Are Franchise Restaurants Really Profitable? | Facts you need to know about Restaurant Franchise & Traditional franchise

By Startup Authority January 20

Introduction

You can literally start your own venture in the food business. Additionally, if you are willing to take a restaurant franchise then with no doubt we can say it is a booming business. Did you know? According to Restaurant India, the restaurant franchising industry is worth around $36 million.

The source also reveals, that in the coming years, this industry will see a growth of 30-35% more. The restaurant franchise industry might touch $100 billion by the end of 2024 in India itself.

Now, we are sure these facts and figures will inspire you to open a restaurant franchise. If you are in tension about how to earn profit then just open up a franchise restaurant. Other than that, one of the biggest advantages of opening such a franchise is you get ample benefits and support.

Most restaurant parent company supports the franchisee owners with everything they require. Such benefits and support from a parent company maintain a sense of continuity between the parent company and the franchisee. Now, some of the jaw-dropping advantages of opening a franchise restaurant are the following:-

Straightforward business model - Opening up a franchise means you are buying a proven system. You do not need to worry about the system as it is already maintained by the parent company.
Reputation - This is one of the important factors in opening a reputed franchise. Customers are already attracted to your new franchise even before you open one.
Free Training and Knowledge - If you are willing to open your own venture then getting training and knowledge for the product and business will not come for free. But, that is just not the case with opening a franchise restaurant.
Easy to open - Opening a restaurant franchise is quite easy. Most processes and procedures are covered up by the parent company itself.

How Franchise Restaurants are Different than Traditional Restaurants?

You could have a proper debate on this topic. Yes, both franchise restaurants and traditional restaurants have their advantages and disadvantages. But, you must choose the one that has fewer disadvantages so that you can have the benefit of its long list of advantages. First of all, we must know what are franchise restaurants and traditional restaurants.

Franchise Restaurants - Franchise restaurant is a restaurant brand that anyone is willing to buy its right of use for a royalty fee. Now, the company that approves opening one of a franchise they are known as a ‘Franchisor’. On the other hand, the one who uses its rights and brand name is known as a ‘Franchisee’.

Traditional Restaurants - Traditional restaurants are also known as independent-owned restaurants. This is where the owner is not associated with any other brand or corporate chain. All the decisions starting from daily operation to marketing are taken by the sole owner of partners if any.

The further, difference between franchise restaurants and traditional restaurants is given in the table below:-

Parameters	Franchise Restaurants	Traditional Restaurants
Investment	The investment required for franchise restaurants depends on the brand selection and area location	The investment required for traditional restaurants is relatively lower as compared to the investment from franchise restaurants
Franchise Cost	To open a franchise restaurant a franchise cost is required. The average franchise cost in India is between Rs 5 lakhs to Rs 50 lakhs	You do not need to pay any franchise cost as you did not take any franchise
Area requirement	A proper area is required to open a franchise restaurant and as per the guidelines of the brand you select	You can open a restaurant at any sized area you have. There is no strict guidelines for you to open a restaurant
Location	Franchise restaurants do not have the freedom the selection of their area location. They must have a piece of land in a good area such as a mall, hospital, school, and in markets	You have full freedom of choosing the location.

Difference between Franchise Restaurants & Traditional Restaurants

Investment Range for Franchise Restaurants

Today, more than 50 lakh franchise restaurants are operating in India daily. They have all invested some amount to start a franchise or an outlet of the parent company. Starting a franchise restaurant or a traditional restaurant you need to make investments.

Some of the necessary investments are tables, chairs, counter desks, all-round chairs, sofas, printers, computers, internet connection, Wi-Fi, kitchen utensils, manpower, and many more.

The average investment required for any franchise restaurant in India ranges between Rs 35 lakhs to Rs 1 crore or more. Now, this investment highly depends on what brand you have selected. If you are willing to open a cafe, or KFC franchise then the investment required is quite high.

Now, on the other hand, if you are planning to open a kiosk franchise model then the average investor could be quite less. The average investment for a kiosk franchise in India is not more than Rs 20 to Rs 25 Lakhs.

What is the average Profit Margin on Restaurant Franchises?

Earlier in this article, we had already spoken of the future of restaurant franchises. It is surely a booming industry and will expand more in the coming future. Restaurant franchises have a good profit margin once they have completed established.

The typical range of any restaurant franchise's profit margin in India is from 0-15%. On the other hand, the average restaurant profit margin generally falls between 3-5%. If your sales are huge then surely you are going to earn a huge profit margin.

What is the average Return on Investment for a Restaurant Franchise?

Not only the restaurant franchises but, the individual restaurant owners also do well. They expect an ROI even before some well-reputed franchise restaurants. Moreover, the ROI depends on the sales of your product.

According to MacroTrends, the average ROI of QSR was 5% in 2022. The general ROI of franchise restaurants was about 10% every quarter. If you open up any franchise restaurant you can expect your ROI in between 3-4 years.

Are Franchise Restaurants Profitable?

Opening up a franchise restaurant is highly profitable. The consumption of food is never going to go down in the whole world. Even if you open up a restaurant franchise in any part of the world you will earn enough to fulfill your wants.

In the same way, opening a fast-food restaurant franchise is a heavily profitable option. Fast food is always in demand and most during any occasion. So, if not fast-food you can open any other food restaurant in India it is surely a profitable business.