The first thing that comes to mind when people hear of “franchising” is notable food concepts like McDonald’s, Steak n’ Shake, and Burger King. In fact, many people are not very familiar with franchise concepts outside of the food and beverage industry. Food is known for bringing people together, fulfilling needs of hunger and desire for experiences. Food franchises (aka restaurant franchises) are often the first thing people correlate with the industry of franchising. Food and Beverage is certainly one of the most popular areas of franchising. Although food franchising is often associated with fast food (aka quick service restaurants), the industry also includes: fast casual, coffee, pizza, burger, smoothie, frozen dessert, snacks, and full services restaurants.
Food franchises make up approximately 36% of the total franchise establishments in the United States and 48% of the annual financial output of the U.S. franchise industry. Food and beverage franchises also make up about 65% of direct franchise employment jobs. The National Restaurant Association expects 1.6 million new restaurant jobs to be created by the year 2027.
Convenience stores are becoming a force in food service footprint. Convenience store franchises have been increasing their food offerings in recent years. Featured convenient stores such as 7-Eleven has over 8600 stores in the United States.
Another major trend in fast food franchises is slimming down the menu. For instance, McDonald’s menu has ballooned by 70% over the years, leading to a slowdown in service is affecting customer satisfaction. The solution has been to cut down the menu to re-energize sales.
Through our online platform Vetted Biz, we have reviewed over 2,900 businesses and franchises. Currently, almost 25% of the businesses on our platform are food and beverage franchises. Of the food and beverage concepts we have reviewed, total investment amounts can start as low as $12,000 for smaller kiosk concepts all the way up to $6 million for a full-service restaurant. Many factors will affect the investment amount, including but not limited to heavy-duty equipment like grills, or where the food and beverage concept needs to be located. In our research, the average royalty fee takes up 8.7% of gross revenue, and the average marketing fee is 1.9% of the gross revenue. From 2016 to 2018, an average of 2.78% of franchise units ceased operations for reasons other than terminations or non-renewals. Moreover, of the 100 franchises we reviewed, there are approximately 3100 franchise units projected to open next year.