Restaurant Franchises

Mortgage lenders often look more favourably on franchised restaurants, especially in the fast food sphere, because the perceived risks are lower than for a new independent restaurant. The business model is well established and customers’ brand recognition often gives these establishments a head start when they open in a new locality.

When considering taking out a mortgage on a restaurant franchise, a number of factors should be taken into account:

  • Choose an already successful franchise: you will be buying into a business model that has proved to work for others
  • Set-up costs for a franchised operation will probably be lower than for an independent operation and some financial assistance may be available from the franchisor
  • Risks are reduced; although some hazards still exist, customers like what is familiar and franchised restaurants are familiar
  • Read the small print; look carefully at the franchise contract and consult a lawyer before signing anything; remember that franchise agreements can severely restrict where and how you operate and what you can and cannot supply to customers 
  • If you get into a legal dispute, the franchisor is likely to have more legal resources available than you do; even if you were to win a case, high legal costs could have an adverse effect on your business
  • You will be paying regular royalty fees to the franchisor and the more successful you become, the higher those royalty payments are likely to be; would you be happy sharing the profits resulting from all the hard work that you have put in?

If you think a restaurant franchise could work for you, then it is worth giving the matter serious consideration and comparing offerings from specialist mortgage lenders. An increasing number of companies are offering restaurant franchises in the UK. In addition to big names like McDonald’s, Burger King, Subway and Pizza Hut, other franchisors including Pure Health, Papa John’s Pizza, Harry Ramsden's, Shakeaway and Wok & Go are becoming established in the UK restaurant market.

Summary

  • Mortgage lenders often look favourably upon franchised restaurants
  • A proven franchise business model offers a greater possibility of success
  • Restaurant franchising is become increasingly popular in the UK, especially in the fast food area
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