4 Things You Need to Consider when Looking at Food Franchise Concepts
Aug 29, 2017
By: Brad West, VP of Operations for Smoothie King
Investing in a food concept isn’t something you just jump into without careful consideration. First, there are multiple formats, including:
- Fast casual
- Quick service (QSR)
That said, each of these types of stores have unique advantages and drawbacks. For example, you’ll typically see higher average annual revenue with a more intense cost of goods (COGs) with full-service. With a QSR concept, the initial investment is lower but sales volumes aren’t usually as high as a full-service restaurant.
For a closer look at what you should consider before investing in a food franchise concept, look carefully at the following four factors:
1. Cost of Goods
Smoothie and retail COGs don’t really have a learning curve. If you follow the recipes properly, uphold the correct ordering process, maintain rotation and par levels, you can usually keep your COGs at a consistent level. At the end of the day, this can have a significant impact on your profit and loss statement. Meanwhile, full-service operators are constantly thinking about labor costs and ways to cut labor in an effort maximize profits.
When you look at the waste levels of a full-service restaurant, you make a certain number of items every night for the dinner period, and whatever doesn’t get served is normally thrown away. Whereas at a QSR concept like Smoothie King, everything is made to order which results in less waste.
One of the key talking points whenever we discuss Smoothie King is that it’s not a complicated business if you follow our processes, procedures and operating systems. The QSR model doesn’t make the actual work any easier – you still have front-of-the-house and back-of-the-house work and a team of employees to manage – but it’s certainly less complex than many fast casual or full-service restaurants.
For example, Smoothie King operates without knives and cutting boards in our stores. Our supply chain helps ensure each franchisee has the ingredients they need in the form they will be used to blend smoothies. Of course, our team members peel millions of bananas a year and there are other prep duties, but Smoothie King owners don’t have to worry about raw proteins, like chicken, meat or pork, in their stores.
3. Labor Costs
With respect to talent, QSR concepts like Smoothie King don’t need a staff of 60 people, which is a payroll full-service restaurant owners will often see. Our stores typically can operate with about 10 team members.
From an operational perspective, you need to invest in labor when you open your location because you need to ensure you’re delivering outstanding service, and you’re not trying to run tight labor for the first 30 to 45 days you’re open. This gives you an opportunity to identify superstar talent on your staff and keep stress levels at a minimum. Many times, full-service restaurant owners are obsessing over ways to keep labor costs down, which can result in employee burnout.
The investment, footprint, and overhead are all smaller with a QSR concept. Most full-service restaurants run between 7,000 – 10,000 square feet, and many fast casuals concepts are at least 2,000 square feet. Most of our Smoothie King stores range from 800-1600 square feet.
When you look at operating costs, from utilities to rent to fixtures, furniture and equipment, the buildout is more attractive for a food concept with a smaller footprint. Comparatively, you don’t have to invest quite as much capital to get your store up and running, which means you’re on a better path to work toward generating a return on investment (ROI) within a more palatable time frame.
What You Don’t Know…
For someone just entering the restaurant industry, the three initial pieces of wisdom I would offer are:
- It’s harder than you think
- It doesn’t instantly make money
- You’ve got to have the right people
In my experience, the most successful Smoothie King franchisees are involved in the business, getting to know the day-to-day operational aspect of owning their store. Once they’ve gotten that experience under their belts, they’re in a better position to develop a succession plan to put the right people in place – especially if they want to add new units. From that point, it’s in the franchisees’ hands to grow their business in whichever direction and for whatever means they choose – whether that’s creating a legacy investment or investing in their local community.