You may have heard the statistic that 90% of restaurants fail in their first year. It’s an exaggeration, but the restaurant industry can certainly be ruthless.
Opening a new restaurant is made easier by walking alongside a franchise partner, but reaching profitability is never as simple as opening the doors and hoping customers walk in.
From the moment you sign your franchise agreement, success requires strategic planning, careful financial management, and a deep understanding of the franchise model. With that, here are some key tips to help you hit the ground running as a new restaurant franchisee.
Understand the Franchise Agreement
Your first step is to understand the franchise agreement. This legal contract outlines your relationship with the franchisor and contains essential terms, including fees, royalties, support, and your responsibilities as a franchisee.
This document guides how you’ll operate your business and sets the financial parameters that impact your bottom line. Familiarizing yourself with the franchise agreement can help you avoid unexpected costs and allow you to focus on profit-building activities from the start.
Choose a Strategic Location
Selecting the right location for your franchise will also have a tremendous impact on future profitability.
A strategic location can drive traffic and increase brand visibility. Look for a location with high foot traffic, local demographics that align with your target market, and limited direct competition.
Consider the surrounding businesses as well. Locations near complementary businesses or entertainment venues can help drive traffic to your restaurant. Accessibility is also key. Ensure there’s plenty of parking and easy access from major roads. By taking a strategic approach to location selection, you’re setting the foundation for a profitable franchise.
Follow the Proven Business Model
One of the main advantages of joining a franchise is the ability to follow a tried-and-true business model. Franchisors have spent years refining their operations, developing best practices, and fine-tuning processes to work across locations. As a new franchisee, it’s crucial to stick closely to this model.
By following these guidelines, you can avoid costly mistakes and fast-track your restaurant’s profitability. Deviating from the established systems might be tempting but trusting the business model will help you maintain consistency, meet brand standards, and achieve your financial goals.
Make a Detailed Budget
Before you open the doors, you need to have a clear understanding of all the costs, from initial franchise fees to ongoing operational expenses. This includes rent, utilities, inventory, staff wages, marketing, and unexpected maintenance.
Your budget should account for fixed versus variable costs, so you can make informed decisions about where to cut back if necessary. Be mindful of cash flow. Your expenses may outweigh your revenue during the initial months, so you’ll need a buffer to weather that period.
Make sure your budget also includes targets for profitability and growth so you have a roadmap to success.
Hire Great Staff
Your staff is the face of your business. From the waitstaff to back of house, it’s crucial to hire employees who not only have the right skills but also align with your brand’s values and culture.
Look for people who bring enthusiasm, a strong work ethic, and a passion for customer service. Your hiring process should include thorough interviews, training programs, and assessments to ensure that each team member contributes to the restaurant’s success.
Retaining good employees is equally important. A high turnover rate can lead to inconsistencies in service, increased training costs, and negative customer experiences. Invest in a positive work environment with competitive wages, opportunities for growth, and strong team dynamics to keep your employees engaged.
Push Alcohol Sales
One of the most effective ways to increase profitability in a restaurant franchise is boosting alcohol sales. Alcohol has higher profit margins compared to food, and customers are often willing to spend more on drinks during their dining experience. Train your staff to upsell, offering premium options or suggesting pairings with appetizers and meals.
Additionally, creating an inviting atmosphere with games or live sports and events can encourage customers to stay longer and order more drinks.
Limit Overpours & Comps
Controlling your inventory is critical to running a profitable restaurant franchise. Overpouring, whether intentional or accidental, leads to wasted product and reduced profits. Even a little extra in each drink can add up to significant losses over time.
Implement systems to monitor and train your staff on proper pouring techniques, like using jiggers to measure alcohol portions. Regular inventory checks will also help track discrepancies and address issues early on.
Similarly, keep comps under control. While offering the occasional free drink or meal to build customer goodwill can be beneficial, too many comps can cut deep into your profits. Have a clear policy in place on when and why comps should be given.
Let People Know You Exist
Even the best restaurant franchise can’t thrive if no one knows about it. As a new franchisee, it’s essential to invest time and resources into building brand awareness and attracting customers.
Take advantage of social media platforms to create buzz around your grand opening, special events, and promotions. Encourage customers to share their experiences online and leave reviews. Collaborating with local influencers or hosting events that resonate with your community can further boost visibility.
Don’t overlook traditional marketing methods either. A well-placed billboard, flyers, or even local radio ads can help you get the word out. Combine these efforts with targeted digital ads to ensure you’re reaching potential customers.
Putting It All Together
Running a successful restaurant franchise requires more than just signing on the dotted line. To ensure profitability, franchisees must be strategic about every aspect of their new business from understanding the franchise agreement to hiring a winning team.
One final note: Don’t be discouraged by the initial numbers; it takes an average of two years for a restaurant to turn a profit. If you have a plan, follow proven franchise systems, and pay close attention to operational details, you can set your new franchise on a path to profitability.
Looking for a partner with a track record of success? Contact the Twin Peaks Franchise Team to learn more about opening your first franchise.