Richard Pakey of Lime Licensing discusses the resilience of food franchising during the pandemic – and beyond.
Food and beverage franchises have certainly stood the test of time. Or should I say survived the pandemic with flying colours! During 2021, we have seen a shift from traditional bricks and mortar sites to virtual ones. Food brands have been fairly resilient, so which types should you consider when investing in a franchise business within this sector?
Different types of food and beverage brands
You will be familiar with the terminology ‘fast food’ or ‘QSR’ (quick service restaurants). And there appears to be no shortage of these types of establishments to cater for our needs. They provide speed and convenience, whether you want a burger, pizza, mug of coffee, cake, or dessert.
There are also ‘sit-in restaurants’ which are especially popular in countries such as America, Italy and Japan. You would expect food costs to be higher in these restaurants as their overall package requires a larger financial outlay to breakeven.
What to expect from a food franchise
As a franchisee, you will enter into an agreement that gives you the rights to operate under that brand name, and to trade at a certain location. Training and ongoing support will form part of your franchise fee. The franchisor will also collect a royalty payment which may be a percentage of your sales or maybe dependent on your fixed costs. You may also be required to commit to ongoing marketing or advertising costs. This will boost your profile locally, while also increasing brand awareness nationally.
Shift to online ordering
Food brands have always had to respond to customers’ changing tastes and habits. This has included an increasing demand for food being delivered to homes and residences. Customers are starting to dictate even more about what they want, where they want it and at a time suitable for them. And during the past 18 months, many businesses have witnessed a 20-30% rise in online orders and deliveries. During the pandemic, this type of delivery service proved to be a lifeline for many businesses, which otherwise may have ended up in the red – or forced to close down altogether. Despite lockdown restrictions easing, deliveries have remained high, with customers finding this service a more convenient way to enjoy their food. Those involved in this industry are not expecting this new trend to change anytime soon. And many brands are now shifting their entire model to capitalise on this changing habit in food consumption.
Good time to purchase a food franchise?
The past year has created more opportunities for budding franchisees to enter the food and beverages sector. With landlords finding more and more of their premises empty, they may just be prepared to offer new clients more affordable terms than those who have just packed up and left. This will reduce overheads and fixed costs for franchisees. There are also more conversion opportunities available today than at any time I can remember. These are very viable sites where businesses have closed down, leaving behind units that can be remodelled at a nominal cost to the new owner.
And those who solely deliver food to residences and offices can operate from premises well away from town centres, where property and rent is higher. This has led to the rise of ‘virtual kitchens’, many of these in secondary locations. As life returns more to how it was pre-March 2020, we are also likely to see the return of food vans and trailers. These will pop up once again at food events, festivals, concerts and perhaps inside shopping malls.
The franchisor’s role
Franchisors will bend over backwards to help new franchisees set up businesses within the food sector. It is in their interests to do so. Franchisors will become more creative in a bid to attract new business partners. They will offer incentives, perhaps even with the purchasing of multiple sites.
Food businesses tend to survive economic down turns better than most sectors, because its model offers greater flexibility for adapting to customer needs. I expect to see many new food brands entering the franchise market over the coming months, and I strongly believe this is a good time to join this expanding industry.
