Fast Food Franchises – Quick Investor Tips


so what are we going to talk about today – how about food franchises? Here at franchise city we work with investors
helping them find the best franchise and the vast majority of people when they come to
us want, or think they want a fast food franchise. Now we have spoken previously on whether fast
food franchising is a good choice and about some individual restaurants, but this video
won’t be justifying whether food is good or bad. Instead we will show you some of the quick
methods we use to help our clients compare and analyze various food franchise choices. Now this is by no means an in depth analysis
just some quick numbers anyone can put together. Now it is quite sad that most people don’t
do any analysis or comparison they just decide to call up the franchise one day, complete
an application, and a few months later are running a franchise while the franchise owner
right next door could be making double what they are. You don’t know unless you research. Some of the statistics we look at to assess
and compare food franchises are sales to investment ratios, AUV or average unit volumes or how
much money a store brings in per year, and failure rates. Now this is for new food franchises only,
a food franchise resale you would be looking at their individual financials and these figures
while important would not be the whole story. Now unfortunately some statistics are not
easily accessed by the public which is why working with a franchise consultant will make
life easier and doesn’t cost you anything – (shameless plug) but there are some stats
you can find online. A really handy list is the qsr50 which provides
a relatively accurate representation of stats for the top 50 qsr food franchises.Now just
this list itself will give you a quick overview of some decent information and you can sort
by total earnings, failures or growth, and a number of other criteria so if we sort by
average sales per unit you can see that Chick-fil-A has the highest average store earnings at
about 4.4 million per year. Too bad you will never get one and I’ll post
a link to the video that explains why right above. Now if we scroll right to the bottom of the
list, we see Baskin Robbins, Subway, Auntie Anne’s, Papa Murphy and Jamba Juice. But while earnings are very important they
are not the whole story. You can also see listed in the far right column
how many changes in units each franchise had for the year. A positive number means growth while a negative
number will generally be store closures. There are also statistics like how many franchises
they have, system wide sales and rankings but for our purposes those aren’t quite as
important. Another interesting statistic to compare food
franchises is the Sales to Investment Ratio. We get this figure by dividing the average
purchase price of the franchise by the average unit volumes. Lets do that for a couple of franchises. So let’s first look at Mcdonalds franchise. We see their average investment range from
their 2017 FDD is $1,008,000 to $2,214,080 making an average McDonalds cost $1,611,040. We can see on the qsr50 average unit sales
are about 2.5 million. So we divide 2.5 million which is their average
unit sales by 1.6 million – and we will just round these figures off giving us giving us
a sales to investment ratio of 158% which is not bad. McDonalds closed 104 stores in 2016. Now again I caution anyone to only use this
statistic to make their buying decision, but it is a lot more than I see most people doing
and it definitely will help. Lets try another one. How about KFC. Their FDD gives an investment range of $1,465,550
� $2,586,550 making the average investment cost for a KFC $2,026,050. Their unit sales average is $1.060,000 giving
a sales to investment ratio of only about 52%. KFC closed 103 stores in 2016. Subway franchise investment range is $147,050
to $320,700 giving an average investment of $233,875. Their average sales volume per unit is $422,520
so we divide 422,520 by $233,875 which leaves us a 181% sales to investment ratio. So while Subway earns much less their investment
is also much less. And we can see that Subway closed 359 stores
in 2016. So there you have just a few quick numbers
you can look at to help in your research for a food franchise. Another helpful research tool is validation
– speaking to other franchise owners in the area, or franchisees that have left the system. That information will be in the FDD provided
by the franchise and will also give you an estimation of the general level of satisfaction
from franchise owners as a whole. Don’t forget to like and subscribe and if
you need help researching and comparing franchises our services are always free – you can visit
us at www.franchise.city – yes that’s .city not .com.




Comments
  1. I'm not evening interested in buying a franchise. I just like the schooling from this guy. Why didn't we get taught any of this at Uni ? Hahaahahahahahhaha

  2. That business personality test is quite accurate. The goal in life is to play the cards in your hand and understand your lack of control. It's like playing poker, without the ability to count cards. Love this channel. All those who read this, just keep watching. It's quite addictive.

  3. I had a restaurant for over 20 years.  The only advice I have for anyone interested in this field is…   DON'T DO IT.!  You WILL be sorry.

  4. My family has a private businesses but I love coming to this channel and listening and learning about business and gaining some useful knowledge

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