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Franchising Demystified

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How To Open A Restaurant Franchise

You have been granted a franchise. It is an exciting day as you sign papers and begin looking forward to a promising future.

The next morning, however, the excitement has diminished—now what? Starting a new restaurant, even within a proven franchise system, requires a lot of work. While it may be months before you open for business, there are still many tasks to be accomplished before that day comes.

How to open a restaurant franchiseThe good news is you are not alone. As a franchisee, you benefit from the support, resources and knowledge of your franchisor as you work towards your grand opening. Experienced franchisors, such as C-Lovers, will provide you with advice on best practices and point out, where possible, anticipated hurdles and how to overcome them. (In fact, franchisors typically provide a start-up checklist to ensure no detail is overlooked.) The following is a list of some common tasks you can expect to tackle between being granted your franchise and celebrating your grand opening.

1. Initial Training

Once you have been granted a franchise, one of your first tasks will be participating in initial training, typically conducted at your franchisor’s head office. This provides you with the knowledge and skills to duplicate the franchisor’s proven business model and replicate the customer experience.

Training is the foundation of a strong franchise system. Successful franchising is all about duplication and consistency. A brand is strongest when the customer has the same experience each time they visit a franchised location, no matter what time of day or location they choose.

During training, you must set aside any preconceived ideas of how the restaurant should be run. Stay open to learning the new methods to which you are introduced. This can be difficult, especially if you have previous restaurant experience. However, your franchisor requires you to learn and adapt to their method of doing business in order to preserve the brand—and better ensure your future success.

2. Finding A Location

One early step will involve finding a location for you to operate the restaurant. In many cases, you’ll derive a large percentage of revenues by simply having a location with high visibility and easy customer access. The right location can launch (or severely limit) your success.

Before beginning your search, check with the franchisor to see whether any pre-approved locations exist, as this could save you a lot of time and effort. If this is not an option, use a commercial realtor or professional who specializes in retail leases to assist you with your search. Once you find a franchisor-approved location, be sure to have all final lease documents reviewed by a lawyer prior to signing.

3. Licenses & Permits

Many franchisees have found themselves ready to open their doors, only to be left waiting for a required permit or license to be issued. To avoid this, apply as early as possible for any licenses and permits, which could include:

• construction/renovation permits;
• business licenses;
• sign permits;
• health department inspections; and
• safe food handing certificates.

When determining what licenses you require, a great place to start is the BizPal website (www.bizpal.ca). This government-run resource offers information on permits and licenses across Canada. An experienced local lawyer, accountant and/or contractor can also help you comply with all federal, provincial and municipal laws.

4. Legal Requirements

A lawyer is an important member of any franchisee’s team. You have already had your lawyer review your franchise agreement prior to signing; now, there are other legal matters to deal with. For example, you may want to incorporate a company through which to operate your new restaurant franchise. If you have shareholders or partners, you will want to have a shareholder or partnership agreement written up. In addition to these tasks, your lawyer can also be a valuable resource when it comes time to reviewing your lease, insurance papers, general contractor agreements and any other legal documents that come across your desk as you work to establish your new business.

5. Banking & Accounting

Once you have a location and an established business address, you should set up a bank account, order cheques and organize credit card accounts and acceptance. Be sure to set up a line of credit to cover your working capital needs once the business is open.

Good bookkeeping will allow you to effectively manage your restaurant. There are several effective accounting software systems on the market to help make bookkeeping easier. C-Lovers support will provide you with a typical chart of accounts and what software they recommend or require. Depending on the restaurant and your personal strengths, you may want to hire a bookkeeper and/or contract an outside company to handle payroll. While it is tempting to save money by doing everything yourself, your time may be better spent building relationships with customers or managing your employees, rather than sitting in the office trying to get your books to balance.

6. Insurance Policies

When opening a restaurant as a franchisee, you want to ensure you are adequately insured. Proper coverage will allow you to recover from a financial loss in the event an accident or other negative incident disrupts your business and causes a loss of income for you (and loss of royalties for your franchisor). Such circumstances may include:
• an injury to an employee or customer on your franchise premises;
• a fire at your restaurant;
• natural disasters (e.g. floods, earthquakes, etc.) and;
• theft or employee fraud.

As you will be making tenant improvements and stocking inventory prior to opening your restaurant to customers, be sure your insurance coverage commences immediately upon taking procession of the premises.

In your franchise agreement or the franchisor’s operation manual, there will typically be specific insurance requirements you are obligated to get from insurance providers. In some cases, a specific insurance provider will be mandated as a supplier in order for franchisees to take advantage of group buying power. An insurance professional can also offer detailed advice according to your specific needs.

7. Location Build-Outs

Some franchisors may build out restaurants through the franchisor’s in-house building department or an approved general contractor. Others may require you to build out the location yourself by hiring your own contractor. In these cases, ask the franchisor to recommend a builder who has worked on stores for other franchisees. You want to select someone who is reputable and can get the job done on time, on budget and within the franchisor’s specifications. Always check references and visit locations the contractor has built in the past. Whether it is through a general contractor or your franchisor, be sure to get specific quotes for build out costs—in writing.

In any construction project, there can be unforeseen costs and delays. While unpredictable, these inconveniences should still be addressed before work begins. For example, discuss conditions that must be met if costs exceed a certain percentage of the original quote (e.g. a 10 per cent variance). You may be able to negotiate a deal in which such overruns become the general contractor’s responsibility or ensure some compensation for you if delays occur.

Throughout the entire process, C-Lovers will be overseeing the plans and construction to ensure the finished location conforms to established specifications. While you may be able to provide input, your franchisor will make the final decisions when it comes to brand consistency. It is important for you to recognize and respect C-Lovers’ experience in these matters. In most cases, there are valid reasons and a solid strategy behind all design decisions.

8. Furniture, Fixtures & Equipment

The furniture, fixtures and equipment you will need to efficiently operate your restaurant are usually clearly defined by the franchisor. Head office will provide you with an approved list of any items you require, as well as contact information for approved suppliers. If you have any questions or concerns, ask your C-Lovers’ support representative. As you receive items, keep track of all warranty and contact information, in case issues arise in the future.

You may be tempted to seek out better deals in an attempt to save money; in fact, you may even come across alternatives that appear to be cheaper. However, you must recognize your franchisor has set specifications on furniture, fixtures and equipment based on experience. As such, saving money in the short term may cost you substantially more over time. Equipment, furniture and fixture purchases cannot be evaluated merely on initial costs. Other factors—such as functionality, speed of warranty service, aesthetics and durability—must also be taken into account.

9. Hiring Employees

Recruiting employees will be an important part of starting your restaurant. Selecting the right staff will dramatically improve your chances for success. This is especially important as a full-service restaurant will require many more employees than other businesses such as a small services operation.

Many franchisors will help you hire and train your initial staff during the start-up phase of your restaurant. Despite the assistance, these are ultimately your employees; it is your responsibility to cultivate and maintain positive long-term working relationships with each member of your staff. Your franchise agreement will typically further clarify that as a franchisee, you are responsible for all decisions related to hiring, firing, training, wages, hours, supervision and discipline. As a result, it is important to be aware of any employment standards and labour laws applicable in your jurisdiction.

10. Inventory Delivery & Management

Inventory is typically the last thing to be stocked prior to opening. That said, you should co-ordinate supplier credit approval well before inventory delivery. Depending on the type of restaurant you are running, there may be substantial lead time required from ordering to delivery. Research these timelines well in advance to prevent any opening delays.

Approved suppliers have been identified, investigated and accepted by the franchisor as meeting its brand and quality standards. You are typically required, under the terms of your franchise agreement, to purchase only from these suppliers. While this may seem limiting, it is done to ensure any products, equipment and services offered by your franchise meet the franchisor’s specific qualifications and are delivered reliably and at a good price.

11. Soft Opening

A ‘soft’ opening marks the first time you open your doors as a fully functional restaurant. This type of
event is usually held a day or two before you open to the general public, with a guest list comprising friends and family members (i.e. people who will understand if things aren’t running as smoothly as possible).

Soft openings represent a good way to assess any potential weaknesses. It is not realistic to expect everything to run perfectly from day one; a soft opening will allow you to identify and correct any potential issues before you go public. These few days should be treated as a dress rehearsal; your goal should be to simulate a typical busy day. Deal with friends and family as if they were customers off the street and identify any kinks and operational bottlenecks. This will allow you to isolate any weaknesses among your employees and give you the chance to offer extra assistance or training before your grand opening.

12. Grand Opening

After a successful soft opening, you will be ready to open your doors. The grand opening is your opportunity to introduce yourself and your concept to the local community. This is a monumental milestone as it signifies the culmination of all the work involved in opening the restaurant.

While national marketing will help promote your brand on a large scale, it is up to you to promote your restaurant locally. Your franchisor can recommend effective ways to advertise and market the business to attract local customers, such as a live radio broadcast, prize draw or free sampling. Any money spent on your grand opening is an important investment. The amount you spend will vary depending on the market and type of restaurant. The goal is to attract as much attention to your restaurant as possible.

13. Stay The Course

With so many details to attend to, running a new franchised restaurant can be overwhelming. This is especially true during the early stages, when you will see all the dollars going out and no income coming in. While success will not happen overnight, being part of a franchise system will provide you with added
resources and extra support during this hectic period. When in doubt, ask questions so you understand the decisions being made; however, part of the value of a franchise is relying on your franchisor’s experience and trusting in its track record. By working with your franchisor, you will avoid costly delays and mistakes and start off on the right foot as you begin life as a franchisee.

Wayne Maillet Restaurant Franchise Opportunity SpecialistWritten by Wayne Maillet, president of Franchise Specialists. Wayne is a leading Canadian franchise management consultant and published author of the book Franchising Demystified. You can order the book at http://www.franchisingdemystified.com/   Wayne Maillet can be reached at 604-941-4361