The Diversity Of Restaurant Franchising

Many borrowers are surprised to learn that they may actually have more options on restaurant loan options for free standing, non franchise properties than franchise restaurants. Of course, the award rush not only gives incentives for new, creative restaurant startups but also an increased need for restaurant supplies in the Chicago area. As with any industry rise, most connected industries also experience increases in business.

A smart restaurant buyer picks up the pieces of the franchise and becomes owner number too. This owner may still be losing money but he only paid around $100,000 so his cost to acquire is much lower. By year two his sales are beginning to keep pace with his fixed costs. By working hard at the business and operating it himself, he can probably go from losing to making money. By the way, both owners have paid the franchise fees the entire time even while they lost money. Another year into the business, this smart buyer realizes he may not have such a great deal after all. He may be operating in the black but when he adds up the time in the business against his return, he is making less than the federal minimum wage. He calls a restaurant broker to sell the business. By this point, sales have developed to the point that all fixed costs are covered. With add backs, he is only earning $35,000 or so a year.

Vapiano will charge a monthly flexible franchise fee depending on variables linked to location and turnover. The franchisee is also required to cover a one-time development fee for each restaurant. This fee covers Vapiano’s active participation in setting up the new location, including location selection, coordination of construction and renovations, staff training, etc.

These boom years also saw an attendant spike in income inequality, a hardship that restaurant workers unduly bore: Dishwashing, food preparation, and hosting jobs consistently rank among the worst paid positions in America. That disparity was even more acute for restaurant workers of color: A 2019 analysis from Restaurant Opportunities Centers (ROC) found that fewer than 18 percent of California’s restaurant employees of color—who make up 70 percent of the industry—made $31 or more per hour, while 35 percent of white employees did.

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