Buying into a restaurant franchise

A question from Yahoo! Answers:

How do I go about buying a business?

I work at a successful restuarant, and I asked my owner…how he became owner, and he said he just bought our restuarant. How would I go about buying a restuarant in the same link? How much money do I need to put in? And what are some of the advantages and disadvantages?

I am not sure what you are referring to when you say “in the same link”. Did you mean “in the same chain”? If so, then you should call the chain’s headquarters and speak to someone in their franchise sales. They’ll explain everything to you. They’ll probably recommend a financial institution that you could work with on financing as well.

This said, I would strongly advise against opening a franchised restaurant, unless you have resources to open many of them at the same time. The incentives of franchisor and franchisee are fundamentally misaligned. For you, your restaurant will represent the bulk of your net worth. For the chain, it will be one investment out of many. As a result, the chain will be very experiment-minded and may take great risks when selecting the location for you (and you will have no voice in choosing the location and no idea about what the risks are). Also, chains typically charge you a fixed annual fee plus a percentage of your top line; as a result, they have no interest in your bottom line. They fully expect some percentage of their franchisees to fail due to poor choice of location. They can afford a mistake; you can’t.

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