By Brittany Waddell, Contributor
In the last few decades, the landscape of restaurant franchising has changed drastically. Franchise restaurants in present-day now attract a multitude of investors for various reasons other than getting into the food industry. In the early 1960s, the easiest way for an individual to start their restaurant business was to open a single franchise. It was a first-time choice for many entrepreneurs that wanted to become business owners. Over the years, the future of franchising has begun to morph into a different type of investment.
Changes Lead to More Success
For those entrepreneurs who are successful in opening up their first restaurant franchise, opening up several more of the same brand franchises in other locations was the next step. The ability for these restaurant owners to leverage their cash flow from their profitable restaurant franchise and their experience in other areas led to many opening additional locations in the early-90s.
While many individuals successfully opened multiple brand franchises on their own, there was also a rise in franchises being opened by teams of investors. Multi-unit ownership for a single person or a group of investors has proven to be a successful method of financial growth because it gives franchisees and the investors established business models with predictable results.
Multi-unit ownership used to be a rare idea. These days, however, it is becoming more and more common to find restaurant franchises with multi-unit ownership. The amount of multi-unit owners has reached more than 75% for restaurant franchises. There are many great reasons for this shift. One reason is that many brands have learned that it is easier to get a single team of investors up and running than hundreds of other single franchisees without experience up and running.
Expansion Is Key to Success
Multi-owner franchises typically have stronger relationships with vendors and realtors, smoothing the development of a franchise unit. They are also able to facilitate expansion more rapidly across a region or even across the whole country. Now is the time when many brands are trying to get first-mover advantages. Because of this, expanding quickly is the key to success.
Enhanced Restaurant Technology
It is no secret that technology is changing our everyday landscape across all markets and areas of our daily lives. The restaurant industry will see changes because of enhanced technology. There are many franchise owners who have been in business for many years that are worried about stepping away from their typical ways of running a business into a more technologically-advanced way. For some, switching from analog technology to digital technology can be scary.
Even still, the restaurant industry and it’s sub-group of franchising is starting to realize their success lies heavily on making the necessary changes to put more emphasis on technology. Across the industry, owners are working methodically to get all their locations set up with updated technology. Many franchisors do not force new technology on their franchisees. However, they are starting to strongly encourage it through a deployment stage based on the franchisee's needs and their cash flow availability.
A Business within a Businesses
A new business model being used in many industries is the “business within a business” approach. Restaurant franchise owners have been recognizing the benefits this type of business model can offer and are taking advantage of it.
One example of this business model is opening a quick-service restaurant franchise within a discount retail shop. This model can be a win-win because customers will get access to multiple types of products or services they need at once while the franchises are able to tap into the customer base of other businesses. Guests will enjoy the convenience that this type of business model offers them.
Franchises of The Future
The ability to grow and expand is important for restaurants. What happens, however, when a growth-driven restaurant franchisee reaches a saturation level for their brand in the market they are working in? It can be hard to find ways to optimize a franchise business infrastructure when it is not solely your own. Multi-brand restaurant franchising has become more popular because of this issue. Many franchisees operate two or more non-competing restaurant brands in order to gain a larger target market of customers.
The franchisees who can run multiple restaurant brands are typically driven by brand diversification, revenue growth, local real estate, open territories, consumer trends, existing resources, and the demographics of the geographical area. The concept of business owners opening multiple franchises of different brands is the future of restaurant franchising.
About the Author
Brittany Waddell is a contributing writer and media specialist for East Coast Wings Franchise. She often produces content for a variety of restaurant industry blogs.