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10 Things to Consider when Selecting a Restaurant Franchisee

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Just as great students make a great college, it takes a team of committed restaurant franchisee to maintain the reputation of a franchisor.

Let’s draw a parallel between franchisee recruitment and selecting students for college admission. The laws are pretty much the same. A highly ranked college gets the cream of the applications. Students apply in large numbers and hence, the college gets to be more selective.

This unlocks a chain reaction. The college enhances its reputation year on year and committed students keep choosing it. Thanks to its reputation, the college begins to attract good teachers as well.

This constitutes a competitive advantage. It can be maintained if the college ensures that it maintains the highest standards of integrity and transparency and is seen as a trustworthy institution. Here are three actions that will inspire trust.

  • Students must get admission on merit
  • The teaching faculty must remain updated.
  • The infrastructure must be cutting edge.

This is how Ivy league institutions have differentiated themselves over the years and what makes them so prestigious.

This is exactly how franchising works as well. Take it from someone who has dedicated the last two decades to building a franchising business on these principles. And just as great students make a great college, it takes a team of committed franchisees to maintain the reputation of a franchisor.

Here’s what you have to keep in mind while selecting from a pool of prospective franchisees.

1. The candidate must be self-driven.He must have the hunger to prove himself in his own eyes, as well as to the world that he is a successful, capable entrepreneur

2. The candidate must be self-motivated:Buying into a reputed franchisee is no guarantee for success. Even the best franchisee systems have their share of franchisees who don’t succeed.

The franchisee system provides the framework like a college provides the framework. The franchisee then has to work with the infrastructure provided to him, and excel. There are bound to be challenges. Even if the franchisee is failing, he has to dig deep into his purpose, believe in the system and play his part

3. The candidate must be educated:When selecting a franchisee, look for a basic educational qualification. College education instills a certain amount of rigor and commitment in individuals.

Only a good student can appreciate ‘learning’ and become a good coach to the team that he will build as a franchisee.

4. The candidate must have requisite capital: This is extremely important. For the first franchise outlet or center, the candidate must have the necessary capital and then some more money to get started. It is well-documented that a franchisee business gives you an 80 percent chance of succeeding. Hence, it is useful to go in with zero loans. The first year is critical; the pressure to set up a business, while having to support a family and pay EMIs can get overwhelming for anyone. A loan free franchisee can exercise financial prudence and set some money aside to support their family for the initial months. They can dedicate themselves to building the business as well as derive the satisfaction of success.

5. The candidate must be detail oriented, process driven:I have met many entrepreneurs who want a food franchisee because they like cooking. These are not the dots to connect. A food franchisee is entirely about processes and has very little to do with your culinary skills. Those who are regimen-friendly and detail oriented will excel in franchising.

6. The candidate must be honest and value driven: People who pay their taxes, pay their franchise fee. They understand that by investing into buying the franchise they are not doing a favor to the franchisor. They are benefitting equally by dipping into the centralized system and scalable thought process. The services have to be paid for and everyone has to make money for the system to thrive and grow stronger. In term, they will grow stronger.

7. The candidate must offer full-time commitment:Being focused towards your business brings success. Getting a proven business model and scalable system on a platter can make you a franchisee lazy at times. But, the focused franchisee will take nothing for granted and invest into setting up multiple-unit franchises, enhancing their earning potential.

8. The candidate must start early:The best meetings are when a parent and their ward come to seek a franchise together. The parent offers their capital and wisdom and the ward offers their energy and time. Starting early is a great advantage to scale up and become a master franchisee of a mature franchisor.

9. The candidate must be progressive: It is extremely useful to be well-read and appreciate the larger picture; about progress, technology and where the economy is headed. This helps every franchise have the right conversations with their franchisor.

10. The candidate must be a good team player:The beauty of franchising is the aggregation of ideas and energy. The candidate must be able to appreciate others’ points of view.

These may sound like a qualitative assessment. However, Peter Drucker famously said “culture eats strategy for breakfast.” This is what restaurant franchisee is all about.

QSRs can unlock opportunities in 2022

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I remember the days back in my childhood when restaurants used to hand over menu cards that were 20 pages long, with each page listing 20-25 dishes. Now the server just hands you a QR code and whispers discreetly that a few items are not available. COVID has been a much needed vanity check for brands, especially QSRs.The magic ‘twosome’ of focus and discipline are back.

The silverThe silver lining of 2021 has been the success of IPOs in the QSR space. This has created a never before opportunity for investors that are looking to diversify their portfolio beyond tech. Those who missed the bus in the first round will want to join the party in the second round. QSR brands that expand in a focused manner will grow visibly. More IPOs will be seen over the next decade or so, from Indian origin brands.

The ‘business mantra’ for 2022 will be to ‘go an inch wide and a mile deep… instead of “go a mile wide and an inch deep.’ As this philosophy gains acceptance-
The most disciplined brands will win. Focussed brands that have survived the pandemic, will scale rapidly to 1000+ stores. Their familiarity has served as a soothing balm for a world recovering from the ambiguity of COVID. They will continue to innovate, offer value and retain the trust they have earned. Together with the international chains, they will spawn dozens of companies in the contract manufacturing space to meet their needs.

Around this hub will be an ecosystem of cloud kitchens, online deliveries and offline retail will find their own space in people’s lives, they will expand the market rather than cannibalize each other.

India is a very large market. Even if only 20% of us belong to the affording class, that number is equivalent to the entire population of the USA. This understanding of the power of India’s consumers, has dawned universally, in the last decade. From cricket viewership to mobile phone purchases India is leading everywhere.

With improved road infrastructure and connectivity brands will find it easier to penetrate tier 2 and tier 3 towns. Restaurant brands will be able to unlock their potential and amplify availability million-fold.

With the virtual presence of QSRs amplified beyond physical locations, off-premise dining will grow. On the consumer side-

1.As every individual seeks to contribute to household income, the demand for eating out will increase. Indians will be eating out 14-15 times a week from the current 2-3 times.

2. Occasion-based social-dining is back with lockdown relaxations, even as

Mobile ordering has soared.
Curbside pickup has found new life.
Third-party delivery has morphed from an experiment to a necessity.
Drive-throughs have found more takers

3. Customers will be spoilt for choice, hence businesses will have to offer greater ‘value, efficiency and trust.’

4. There will be a perceptible improvement in restaurant designs as the youth will want to associate with brands they have a rapport with.

5. Each consumption opportunity will have to be serviced appropriately- for e.g. the digital menu will contain products that ‘travel well’ for delivery and a separate in-store menu will offer food that is best served hot at the store itself.

There is no better time for entrepreneurship than now and no better place for it than India. More and more people want greater ownership of their future. Franchising as a business model will hence, grow rapidly and this will be a huge boost to the QSRs. Entrepreneurs will discover many options to start a business, cocooned within a brand’s safety net. We have survived one of the most difficult periods in human business history. The table is set for ingenuity and customer-centricity. While none of us will look back fondly on the pandemic, we will always have to acknowledge that this period helped us fast track into a new era for the restaurant industry.

Dheeraj Gupta is the Founder and MD of Jumboking

2022 will see greater adoption of franchising

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Several forecasts about ‘paradigm shifts in consumer habits’ were being discussed during COVID-19. Let us first acknowledge that a majority of the pre-pandemic habits are back, simply because these are fundamental and driven by man’s social needs.

The one perceptible shift one can see in consumers is a shift to ‘value’, ‘efficiency’ and ‘trust.’ At the risk of repetition, the words ‘value’, ‘efficiency’ and ‘trust’ converge into what we call A BRAND. Several brands, across industries are going to relook their own proposition and make themselves more accessible to larger audiences.

2022: The opportunity
There’s no denying that COVID sent culture shocks that permeated the social and economic fabric of nations and communities alike. The prolonged exposure to stress and the acceptance that the world is changing in newer ways- has had three major consequences –

  • More and more peoples want greater ownership of their future.
  • Brands have no choice but to offer greater ‘value, efficiency and trust’. Hence, they will have to innovate and grow prudently.
  • Each brand will unlock the potential to be amplified million-fold. The familiarity offered by a brand is a soothing balm for a world that is recovering from what has been an ambiguous two years.

The business model that can facilitate the above shifts is franchising. And India in particular is uniquely suited for the same because

  • 1) We are an entrepreneurial country: The next generation wants to run their own business and franchising will give them a balance of being their own boss and benefiting from the systems of a larger organization.
  • 2) Lucrative jobs will demand upskilling: Thanks to several digital-first initiatives and greater automation, the good jobs are moving to higher skilled folks. There is a large employee pool, whose administrative and people skills will be unlocked in a far more profitable way through franchising
  • 3) Resilience is more valuable than risk: With proven franchise opportunities available more people will see the merit in becoming part of an organized system rather than trying to do everything on their own.
  • 4) Efficient unit economics are critical: Skilled labor is and always will be expensive, especially in the food space. Franchising helps power ‘unit economics’- the cost of running the store is kept under check thanks to centralized manufacturing and investments in technology at the backend. Besides, for an individual franchise, good unit economics and good fundamentals will allow for scaling up.
  • 5) Shift from commodities to brands: 2022 will see consumers move from commodities to brands in the QSR space. As competition increases, it is the discipline of systems and processes to maintain the distinctiveness of the brand that will produce results. A good franchisor invests heavily in training- this will in turn translate into greater differentiation. Individual franchisees will benefit from easier discovery.

The whole is greater than the sum of parts
This is very apt for franchising. It turns out that there is safety in numbers. What we saw during COVID- a mad unsustainable race of ‘buy 1 get 1 free’ among QSRs, destroyed several promising start-ups in 2021. This has made people realize that running individual stores is not easy. Unforeseen crises and market movements tend to over-stretch the business to breaking point.

Franchisees are far more resilient. As the parent company drives margin protection via efficiency improvements u0026amp cost cutting, every franchisee takes care of their own payroll and balance sheet. Several elements of cost are simply not theirs to bear.

Summing up, the Indian mindset is ideally suited to the adoption of franchising; whatu0027s more, early adopters of franchising will benefit greatly in 2022.

By Dheeraj Gupta, Founder of Jumboking