Fast Food Franchises UK – the TOP 10 MUST KNOWS about finding and running a successful UK Fast Food Franchise.
Thinking of buying a fast food franchise? Here are 10 points you can’t afford to miss.
Franchising is not, in itself, a business. It’s just a business model that powers hundreds of businesses turning over dozens of billions of pounds each year in the UK. The numbers are good enough to depict the scale and magnitude of the popularity franchising enjoys – but it wasn’t always like this.
When franchising was still a novel idea, there weren’t too many takers. Giving away business know-how to strangers for money just didn’t make sense to many. The catalyst for change was the food and beverage industry – undoubtedly the foundation of modern franchising.
A quick visit to any local mall and a stroll down the high-street are good enough to understand this impact. You just can’t help bumping into brand-name restaurants and takeaway joints. If this gets you excited about jumping on the bandwagon of fast food franchises, here are 10 points that will help you make an educated, informed decision.
1. Understanding the Market for Fast Food Franchises
A general perception about the food and beverage industry is that of unpredictability. Many outsiders find it extremely difficult to break into this industry, thanks largely to knowing too little about the industry.
The food and beverage industry has always shared a huge chunk of consumer spending in the UK. More importantly, this industry has been the largest manufacturing sector over the last ten years. At £110bn, the annual revenue generated by this industry props up the national GDP by about 7%. The present annual growth rate stands at an impressive 10% (much higher than the national average). These numbers, from no viewpoint, are insignificant.
The growth is fuelled by the ever-rising number of people who prefer to dine out. In 2017 alone, UK diners spent over £54.4bn on eating out.
2. The Seemingly Impact-Proof Demand
Now that we have established the enormous size of the food and beverage industry, let’s take a look at why the fast food industry, in particular, has been successful.
Much of the credit for this success goes to the nature of the demand this industry enjoys. Fast food – a few decades ago – was a thing of indulgence. Today, it’s become a way of life. We all have – at one point or another – preferred fast food over elaborate meal plans. Such deep is this effect that 62% of millennials in the UK choose to dine out, order delivery or take fast food out over long-winding dinners and restaurant meals. Considering the increasing purchasing power of this demographic, the demand side for fast food franchises seems to be well taken care of.
What should also come as a promising sign for you if you are thinking of investing in a fast food franchise is the very nature of this demand. The food and beverage industry passed the trial by fire throughout the turbulent 2008-12 period, coming out with flying colours. While fancy restaurants and top-of-the-line diners may feel the heat during economic slowdowns, fast food franchises can rest easy, given that their appeal lies in the affordability for the end customer.
3. The Brand Value Factor Has Kept Fast Food Franchises Going
While discussing what franchising really is, we made a point that the case for franchising is based on the franchisor’s brand value and the replicability of the business model.
As far as the brand value goes, fast food franchises are perhaps the best exponents of franchising. Brand loyalty has played a huge role in shaping up the 21st century consumer market, and this is exactly why fast food franchises – not just in the UK, but the world over – are making it big.
Walk into any McDonald’s or order from any Subway – the ambience and the food are bound to give you the same experience. This experience is the physical, tangible way for the brand value to make its presence felt.
By buying and running a fast food franchise, you can instantly get associated with a brand that already has fans and loyal customers.
4. The Importance of Location
For fast food franchises, the location has the power to make or break the business. The brand value is important – as we just saw – but it can take your business only so far. To actually attract new customers, you need to be operating in a location that invites heavy footfall.
If you build it, they will come – or maybe not. But if they see you, they will definitely come!
In this sense, fast food franchises are quite similar to retail franchises. Just by being in front of people is often enough. This is also the reason why you see many fast food restaurants often changing locations. The customer is loyal to the brand – not to the individual franchise or location. So, before putting your money into a fast food franchise, do make sure that you have assessed the potential of multiple locations through a detailed market research.
5. How Much Does a Fast Food Franchise Cost?
This is probably the burning question that led you to this page.
The answer, we’re afraid, is never the same.
There are so many fast food franchise opportunities available that it’s impossible to arrive at a reasonable average or even a small range. What we can tell you instead is that fast food franchises don’t come cheap.
A typical A-list fast food franchise – think McDonald’s, Hardee’s, Dunkin’ Donuts or Subway – will require you to put up a minimum initial investment of £400,000 to a whopping £2mn. A lesser-known franchise can be purchased with a minimum initial investment of less than £100,000.
All the potential and positives we have talked about so far translate into a steep price that franchisees need to pay. Don’t get us wrong – even at such high prices, the top fast food brands find many more takers than they can accommodate. The result? Long wait lines that stretch into years before you can be a proud owner of a McDonald’s or a KFC restaurant!
In addition to the minimum initial investment, global brands usually have a rather strange net worth requirement. If you can’t demonstrate that you can cross this bar, even putting together the minimum initial investment won’t help.
On the other hand, there are many lesser-known and thus less valuable fast food brands that are on the lookout for new franchisees to join them. In fact, one of the important motives behind this article was to bring to your attention the need to identify the potential within such brands.
The bottom line here is – don’t let the price tag discourage you. There are many ways to succeed in this line even when you can’t afford the best of the best.
6. The Economics of Fast Food Franchises
Over the years, fast food franchising has not only overtaken every other franchise sector, it has also set up a proven template for others to follow.
Important parts of this widely copied template are revenue generation, revenue sharing and reinvestment methods. While the sensitive details are usually available to only the franchisees successfully bid for franchise units, there is enough information available in public domain to create an elaborate picture.
The first investment component is the flat-charge franchise fee. Most fast food franchisors charge these fees, with the rest rolling it in the overall initial investment sum.
Apart from the franchise fee, you will need to invest enough capital to cover for the location, security deposits, equipment, inventory and brand materials. Most franchisors require you to put up adequate capital that will sustain the business operations for a period of 4 to 6 months. In addition, top brands will require you to have a further liquid cash pool to fulfil unforeseen contingencies.
The revenue generated by the franchise unit is shared with the franchisor on a fixed royalty basis. The common industry practice sees the royalty set at 4 to 8% of the gross sales (not profits). Additionally, you will need to reinvest a fixed percentage of gross sales as contributions to the collective marketing pool.
7. Should You Buy a Fast Food Franchise?
Buying a franchise is a decision that needs to be taken after a thorough research of every aspect of the business. While it’s easier to skip the ‘investigation’ part for globally known brands, you just cannot afford to rely on what the franchisors want you to hear. To learn more about how to choose a franchise, please head to this free guide.
Are Food Franchises for You?
Running a restaurant – that’s what this essentially is – is not an easy job. You will need to oversee multiple fronts at the same time, 5 to 7 days a week, throughout the year. There are no slow seasons, there are no bank holidays. Most restaurant owners can attest to the fact that this is a business that conveniently blurs the boundaries between your personal, social and professional lives.
Additionally, your people skills will be put to the test every single day. You will need to manage the staff, deal with the suppliers, maintain a good relationship with the franchisor and – above all – satisfy the customers on a daily basis.
If you’re ready to work hard and you are passionate about providing real value to your customers, fast food franchises (or any food franchises, really) can offer you a rare blend of financial success and job satisfaction.
8. Is This the Right Time to Buy?
You can browse through the performance track records of local fast food franchises to know what the business has been like over the last few months and years. Most fast food franchises post steady numbers throughout the year.
9. The Future of Fast Food Franchises
The future of fast food franchises will be defined by changing eating habits, disparities in the purchasing power of various demographics and, of course, marketing gurus.
Identifying the trends and swimming with the market currents is the best way of getting good returns on your investments in money markets. The same rule applies here. If you keep your eyes and ears open, it’s not difficult to spot such trends.
Vegan lifestyle, for example, has never been more popular in the UK than it is now. If you are passionate about the vegan ways, you can talk to vegan fast food franchises. Similarly, more and more people in the UK are willing to try authentic, global makeovers of their favorite fast foods. Capitalising on such trends early by securing suitable franchising opportunities can save you a great deal of money and keep your business ahead of the curve.
10. Top Fast Food Franchises in the UK
Here’s our selection of some of the most popular and exciting fast food franchise opportunities in the UK. We have tried to keep our selection limited to relatively lesser known franchise opportunities, giving a miss to international bigwigs such as McDonald’s, KFC, Subway & Burger King.
- Minimum Initial Investment: £100,000 (plus VAT)
- USP: Handmade Belgian waffles, secret family-owned recipe
- Wide menu options
- Operational in major high-street locations across the UK
- Thorough training and support
- Minimum Initial Investment: £75,000 (plus VAT)
- USP: Premium European wines. Authentic wine drinking experience with accompanying fast food.
- Thorough staff training
- Centralised customer service
- Innovative wine testing campaigns and clubs
- Minimum Initial Investment: £25,000 (plus VAT)
- USP: Fresh ingredients, innovative flavors
- Young brand, growing business
- Extensive marketing and business support
- Minimum Initial Investment: £50,000 (plus VAT)
- USP: Wide variety of soft pretzels
- Globally recognised brand
- 1800+ units in operation
- Funding assistance may be available
- Associate BFA Member
- Minimum Initial Investment: £250,000 (plus VAT)
- USP: Authentic Italian ice cream made using natural ingredients
- 110 outlets in operation
- End-to-end business support
- Understand the business model before you finalise a particular franchise.
- Know what the franchisor location and territory policies are.
- Read through the revenue sharing and reinvestment terms.
- Talk to operational franchisees.
- Make sure you are passionate about the industry.
- Be prepared to work round the clock, through the week in the initial stages.