Franchise Money Maker

Guest Essay: Credibility Sells Restaurant Franchises
Aspiring franchisors must have a business plan and prove their concepts’ viability to build a successful franchise business.

By Tom Wilscam
August 8, 2007

When you’ve been in the restaurant industry for more than 40 years as I have, you quickly realize that credibility is one of the most important things you possess.

Credibility means believability. You learn and then earn credibility. To gain the credibility necessary to build a successful restaurant franchise chain, the franchisor must have a track record of success in developing and expanding multiunit restaurants.

One successful restaurant can be the result of being in the right place with the right concept at the right time or because of the owner/manager’s management skills and personality. A successful restaurant franchise company cannot rely on the luck of being in the right place at the right time or the personality of its franchisees. To sell franchises, the company—and the concept—must have credibility.

Failing to Plan Is Planning to Fail

The first step in establishing a franchise company’s credibility is to create a business plan. It will not only guide aspiring franchisors to what needs to be done, but it will help them discover what they don’t know and need to learn about the restaurant business. Here are the components of a business plan:

1. The business plan should begin with an executive summary of the concept. How does it fit into an existing proven national market, and why it will be successful?

2. How does the concept differentiate itself from the competition?

3. Who is the competition?

4. A detailed description of the menu and method of service.

5. Target customer profile.

6. Interior decor.

7. Marketing strategy.

8. Ideal locations with detailed demographics and why these locations will work for the concept.

9. Ownership and management team resumes.

10. Financial requirements.

After completing the business plan and opening the first restaurant, aspiring franchisors will need time to modify the plan as necessary. Then they are ready to open the second and third restaurants to prove the concept’s franchise viability.

Proof Positive

To show potential franchisees that a concept has legs for franchised growth, it must meet the following criteria:

1. The franchise concept must have an existing market as proven by the success of other similar concepts.

2. The concept grosses annual sales at least two times the original investment.

3. The concept nets 15 percent to 20 percent profit.

4. At least three restaurants have seen success in different markets.

5. The company has developed step-by-step operational systems that require little more than to follow directions, as well as security and profit control systems.

6. The training team is skilled in the concept’s operations and can communicate those skills to others.

7. The corporate infrastructure can provide franchisees with consistent and timely support.

As aspiring franchisors modify their business plans and prove the viability of their concepts, they will learn and earn the necessary credibility to become a successful 100-unit franchisor.

Tom Wilscam has more than 40 years of experience in the restaurant industry. He has developed and owned several chain concepts including Hungry Farmer, PTI Restaurant, Good Earth and Garcia’s Mexican Restaurant, as well as Bagel Stop, an 11-unit chain he sold to Einstein Bros. in 1996. Today he is vice president and director of franchise sales at Denver-based Cromwell Corp., a restaurant-consulting company that franchises Juan’s Mexicali, a fast-casual Baja concept, and Grains of Montana, a bakery-cafe concept.

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