindset, support, and collaboration.