Many entrepreneurs assume buying a fast food restaurant is the key to quick success. While there are advantages to selling quick bites over 3-course meals, you can’t expect automatic profitability from owning a casual restaurant. The fast food industry sees annual growth of 4%, meaning competition is steep. But, patrons are dining out now more than they have before, so rest assured there is room for you to tap into this $825 billion industry.
Whether you’re planning to acquire a franchise restaurant or an independent eatery, there are a handful of questions you need to ask before investing.
Deciding whether to franchise or go independent boils down to a variety of internal and external factors. Franchising offers built-in demand, the ability to work with established suppliers, and a foot-in-the-door for a turnkey operation. But, franchisees are limited in the amount of creativity they can implement into their restaurant. They must follow a rulebook that specifies the level of consistency they’re expected to maintain. Also, keep in mind that “chain” and “franchise” aren’t synonymous terms in the restaurant industry. All franchise restaurants are chains, but not all chain restaurants are franchises. Chain restaurants are owned and operated by one parent company, whereas individuals can purchase rights to own franchise businesses.
One significant component to buying any business is developing buyer personas based on your usual customer profile. As a business owner, you must determine who your audience is and what they’re receptive to. Since you’re interested in buying a fast food restaurant, remember that most of your consumers will come to you for convenience and affordability. You should also strive to appeal to the local market, as most customers will not drive long distances for a quick bite. When analyzing your market, you must also assess the local economy, as well as your nearby competition, which isn’t limited to other fast-casual concepts.
No matter what direction you take (i.e., franchise vs. independent), buying a fast food restaurant is quite an investment. A lot of investors are surprised to learn just how expensive it is to tap into the franchise market. For example, opening a McDonalds or Taco Bell requires an initial investment ranging from $1-$2 million. Plus, franchisees must meet a certain figure pertaining to net worth and liquid assets, which may seem off-putting. But, don’t forget to consider all that is acquired through the purchase of a franchise: brand recognition, restaurant/kitchen design, menu, marketing campaign, etc.
On the other hand, existing independent restaurants tend to be less of an initial investment, plus you won’t need to worry about paying monthly fees to a franchisor. Whether you invest in a franchise business or blaze your own trail with an independent shop, be sure to crunch the numbers before signing on the dotted line.
Ultimately, when analyzing an existing business, you have to determine if it has the potential to grow into the business you envision. Questions you may want to consider include:
Before beginning to search for a fast food restaurant, create a vision of your ideal business. Refer back to these ambitions as frequently as possible when in the consideration stage of your buyer’s journey.
Buying a fast food restaurant can be lucrative, but you need to find the right business venture that suits both you and your local market. Browse our current listings to find businesses for sale near you. Then, contact your local Sunbelt Business Brokers office to get started on acquiring your new investment!