You are looking to open a quick serve restaurant or frozen yogurt shop and do not want to reinvent the wheel, so you are thinking a franchise is the way to go. After all they are proven concepts with a detailed business plan and plenty of support and knowledge, right? This week we are going to give you some food for thought before you purchase a franchise.
Franchises are taking over the restaurant and frozen yogurt shops in this country. Almost 50 percent of the more than 574,000 restaurants, and over 65 percent of the more than 80,000 ice cream, gelato and frozen yogurt shops in this country are franchises. With so many to choose from a prospective franchise buyer needs to be well equipped with the knowledge to spot the franchising opportunity that matches their goals and provides the best chance of success.
If you are looking to put your individual style and taste into your business then a concept brand may not be for you. Concepts do not change and adapt to your goals and aspirations and they decide how quickly other locations open. Some franchisors prefer to grow slowly and try to ensure the success of each location that opens. Others open as many locations as possible and as quickly as they can with the thought that if 80 or 90 percent succeed then their brand is a on a successful path. That may be good for the concept but not for you if you are in that 10 or 20 percent that fails and losses their capital in the process.
The Federal Trade Commission requires all franchisors to disclose a Franchise Disclosure Document (FDD) to candidates at least 14 days prior to signing any contracts or collecting any money. This legal document’s purpose is to disclose comprehensive information about the franchisor and the franchise offering. The FDD is divided into a cover page, table of contents, and 23 items or categories.
The two most important items in the FDD to focus on are Item 19 and Item 20. Item 19 “The Earnings Claim,” is an optional disclosure but one you need to discuss before you purchase a franchise. This item provides details on earnings, costs, and other factors likely to affect future financial performance after a candidate signs on to become a franchisee. Here you may find hidden fees and costs; these are a red flag as they usually indicate franchisor profit from food or equipment purchased by franchisees.
Item 20 provides an up-to-date account of the number of units and discloses all closures and sale transfers. Item 20 also provides the names and contact information of franchisees and former franchisees, who should be contacted for information in the due diligence process.
In our next blog we will give you a checklist to help you choose the concept that matches your goals and provides you with the best chance of success.
Whatever franchise you choose or if you decide to open your own yogurt shop or quick serve restaurant Calypso has the point of sale software systems and cash registers pos equipment for your business. We offer complete turn-key solutions. Calypso’s point of sale system has built in QuickBooks integration, kitchen video displays, inventory management, barcode scanning, digital surveillance integration, employee time clock and a labor scheduling module. Contact Calypso today at 800-771-7100 to get started!