Fast Food Franchise: A Bad Investment?
A fast food franchise is one of the most common types of large-scale franchises that entrepreneurs pursue. This is partially due to the wide brand recognition of companies like McDonalds, Burger King, Taco Bell, KFC and others. Since these businesses are located all over the world, new investors assume this brand recognition will help ensure their success faster than creating their own unique start-up.
It’s certainly true that brand recognition can be a boon for business. When you open up a fast food franchise in a location where people are already familiar with the products and loyal to the brand, then you can generate a stream of customers almost automatically.
But it’s important to realize that brand recognition is only one component of starting a successful business. Entrepreneurs may be enticed by the fact that they see a franchise “everywhere.” But what they’re not seeing is the serious problems and challenges that those business owners are facing “behind the scenes.”
Let’s look at some of the reasons why a fast food franchise can be a bad investment.
Starting a business in fast food requires a tremendous monetary investment. Let’s look at McDonald’s, just as an example. McDonald’s typically requires that franchisees have a minimum of $500,000 in non-borrowed funds in order to be considered as a franchisee. Buyers are also required to make a minimum down payment of 25%, and the balance must be paid in less than 7 years.
This investment alone makes the opportunity nearly impossible for many entrepreneurs. But the franchise
fees don’t stop there. Every month, McDonald’s charges its franchisees an additional service fee of at least 4.0%, based on sales performance. The company also charges for rent, based on a flat monthly amount or a percentage of monthly sales. These costs don’t even include all the other operating costs for employees, inventory and other overhead. McDonald’s estimates that the “equipment and pre-operating” for opening a new restaurant can range from $959,450 to $2,110,700.
Even if you have the funds necessary for this investment, it could take decades before you make all that money back.
Having multiple locations is often the sign of a strong brand – but it’s not necessarily an indicator of a strong business. Planning a fast food franchise must be done extremely carefully in markets that demand it. Many fast food brands have completely saturated certain markets, forcing business-owners to compete with each other, and making it difficult for new investors to get started.
– Questionable Product
A serious issue for some investors looking at a fast food franchise is the quality of the food being sold. Year after year, new reports are released on the growing problems of obesity, diabetes and other health concerns in the United States. Many popular fast food chains are knowingly contributing to this problem with heavily processed foods that are rich in calories, fat and questionable ingredients. The question you have to ask yourself is: do you really want to invest in a business that is harmful to the health of your customers?
If you’re looking for a fresher alternative to fast food franchises, you should strongly consider starting a HUMAN Healthy Vending business. Our start-up costs pale in comparison to the major franchises’, yet our business offers fast cash flow and the highest profits in the vending industry. The market is wide open for our products, and yet the demand is growing by the day. Not only that, our products are healthy! We give people the “fast” nutritious snacks, foods and drinks they’re looking for – and we keep them coming back because they taste so good, and they’re good for them!