Buying a Restaurant Franchise is a dream to many! And a lot of people save for years in order to open their dream restaurant business one day!
But restaurants fail at an alarming rate. About 60% of restaurants fail in the first 3 years of doing business! And the franchise’s in the restaurant business are no exception!
Here are 3 steps simple checklist which can help you do the due diligence if you are planning to buy a franchise business of a famous restaurant
SIMPLE RULES OF DUE-DILIGENCE BEFORE YOU INVEST YOUR HARD EARNED MONEY IN A RESTAURANT BUSINESS!
1. At least 3 years in existence
It takes about 3-5 years of time in general to recover the capital investment in a typical restaurant franchised business! But most restaurants shut down within the first three years of their operations because they don’t have cashflows to sustain their operating costs!
A majority restaurants and cafes which are unique in their concepts, attract a lot of customers during its launch and the next couple of months.
Eventually, after trying out concept for one or two times, people get bored with it and move on to the next new concept!
So suddenly the sales drop and the restaurant barely manages to cover the cost of operations which leads to shutting down
So what you got to be seeing is, before investing in a business, check whether it has really survived all the seasons and is stable and profitable for at least 3-4 years!
2. Talk to the previous franchisee’s who shut down!
When you like a restaurant as a customer, your analysis pretty much becomes biased towards buying the franchise!
You easily ignore the obvious negatives in buying the franchise! So some third party needs to play a devil’s advocate in evaluating the goods and bads of the business!
There is a saying, the biggest lessons of business are learnt in adversities and losses, not when the company is doing good!
Who better than the one’s who’ve burned their hands buying the brand’s franchise can share the problems in buying the franchise!
You have to know these problems not to shy away from buying the franchise but to evaluate whether you have the capabilities to handle such problems in case the same thing happens in your franchise!
3. Personal Footfall Counting!
As weird as it may sound, but counting footfalls personally has changed decisions for many!
Make random visits to the restaurant during the weekdays, weekends at different hours of the day!
You may actually see things differently if you do the math yourself!
If numbers don’t add up you can simply avoid as there are hundreds of other opportunities to invest in!
If you have any questions related to franchising, you can ask them in the comment section below!
We’ll be happy to answer!