Buzz
“Strong because of rice, daring because of money”, “a hundred words are not as good as familiar hands” are the epitomes highlighting the importance of funds and business experience in restaurant ventures.
In the previous discussion in Part 1, we touched upon two crucial factors influencing the decision between opting for a franchise or starting your own restaurant: 'Initial Responsibilities' and 'Creative Control Rights'. In this article, we delve into the remaining significant factors, namely Costs and Experience Capital.
Let’s explore how these two factors may sway your decision in choosing your business model!
3. Restaurant Costs (including both initial and operational costs)
While the initial startup costs are typically lower when opening a franchise location compared to starting an independent restaurant, the comparison doesn't stop there. Both financial approaches can vary significantly, making money a crucial factor when deciding which business model suits you best.
3.1 Costs - for the model of independently opening a standalone restaurant
When owning your own eatery, you reap all the profits without having to share or lose monthly fees. With that mindset, you might be more prone to overspending and losing more money when opening your own establishment.
However, if you're a savvy financial manager, capable of working with tight budgets, you'll save quite a bit by making timely and prudent budget decisions. For instance, you might forgo certain decorating decisions or unnecessary renovation plans,...
>> When it comes to costs, consider independently owning a restaurant if you:
- Are prepared for significant expenses including lease, space design, furnishings, and creating your menu,...
- Understand and accept other initial fees including insurance, permits, and licensing fees,...
- Are willing to invest in active marketing campaigns to build brand recognition
- Want to choose your own ingredient suppliers and have established reliable supplier connections with favorable pricing
>> Avoid opening your own restaurant if you:
- Limited capital
- Lack of abundant resources for marketing plans
- Uncertainty when making all financial decisions independently
3.2 Costs – for the franchise restaurant model
To be granted a restaurant franchise, potential partners must meet the franchisor's initial financial requirements. This typically involves liquidity, meaning you, as the franchisee, have funds available to support your restaurant's operation in the first few months. Additionally, you must meet the franchisor's minimum net worth requirements to demonstrate you have enough money to invest (and sustain growth) in the restaurant's future.
In addition to these requirements, you'll also need to allocate a certain budget for brand franchising and incur some initial expenses such as franchise fees, licensing fees, operational costs, brand promotion expenses, and various other fixed costs,... which can range from a few million to hundreds of million Vietnamese dong depending on the popularity of each brand.
For the franchise model, the franchisee will receive support from the franchisor in outlining initial financial plans. Furthermore, because the success of the franchise model is typically assured, seeking investors or bank loans will also be easier, not to mention you'll benefit from purchasing ingredients in bulk at lower prices.
>> When it comes to costs, consider becoming a franchise restaurant brand if you:
- Have sufficiently strong initial capital
- Want to invest in a proven successful franchise business model
- Require financial strategy consulting
- Are willing to pay licensing fees and other fixed costs.
>> Avoid becoming a franchise restaurant brand if you:
- Want full control or flexibility with budget plans
- Prefer not to use pre-designated ingredient suppliers when franchising.
4. Business Experience Capital in the Restaurant Industry
It's beneficial if you've had some experience in building and operating restaurants before.
However, with a proven successful franchise model, individuals with little or no restaurant business experience can still thrive. Because the franchise model will provide you with full processes, guidance, and support, along with all the necessary resources and training to help you succeed.
Conversely, if you have significant experience in the restaurant service industry, you can confidently venture into independently owning a restaurant.
>> Opening your own restaurant, when:
- You've worked in the food service industry for many years and now want to open your own restaurant. This could be a great choice for many former chefs, kitchen managers, and restaurant staff,...
- You have substantial knowledge and important experience in this field? You're likely to feel more comfortable taking responsibility for creating and implementing your business plans rather than following someone else's choices.
>> Choosing the franchise restaurant model (Franchisee) when:
- You're an entrepreneur or former CEO,... with sufficient capital and want to invest in a restaurant chain as a form of investment. Because brand franchising is a proven successful business model. If your previous work experience has provided you with deep understanding of demographic marketing, customer needs,... then you'll be very suitable as a successful franchise owner.
Comparison Chart
This chart highlights each mentioned risk factor in the article as well as the “position” that a franchise operator and an independent restaurant owner stand on the scale:
Above is the comparison of certain risk factors when choosing between the franchise restaurant business model or starting an independent restaurant business. Each model has its own pros and cons. Consider your desires and personal goals to make a decision on your own restaurant model.
Wishing you all wise decisions and prosperous ventures!
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Reference: webstaurantstore
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