An Idea to Savor: Explaining the Success of the Food Franchise

Date Added: Sep 22, 2008

It was an encounter that changed the history of food and franchising. In 1956, entrepreneur Ray Kroc paid a visit to a thriving burger joint run by two brothers from California, Bill and Mac McDonald. A couple billion hamburgers later, McDonald’s has not only changed the way the world eats, but it also revolutionized the franchising capabilities of people hungry to start a business.

As eating habits change - from tacos to subs to organic food - the soaring popularity of food franchises remains constant. The statistics speak for themselves. There are over 945,000 restaurants in the US, and according to the National Restaurant Association, restaurant revenue for 2008 is forecast around $558 billion. Restaurant revenue is expected to grow 4.4% in 2008, as it makes up 4% of America’s gross domestic product. So given the competitiveness of the market, why do people who are starting a new business so often turn to food franchises?

Clarity: There is a reason that when people think of the word ‘franchise’, their neighborhood Taco Bell or Dominos is the first thing they think of. Food franchises thrive because they represent the best in what franchise investment should be. The most successful food franchises have a clear concept and a proven and profitable track record. They are generally popular as well as cheap and easy to operate.

Necessity: We all have to eat, and with work occupying more and more people’s lives, the reliable pizzeria or fast food chain has become increasingly important to our social structure. Investing in a business that people actually need to live is a good starting point for any entrepreneur.

Popularity: Try as you may, you will find it very hard to find someone who does not like a piece of pizza or a sub. One of the main reasons that food franchises make up the largest percentage of franchised businesses in the world is that they give people something that they crave.

Still, food franchisees should be under no illusions. The hours are hard and the challenges of building a highly-profitable food franchise are many. And the economic downturn hardly helps matters. According to a survey by the National Restaurant Association, almost half of the people who own chain restaurants think things are going to get worse in next six months. Yet against these glum forecasts, many food franchises remain highly popular. It has always been the brave entrepreneur willing to task a risk on a novel idea and put in the hard work to grow the business who succeeds in franchising. And that, like the popularity of a slice of pizza, will never change.