Given the rising awareness regarding the beneficial effects of healthy eating, it would definitely be a risk to invest in a fast food franchise. Research has shown that food served in such restaurants is highly correlated to cancer, coronary disease, obesity, diabetes and many more. With all this currently in view, the public turns to healthier options. This is apparent at the steadily decreasing revenue of colossal fast food franchises. We even see a decline in at home frying amongst the public.
However, if you still think that such a business endeavor will pay off, there are a number of issues you should consider before you go ahead with your investment.
Ask yourself what you expect of your investment
First, you have to ask yourself what you expect of your investment. Fast food franchises, such as McDonalds, have a 45,000 USD franchise fee for 20 years. Renewing your contract will result in paying another fee. Added to this, there is a ‘royalty’ fee which is about 13% on your annual sales. No matter what you do, no matter how creative you are in increasing your sales, you will always have to share your profits.
Consider what kind of fast food you will be serving and to whom?
As with any business, location is a critical factor that will determine the long term success of your fast food restaurant. You must consider what kind of fast food you will be serving and to whom. Rural areas already have well established privately owned restaurants that may pose an extremely strong competition. Opening a McDonalds for example, in a small town in which everyone goes to ‘Mama’s Burgers’, a 50 year old family business, is not wise. Chances are that the owner knows his/her customers personally, has a local meat supplier and employs locals. Such a restaurant will always have an advantage over you, which translates as reduced income or even putting you out of business. The best choice is to go for densely populated areas or highways, where it is much more likely to have a good daily turnout. Even in big cities though, you might not be as successful. You have to consider who the average resident is. In San Francisco for instance, a McDonalds would thrive much less than in any town swarmed with college students. In a city that is mainly occupied by middle or upper-class families that would prevent their children from having junk food, it is unlikely that they will become regular customers, in contrast to students that will go for quick and cheap. And remember, there are always new products coming onto the market for consumers to take the fast food taste right to their own homes by doing things like using propane to deep fry.
Do you really want to embark in something like this?
The most important issue to consider though is whether you really want to embark in something like this. Although such a business might be profitable, even though stock markets tell the story of gradually declining empires, is it ethically sound? The meat used in fast food chain restaurants in the cheapest companies can get their hands on. It usually comes from milking cows. These cows have been filled with hormones to promote milk production. They are kept in horrible conditions; they are drained on a 24 hour basis. They usually die from exhaustion within 3 to 5 years, when the normal life expectancy of a cow is at least 20 years. Their meat is grinded and filled with preservatives and flavor enhances. Would you really want to feed people that? Would you really want to support an industry that profits through animal cruelty, while jeopardizing human health? It’s really up to you…
Go to http://finance.yahoo.com/news/what-it-takes-to-start-a-fast-food-franchise-222831956.html to learn what it takes to start a fast-food franchise.