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Food service has a terrifying reputation as a business sector—restaurants routinely go out of business in their first year. Deep funding would create a buffer a
by tikhonj 11y ago
Food service has a terrifying reputation as a business sector—restaurants routinely go out of business in their first year. Deep funding would create a buffer and help it grow, of course, but I still wouldn't want to bet on a restaurant.
- pbreit 11y agoIndie restaurants, maybe. But for franchises, the opposite.
- Fomite 11y agoDepends on the franchise. Subway, for example, is apparently an absolutely brutal franchise to run, whereas Chik-fil-a is super careful about who they give them to.
- treehau5 11y agoRestaurants, not junk fast food chains. He or she was probably referring to corporations like Bloomin' Brands (OSI) and Brinker International.
- Fomite 11y agoI happened to pick two fast food chains because I know they're on polar ends of the "How nice is it to be a franchise" spectrum. The core of the point is that not all franchises are created equal.
- treehau5 11y agoBut it matters which franchises you are talking about. A restaurant like Maggiano's, or Bonefish Grill is as far removed from Subway as Subway is as far removed from a 7-Eleven.
- mangeletti 11y agoIt's worth noting that Bonefish Grill operates a "managing partner" system, vs an ordinary franchise. The corporation owns 85% of the business, while a location's managing partner (who invests some money to get started) owns 10% (a regional manager owns the other 5%). IOW, they're not, strictly speaking, a franchise.
- gist 11y agoWhat is the upside for owning only 10%? Seems that the only asset that you have is that interest which you can sell to someone else, that is managing partner, with approval of corporate. In the bonefish grill's that I have been at (several), the managing partner is typically present at the restaurant when I have been there. As such this is in a sense like buying yourself a job. (You could say the same about some franchises but somehow I see this a bit differently..)
- mangeletti 11y agoI agree. The benefit of this system is primarily that of the corporation. You get a manager, sell them a small percent, which helps cover some (a small amount) of the location's launch costs, gets the manager committed and makes them feel like a real owner, which makes them focus on success much more... with little serious upside. Not to mention, it puts the manager at a financial loss (their initial investment), if they quit within 5 years. I knew a managing partner of a Carrabba's. He quit something like 2 years later and bought this little burger drive through. It must have been really bad at Carrabba's...
- timr 11y agoOne of the amusing ironies of the food-delivery bubble for me was that you're taking the crappiest part of a crappy industry's economics, and scaling it. It's all of the costs and logistical pain of running a restaurant, with none of the margins. Brilliant!