Should I Buy a Burger Franchise or Start my Own?
March 16, 2020
Foreword: Best Burger Franchise in Bali
Hi, and thanks for reading our blog. If you’re in Bali and haven’t tried the famous Dod’s Burger then you’re definitely missing out! Come down to our outlets in Kuta or Seminyak, and see for yourself why everybody is talking about our burgers. Thanks!
Should I buy a burger franchise or start my own burger business?
It’s a common question for those just starting out on their business journey, and I’m going to answer it by giving you the pros and cons. There is no black and white answer to this, as it depends entirely on you as an individual, and your outlook as an entrepreneur.
Pros and Cons of Buying a Burger Franchise
First of all, let me say that I’m personally a big fan of buying into a franchise system for two reasons:
- In the short term, buying into a franchise system allows you to start at square two as opposed to square one. In other words, it takes away the headache of coming up with a concept from scratch. If you choose the right franchise, you’re practically buying a business model that already has a proven track record.
- In the long term, buying into the right franchise allows you more time to focus on your customers instead of having to continously spend your time thinking about new menu items. The right franchise will take care of creating new menu items regularly, so your business can stay relevant in the face of competition and changing consumer trends.
Having said that, I’m not advocating that everybody should buy into a franchise.
There also many disadvantages in buying into a franchise:
- You lose part of your independence as an entrepreneur. Signing a contract with a franchisor means you have to play by their rules! Any major decisions you’re making will have to be agreed and approved by the franchisor. For example, adding new menu items, selling promotions, changing prices – the franchise contract will stipulate that the franchisor get the final word.
- You lose a big chunk of your profits when you pay royalties to the franchisor. This royalty fee could be anything from 3% to 6% of your revenue. Yes, that’s a percentage of your revenue not profit. When you convert this, it could be up to 25% of your profits before tax! Do you really want to give away a quarter of your profits after all the hard work you’ve put in?
- You can’t leverage economy of scale when you buy a franchise. What I mean is that, when you open new franchise outlets within your designated area, you would still have to pay the initial franchise fee, as well as the same royalty fees you’re already paying for your other outlets. There is no concept of bulk discount when it comes to franchise payments.
Find your inner reason in starting a burger business
If your reason in starting the business is because you’re sick of the corporate rat race and hated the boss, then buying into a franchise won’t be your thing. Why? Because having a franchisor on your back is like having that boss all over again! Only this time, you have your own money on the line.
However, if you have zero previous experience in the culinary business and you don’t even know how to peel carrots, then my suggestion is that you choose the franchise route as that would minimize your risk. Buying into a franchise would definitely take away one risk parameter – the risk in not knowing what you’re doing!
Starting your own burger concept from scratch
The good news is that, starting a burger business from sratch is not rocket science. Yes you do need to know the basics, such as what equipments are required, how to lay out the kitchen, or how to cost and price your burger. And yes you do need a good dose of common sense.
But if you do a lot of Google research and keep reading the articles on this blog, there is absolutely no reason why you can’t conceptualize and start your own burger business!
Checklist on what you need to do to start your own burger concept:
- Find the real inner reason why you want to start this business.
- Decide what kind of burger concept you want to create : fast food or gourmet.
- Based on your burger concept, decide on the interior design of your shop, and the size required for your outlet. Always start small to minimize your risk as you’re learning the ropes. Speak to a architects and interior designers to get a feel of how much it’s going to cost.
- Research on what equipments you’re going to need. The biggest equipements and machines you will need are : griddle/griller, fryer, toaster, freezer, and chiller. Find out on the internet how much each will cost. The price range is quite wide on these items.
- Create your menu. This step will make or break your business, so ensure that a lot of research and consultation go into creating this menu. There are consultants that you can pay these days to create your menu. Or you may even want to hire a chef at this stage to help you with the menu creation. Mess up this step, and your business is doomed before it even starts. Price each menu item. Read this to help you create your menu : Building the Menu for Your Burger Business.
- Decide and lay out on a spreadsheet all the ingredients you need to create your menu items. The smart thing to do is to use the same basic ingredients for as many menu items as possible. The not-so-smart thing to do is to use an ingredient for only one menu item.
- Think about how many staff you need to run your operation. This is not as simple as it sounds as you will need to work out the shift hours required and how much overtime you would need to pay.
- Calculate all the costs involved from no.1 to no.7.
- Find your shop location. I listed this last because there is an irreversible legal contract that would need to be signed at this point. Do not sign any contract until you have calculated all costs for all the steps mentioned above. Read this to help you choose your location : Choosing the Perfect Location for your Burger Franchise
- Calculate your financials including all costs, running expenses, lease, staff salary, and your breakeven point. Be as conservative as possible. Finally determine if you can still make a profit from this venture.
Author’s note :
Hello I am Eddy and co-owner of Dod’s Burger outlets in Kuta and Seminyak, Bali. I have been in the burger business for a number of years, and I can help you start your own burger business, from concept stage to operational. I also give advice to those who want to start a business in Bali. Please reach out if you would like me to help you at email@example.com.
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