How to Start a Franchise Restaurant

Opening a restaurant franchise is an exciting and sometimes challenging way to become a business owner. It is also one of the most reliable and easily accessible franchise opportunities for investors. Many restaurant franchises offer benefits such as brand recognition, ready-made operational models, marketing, and corporate support. These factors can reduce the risks associated with entering competitive markets.

However, there can be significant financial investments involved, and you’ll need to be willing to follow someone else’s playbook. This guide describes how to start a franchise restaurant and walk you through the most important steps when beginning.

Step 1: Understand the Restaurant Franchise Model

Restaurant franchises allow investors to license the brand, systems, and established internal processes of their food service business. They come along with the benefits of running a business with a recognizable name and corporate and marketing support.

But franchise restaurant ownership isn’t for everyone. First, you’ll likely need to pay an initial franchising fee and ongoing royalties. You’ll also need to follow the operational guidelines set by the brand, including, but not limited to, using their established menus and pricing models.

For many investors, the tradeoffs are worth it. You can skip the hard parts of opening a new restaurant on your own. You’ll join an established system that’s been tested and designed to be reproducible, scalable, and successful. However, for others looking to start a business with less responsibility and constraints, it might not be the right choice.

Do You Need Restaurant Experience?

Some restaurant franchises require previous food service or general management experience. In fact, some brands will only approve franchisees with restaurant or hospitality backgrounds unless they partner with a qualified operator. However, not every brand requires this.

As a general rule, the more complex the business model, the more likely a restaurant experience will be required.

Before you apply, you should research:

• If training is provided
• If you must have hospitality or operations experience
• If you have the option to partner with an experienced operator or hire a qualified GM

Step 2: Choose the Right Restaurant Franchise

The most important part of choosing the right restaurant franchise is understanding your professional and personal lifestyle goals, available capital, expectations for profit and ROI, and your strengths and preferences.

There are hundreds of restaurant franchise models available, each with its own benefits, challenges, and investment requirements. Some may require retaining and managing staff. Others can be less hands-on, with kiosk-style operations and lower overhead.

The main categories include the following:

• Quick-Service Restaurants (QSRs): These restaurant franchises include fast-food chains such as Taco Bell, Subway, or KFC. They are higher volume, popular business models that come with streamlined operations and lower price points.
• Fast-Casual Dining: These franchises offer an increased level of customer experience, such as Moe’s Southwest Grill or Five Guys, where the food quality is great, but the level of customer service remains simplified.
• Full-Service Dining: Restaurants like IHOP or Buffalo Wild Wings offer sit-down meals and wait service. However, this option requires additional investment costs and the responsibility of hiring and managing staff.
• Specialty and Niche Concepts: These franchises can provide a unique market advantage; think of smoothie franchises, coffee chains, and dessert bars, to name a few.

What Makes Restaurant Franchises Unique?

Restaurant franchises represent a large and growing market, but they come with unique challenges and aren’t for the faint of heart. They can require long hours, hands-on management, and a keen understanding of both labor and food costs. Unlike vending routes and other passive income franchise models, restaurant owners are directly responsible for ensuring safe and reliable operations, staffing, and service delivery.

The average owner income for restaurant franchises is around $100k, but that number can increase dramatically with multiple locations. In fact, investors that own 5 or more units will average around $160k after taxes according to industry benchmarks. Margins are usually between 10–15%, and success will depend on volume, operational efficiency, and consistency.

Step 3: Prepare Financially and Understand Investment Requirements

Restaurant franchises commonly require a six-figure investment, but the structure of those costs can vary. Initial fees and setup expenses need to be factored in. You might also need to have six months of working capital to support operations.

Many franchises use a mix of personal capital and financing. Common forms of funding include SBA loans, traditional bank loans, franchisor financing (if available), and investors. You’ll also need to provide a business plan and personal financial statement to secure funds.

Common costs associated with restaurant franchises include:

• Franchising Fee: This one-time fee will give you the right to use the franchisor’s brand and systems. It can range anywhere from $10,000 to $50,000 or more.
• Buildout Costs: These are the costs of buying equipment, kitchen installation, signage, seating, and more.
• Lease Deposits and Real Estate: Securing a physical location frequently comes with upfront costs and improvements.
• Training and Initial Inventory: Many brands will require franchisees to complete extensive training before launch.
• Royalty and Marketing Fees: These are often a percentage of your gross revenue.

Step 4: Evaluate the Franchise Brand and Support

Once you have a list of potential restaurant franchises that align with your goals, examine each opportunity more closely. Reputable franchisors will provide a Franchise Disclosure Document (FDD), a legal document that outlines their operations, fees, support, and financial performance.

Remember that a franchise is a long-term partnership. Look for companies that treat their franchisees as collaborators, not just additional sources of revenue. Brands that offer streamlined onboarding, regional support representatives, and strong leadership are good indicators that your investment will lead to better outcomes.

Take a deeper look at your restaurant franchise by:

• Reviewing the FDD to understand royalty structures, requirements, and litigation history.
• Asking about training programs, marketing support, technology tools, and operations manuals.
• Speaking to existing franchisees to learn about their first-hand experiences with the brand.

Step 5: Secure Financing

If you’re not planning to pay entirely out of pocket, you’ll need to secure financing. Most restaurant franchises are eligible for loans through the Small Business Administration (SBA), and many franchisors are part of the SBA’s Franchise Directory.

To prepare to secure financing, you’ll need a professional business plan with financial projections. Lenders will want to see your plans for profitability, cash flow, and future growth.

If you’re researching how to start a franchise restaurant and considering your financing options, we’ve listed some of the top funding sources below. They include:

• SBA 7(a) Loans: Long-term loans with relatively low interest rates and down payments.
• Franchisor-Backed Loans: Some brands have lending partnerships that simplify the approval process.
• Commercial Bank Loans: May be available if you have strong credit and experience.
• Home Equity or Personal Loans: Common for smaller investments.
• Investor or Partner Capital: A good option if you lack liquidity but want to maintain ownership.

Step 6: Find and Secure a Location

Restaurant location is a critical factor in business success. Many franchisors will offer help to franchisees with site selection, lease negotiation, and market research. However, you should also do your own research.

Consider that keeping your overhead costs low is important, but location can influence your ability to generate revenue more than any other factor. You should also consider zoning regulations, obtain necessary permits, and prepare to make renovations according to your franchisor’s specifications.

Ideal locations for restaurants will have:

• High foot traffic or vehicle counts
• Good working proximity to your target demographic
• Visibility from major roads or shopping centers
• Required parking and accessibility
• Agreeable lease terms and flexibility

Step 7: Sign the Franchise Agreement

Once you’ve found your ideal location and financing is in place, it will be time to sign your franchise agreement. Your franchise agreement will govern your relationship with the franchisor for the entire duration of your contract, which can span from 5 to 20 years.

Before signing the dotted line, it is advisable to have a franchise attorney review your agreement. It will be well worth the legal fees to ensure you have a solid understanding of the obligations to your franchisor and your protections.

You should closely evaluate the following factors:

• Rights to operate under the brand
• Fees and royalty structure
• Operating standards and guidelines
• Territory rights and exclusivity
• Renewal and termination conditions

Step 8: Complete Training and Build Out Your Restaurant

After signing your franchise agreement, you’ll begin two critical paths, including training and location buildout. Most franchisors will require 1–7 weeks of training, depending on the complexity of the business model.

Programs may be held at company headquarters, while others may happen on-site or be offered virtually. While you undergo training, your business location will need to complete construction and renovations based on brand standards.

During this phase, you should prepare for the following:

• Hiring and training staff
• Ordering inventory and equipment
• Setting up a POS system and back-office software
• Coordinating with your franchisor, marketing, and planning your grand opening

Step 9: Launch Your Restaurant and Grow Your Customer Base

Your opening day will be a major milestone of success. In reality, your work is just beginning. The first 90 days after opening will be critical for establishing your local presence, building and improving your company’s reputation, and increasing the progress of your business.

You should take every opportunity to engage with the community in which your business operates. Polished customer service, clean facilities, and high-quality food will help ensure that your first-time visitors become long-term repeat customers.

Most franchisors will provide marketing support for an initial launch (grand opening), but you should also make additional efforts to:

• Promote your restaurant heavily on social media
• Use local influencers and community groups
• Offer opening specials and coupons
• Host a ribbon-cutting or customer appreciation event

What You’ll Need: Common Documents and Tasks

For future reference, we’ve listed the most common documents and tasks you’ll need to complete during the franchise ownership process below.

Are You Not Sure About Restaurants?

After considering the information included in our “how to start a franchise restaurant” guide, you might be questioning if restaurant ownership is the right choice for you. That’s ok. Not everyone is cut out for the food and beverage industry. The hours can be long, margins tight, and customer expectations high.

If you’re not confident that food service fits your current skill set, desired lifestyle, or expectations for ROI—but you still want to consider franchise ownership—there are plenty of other options available to you.

Consider alternatives, including, but not limited to:

• Fitness franchises: Strong margins (~15%), and recurring revenue from memberships
• ATM or vending routes: Lower cost of entry, often passive income
• Home service brands: Often higher margins and greater scheduling flexibility

Also, browse our full franchise directory to compare opportunities across every sector.

Still on the Fence? Contact Franchise.com Today!

Restaurant franchises are not passive investments. Don’t plan to be hands-off with this type of business model because ownership will require a full-time commitment to staff management, food and service quality, marketing, and other responsibilities. However, with the right support, funding, and location, you could be on your way to realizing your dream of owning a restaurant.

If you have questions about how to start a franchise restaurant, the information included in this guide, or would like to know more about available franchises that align with your personal and professional goals, contact us today! We have years of experience guiding investors toward the best franchise opportunities that meet their unique needs.

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