It's important to understand that restaurants are only the starting point when considering this industry. The segments and brands have differing fortunes depending on macroeconomic conditions and other factors, so identifying a segment should be an analysis unto itself, and only then should you begin considering specific brands.
Restaurants are broadly divided into quick service (QSR) and full service (FSR). You may also see the categories of QSR, fast casual, casual dining, and fine dining used:
The higher you go up the chain, the fewer the franchised concepts. QSR franchises abound, and casual dining brands are also fairly common. But most full-service restaurants are corporate-owned. Darden, for example, the owner of well-known brands like Olive Garden and Longhorn Steakhouse, does not offer franchises within the U.S. These categories are further segmented by menu type: for QSR, for example, burgers, chicken, and pizza are the primary food franchise opportunities.
The other significant variable is commodity costs. Food is obviously the key input for restaurants beyond labor. Individual food commodities do not move in lockstep. In 2017, for example, eggs were up 17.3 percent year-over-year while ground beef was up only 6.7 percent; cheese was up only 2.0 percent, and coffee was actually down 0.5 percent. Each commodity has its own market and production factors that drive its price. But broadly speaking, 2016 and 2017 were very favorable years for food prices. It is important to take a longer view, at least a five-year lookback, when creating financial projections for a restaurant.
Trends tend to be segment-specific. Over the past one to two years, FSR brands have been suffering a decline in comp (year-over-year) sales, turning in weak performance in Q1 2017 and Q2 2017 and negative comps in Q4 2016 and Q3 2017. QSR brands, however, have enjoyed 1-3 percent positive comps in the same period. However, QSR brands have been focused on value as opposed to product innovation to drive traffic, which tightens margins. It is also important to remember that franchisors can pressure franchisees by nationally advertising low-priced and attractive but low-margin promotions even if they cannot mandate participation.
Restaurant franchise opportunities offer a tremendous breadth of opportunity. You'll find a full list of food franchises for sale available in our listings, with all of the info you need to help you make a sound investment.
You currently have 10 franchises in your request list. This is the maximum amount that can be submitted at one time.
Please submit your information to continue.×