A Franchise is a category of chain operations

Capital, for kitchen equipment & furniture
(McDonald�s : $ 450.000)

Payment of Royalty Fee, monthly fees based on sales.
(McDonald�s : 5%)

Contribution to national and local advertising campaigns, monthly fees based on sales. (McDonald�s : 4%)

The Franchisee must reach the commercial objectives
(total sales) that are usually increased monthly, and the region development schedule (new restaurants operating)

The Franchisee must maintain Franchisor�s quality standards, operating methods.

Help for site selection

All necessary start-up assistance & training

On going franchisee training program

On going employee training program

Educational materials for employees: Operations Manual

Selection of kitchen material, furniture, decoration

Restaurant Construction/Renovation

Selection of food and beverage products

Selection of merchandising products

National and local advertising campaigns

Tested operating procedures (how things should be done)

First, your restaurant concept must lend itself to franchising. (explained here below)

Second, your brand and trademarks must be powerful. (explained here below)

And finally, you have to be able to support the necessary training involved with franchising your restaurant.

Your concept should not be easily replicated

Your concept should be easily teachable to others

There should be sufficient demand for your products or services to warrant branching out into other locations

You still should be able to control the quality of your products or services after they are in the hands of franchisees

Your franchisees should be able to maintain a profit after paying you the franchising fees or royalties

To determine the strength of your trademark and brand:

Your trademark/brand name should give an appropriate message about your products or services

Your trademark/brand name should clearly tell what your company does

Your trademark must be very unique,  others should not use  similar trademarks/brand names that can be confused with yours

Your trademark/brand name should be federally registered

If you're considering international franchises, Your trademark/brand name should be translated appropriately into other languages

Once you have determined that a franchise arrangement is your best option for growth and you've calculated what investment is required from both you and the franchisee, the next step is to consider the different types of franchisees

Single-Unit Franchisee

The most common type of franchisee is called a single-unit franchisee. This type usually owns and operates a single franchise of your business. Even if they own more than one, each is set up independently at different times.

Development Franchisee

A development relationship grants the right to develop a specific number of franchises within a specific territory

Master Franchisee

In a master-franchise relationship, the franchisee takes on some of the franchising responsibilities for you. You grant the master rights for an area to the master franchisee, who in turn grants the rights for subfranchisees in that area. This process has been used in the United States, but is more common in international franchising.

Typical qualifications are:

Overall business experience (not necessary in restaurant industry)

People-handling skills: The restaurant business requires working with people at all times: recruiting, training, supervising�communication and leadership skills.

Financial qualification

Proven track record and honesty: Franchisees with a proven record in business have been shown to be better franchisees than those new in business.

Strong desire to succeed

The Franchise contract is usually separated into 2 different parts: The contract itself, which is a short document  including mainly fees,  and the Outlet agreement, which explain rules about how to run the restaurant and the consequences when rules are not applied.

A Franchise Contract typically includes:

Amount for initial fee (usually 15.000 $ to 60.000 $)
Amount for on-going fee (around 5%)
Advertising contribution (around 5%)
Franchisor Bank Account
Duration (usually 10 years)
Renewal duration (usually 10 years)
Renewal fee (usually the same as the initial fee)
Transfer fees

An Outlet Agreement explains in detail the rules about the way to run the restaurant and the consequences of not keeping standards or applying rules. It typically includes:

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For Development and Master Franchisees, a Development contract will be prepared and typically include:

Development schedule (ex: end of this year 3 units, end of next year 5 units)

Expansion Criteria (follow standards, training program�)

Termination (franchisee can�t pay, can�t develop�)

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