Case Study
Settling the Great Franchising Debate
October 3, 2024
In the restaurant industry, the equivalent of "to be or not to be?" is "to franchise or not to franchise?" This is a question that many pizzeria owners struggle with when they get to the point where they're ready to expand. It seems like there are countless articles online arguing the positives of franchising, with just as many cautioning about the downsides of it. So which side is right? That entirely depends on your specific operations and what your goals are for your restaurant. But after reading this in-depth guide, you'll know all of the key points regarding restaurant franchising and when to do it, as well as when not to do it. What is Franchising? Let's start with the basics. Franchising is the process of expanding your restaurant chain by allowing individuals to own and operate one or more locations of your restaurant. The franchisee is the owner of the locations, and the franchisor is the owner of the brand. Franchising is a technique used by many of the largest pizza chains in the world (Papa John's, Pizza Hut, Pizza Ranch), and is one of the reasons they were able to get so big so quickly. How is Franchising Different From Licensing? A lot of people tend to think of licensing and franchising as the same thing, but there are some subtle differences between the two. You can think of licensing as the diet version of franchising. While licensing involves allowing a third party to use your business's products or trademark for a specific purpose, franchising involves so much more. A franchisee will often be required to offer a specific set of products and use certain equipment or supplies. These requirements are outlined by the franchisor. The goal is to have franchise locations look indistinguishable from one another, both inside and out. This is why the franchising process involves a long Franchise Disclosure Document (FDD), which outlines everything that a franchisee will need to know about a company before entering into an agreement.
