Expansion Strategy
Restaurant Franchise Development
Should you franchise your concept—or grow with company-owned locations? Here's what it actually takes to become a franchisor.
Expansion Consulting →
Expansion Strategy
Should you franchise your concept—or grow with company-owned locations? Here's what it actually takes to become a franchisor.
Expansion Consulting →The Big Decision
Franchise if you want faster expansion with less capital, can accept lower per-unit profit for scale, and have systems others can replicate. Open company-owned locations if you want full control, higher per-unit margins, and can fund growth yourself. Many brands do both.
The hybrid approach: Many successful brands franchise in distant markets while keeping company-owned locations in their core market. This captures the best of both worlds—scale through franchising, profit through owned units.
Investment Required
Becoming a franchisor costs $50,000-$300,000+ including legal fees for FDD preparation ($25K-$75K), operations manual development ($15K-$40K), trademark registration ($5K-$15K), franchise marketing ($20K-$50K), and infrastructure setup. Ongoing costs include compliance, training, and support systems.
| Item | Cost Range | Notes |
|---|---|---|
| FDD Preparation (Legal) | $25,000 - $75,000 | Franchise attorney fees |
| Operations Manual | $15,000 - $40,000 | Documenting all systems |
| Trademark Registration | $5,000 - $15,000 | Federal protection |
| Franchise Marketing | $20,000 - $50,000 | Attracting franchisees |
| Training Program Development | $10,000 - $30,000 | Curriculum, materials |
| Support Infrastructure | $15,000 - $40,000 | Technology, staff |
| State Registrations | $5,000 - $25,000 | 14 states require registration |
| Total Initial Investment | $95,000 - $275,000+ | Before selling any franchises |
The real cost: You'll spend this money before you sell a single franchise. And you'll need to maintain compliance, update documents annually, and support franchisees indefinitely. Franchising is a new business—not just an expansion of your restaurant.
Readiness Assessment
Your restaurant is ready to franchise when: you have 2-3 profitable locations proving the concept works in multiple markets, documented systems that can be taught to others, a differentiated brand with trademark protection, sufficient capital for franchise development, and the infrastructure to support franchisees.
One location isn't enough. Franchisees aren't buying your restaurant—they're buying a proven system. If you can't prove it works in multiple locations with different managers, you're not ready.
Legal Requirements
An FDD (Franchise Disclosure Document) is a legal document required by the FTC that provides prospective franchisees with detailed information about your franchise including fees, obligations, financial performance, litigation history, and franchisee contact information. It must be provided at least 14 days before any agreement is signed.
The FTC requires every franchisor to disclose specific information in a standardized format:
Item 19 (Financial Performance): This is the only place you can make earnings claims. It's optional, but franchises with strong Item 19 data sell faster. If your numbers are good, include them.
Common Questions
Becoming a franchisor costs $50,000-$300,000+ including legal fees for FDD preparation ($25K-$75K), operations manual development ($15K-$40K), trademark registration ($5K-$15K), franchise marketing ($20K-$50K), and infrastructure setup. Ongoing costs include compliance, training, and support systems.
Your restaurant is ready to franchise when: you have 2-3 profitable locations proving the concept works in multiple markets, documented systems that can be taught to others, a differentiated brand with trademark protection, sufficient capital for franchise development, and the infrastructure to support franchisees.
An FDD (Franchise Disclosure Document) is a legal document required by the FTC that provides prospective franchisees with detailed information about your franchise including fees, obligations, financial performance, litigation history, and franchisee contact information. It must be provided at least 14 days before any agreement is signed.
Franchise if you want faster expansion with less capital, can accept lower per-unit profit for scale, and have systems others can replicate. Open company-owned locations if you want full control, higher per-unit margins, and can fund growth yourself. Many brands do both.
Whether franchising makes sense depends on your concept, capital, and goals. Let's assess your readiness and map out the options.