As a restaurant owner you are undoubtedly all too familiar with the ongoing struggle to find ways to contain and reduce costs in your business.  Though cost management is always an important aspect of the success of your business, it is becomes even more important when the economy begins to suffer as it has over the past few years.  As more and more restaurants begin shutting their doors for good, it becomes even more important to be smart about the way that we run our businesses so as to avoid joining those who have failed.

When every single penny counts you cannot afford to leave any stone unturned in your quest to maximize profits by reducing costs.  There are a number of cost management measures that many fail to notice.  One of these lies in the area of insurance.

Insurance is an absolute necessity.  Not only are you legally obligated to carry certain coverages, but it is just good sense to protect yourself and your business.  Though we all hope that we will never have cause to utilize those costly plans, it is certainly an instance of “better to have it and not need it than to need it and not have it”.  There are ways to reduce your insurance cost without sacrificing the amount of coverage that you carry, though.

One of the most obvious ways to drop the cost of the insurance you carry as a business owner is to raise your premiums.  You can potentially save a lot of money this way, especially if you are fortunate enough to not have to file claims.  The best way to protect yourself if you choose to do this is to set aside the difference between what you would be paying for a lower deductible and what you pay for the higher deductible.  By setting aside money in this way you can cushion yourself should you find yourself needing to pay out of pocket.

Of course, should you find yourself not needing to cover those deductibles, then so much the better.  The best way to do this is to crack down on safety issues in your establishment.  Knuckling down about safety in your restaurant can work in your favor in several ways.

Most obviously, if you are doing everything in your power to prevent accidents from occurring in your place of business then you stand a much better chance of avoiding having to pay out those costly deductibles.  This means that the money you set back, which you saved from your reduced insurance payments, is money for your business – a net gain.

Improved safety works in favor of your business in another way, though.  Businesses that report few or no workplace injuries become eligible for further reductions in the cost of their insurance policies.  In fact, by just reporting less than average workplace injury claims you may be able to save as much as 25% off of your insurance premiums.

Finally, shop around for insurance often.  At least once a year, when it comes time to renew, take a look around and see who is offering the best rates.  Never make the mistake of simply renewing with your current company just because they are who you have always used.

At some point in almost every young person’s life, usually fairly earlier into their work career, they set their sights on a leadership position within whatever organization they have gained employment in.  While restaurant management may offer its own rewards, it isn’t a task that just anyone is well suited for.  Successfully managing a restaurant requires the ability to think on your feet and to multi-task to a high degree.

It is because the duties of a restaurant manager are so stringent that leadership positions within a restaurant are often broken down into a number of subsets, such as assistant managers, crew leads and the like.  In many large restaurants the kitchen may operate under the auspices of an executive chef who undertakes most of the duties of managing kitchen operations while a floor manager supervises the servers and greeters.  However, at the top there must always be one main supervisor holding the totality of operations together into a fluid and cohesive whole.

At the very core of anyone with an eye on advancing through the ranks of restaurant management must be a strong sense of customer service and duty to the public.  The successful manager understands that his or her first duty is always to the customer.  This is often displayed by the most successful managers, not in how they deal with customer complaints or concerns, but in their willingness to get out there with the rest of the staff and assist customers on an especially busy night.  At heart, all good restaurant managers are still servers or cooks at heart.

It is for this reason that many restaurants choose to promote from in house.  Anyone who has never filled the entry level roles in a dining establishment could never hope to have the in depth understanding of the intricacies of restaurant operations coupled with the true spirit of service.  It is almost a universal truth that the employee who worked his or her way up from the kitchen to the office will do a better job than a party brought in from the outside.

Since the best managers generally come from in house, it falls to existing management to be able to spot potential, initiative and a natural bent toward leadership within the ranks.  Employees demonstrating these capacities should be encouraged to develop them and placed into leadership roles as soon as they are ready.  The shift lead of today is the outstanding manager of tomorrow.
Of those traits listed above, initiative is probably the one most often overlooked or left uncultivated.  A decent manager will ensure that all of the day-to-day duties of a restaurant are carried out, that employees are performing up to expectation and that customer issues are handled appropriately.  That is simply the baseline that defines an adequate manager.  The truly good manager, the one you want running the show in your absence, is the one who shows initiative.

The employee with initiative doesn’t ask, “Did I do an adequate job?”  The employee with initiative doesn’t even ask, “Did I do the best job I could do?”  No, the employee who will make a great manager some day is the one that asks, “How could this job be done more efficiently and effectively?”  It is this sort of employee that, when promoted, will begin to look for ways to improve the restaurant and make it more profitable.

There has been a pretty popular movement in recent years, especially in more rural areas, to support local business.  Certainly this is a very noble aim and one that should be supported by anyone who wants to see their community prosper.  However, in the push to support local business, many franchise owners are thrown under the bus of public opinion.
To say that franchises are not local business is misleading and misguided at best.  In fact, such assertions are patently false in a great majority of cases.  Just because a franchise’s franchising organization may be located in a far distant city says very little about where the profits from that business are going.
The fact of the matter is, well over half of individuals who decide to purchase a franchise go into business within the community in which they live.  This means that the franchise owner is, in fact, local business.  However, if this simple truth is not sufficient to quiet those who would see franchises driven out of communities simply because they pay a small percentage of their profits to a corporate office for use of a brand name, then more facts are warranted in support of franchises as local businesses.
Beyond being owned by individuals from the communities in which they operate, franchises also draw their workforce from that same community.  What may be perceived as taking away business from one local businessman is simply providing business for another, as well as providing jobs for many others within the community.  Because franchises are more likely to succeed than independent businesses, anyway, the jobs of those employed by these franchises can be viewed as more secure as well.
Furthermore, the simple fact that a franchise operates under a corporate logo does not mean that they, in some form or fashion, necessarily exist outside of the normal business community within an area.  Though a franchisor may establish regulations regarding the quality of goods purchased by its franchisees, or may even establish guidelines about specific vendors and suppliers that may be used, in many cases those vendors and suppliers deemed acceptable fall within the locale of the franchise.
For a franchisor to insist that franchisee use products from across the country when a vendor within the region may be just as well suited is hardly sensible.  This is especially true in the cases of fast-food franchises, where a high degree of product freshness is necessary.  Therefore, to assume that franchises are eschewing the services and products of other local vendors is not true in all cases and should not be used as a blanket accusation against franchising as a whole.
The simple truth is that franchises do represent, more often than not, local business.  Yes, the name may be national.  However, the owner, the employees and even the supplies are most often local.  The franchise bolsters the economy of the community and the franchisee most likely keeps his or her money in the same bank that supplied the loan to establish the franchise.  Franchises are every bit as much a part of the communities in which the operate as the most provincial “Mom and Pop” type of establishment.

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When most of us think about franchise ownership we think about the big names, the monster of franchising like McDonalds.  As such, most of us view franchise ownership as impractical, if not completely out of reach.  After all, to even be considered for ownership of a McDonalds one needs to have a net worth several times greater than many of us could realistically hope to achieve.

Fortunately, for those wishing to go into business and to still have the security and benefit that comes along with franchising, there are other options.  Though the big name franchises certainly are worth the investment if you have the capital, there are more affordable options for those of us with more average finances.  In fact, there are a great number of franchising organization that offer franchises that can be run right from the home.

When you hear “home-based business” you may be inclined to think of the numerous spam e-mails you have undoubtedly received which promise to make you rich by just licking envelopes or posting ads.  Any intelligent individual will quickly recognize such “get rich quick schemes” as the scams that they really are.  There are, however, very legitimate and very profitable home based businesses for those looking to, not necessarily get rich, but to get comfortable by putting honest work into running their own businesses.

There are a number of benefits that go along with owning a small, home-based franchise.  These benefits, of course, exist on top of the already evident benefits of franchise ownership over independent ownership.  For the investor looking to grow a business off of a limited amount of capital, some of these small franchise options can be very appealing indeed.

For starters, just as implied, small franchises are infinitely more affordable to establish.  Whereas a major fast-food chain can cost several hundreds of thousands of dollars, many small home-based businesses can be started up for well below $100,000.  These businesses are not just inexpensive to start-up, either.  For the most part they operate at much lower overheads as well.

A steady business that operates at a low overhead begins to show a profit much more quickly.  The sooner your business begins showing a solid return on your investment, the quicker you are on your way to financial independence and stability.  Most small franchises begin showing a solid profit after only a year or two, as opposed to larger businesses that may take 5 years or more to become fiscally sound.

Operating a business from home makes one eligible for a number of tax benefits as well.  As you may be aware, the expenses of doing business may be eligible for tax deductions.  When you run your business from home, then portions of your rent/mortgage, utilities and the like become eligible business expenses as well.
Small home-based franchises are generally much easier to administrate as well.  In fact, most are entirely owner-operated.  This means no employees and no employee paychecks.  The owner has only him or herself to worry about and is answerable only to his or her franchisor.

It isn’t any big secret that franchise owners command a greater advantage in the marketplace than independent business owners.  Franchise owners tend to have a much higher success rate and usually begin showing a profit sooner than their independent counterparts.  It is commonly understood that brand recognition, benefiting from a pre-established business model and having the marketing support and resources of their franchisors help franchisees succeed.

However, there are many other benefits of franchise ownership that may be more often overlooked.  For the individual who wants to go into business and is still unsure, it is important to look at every facet.  Only in this way can the investor make the decision most suited to his or her needs as to whether to purchase a franchise or to go it alone.

Many people claim that, though franchises tend to become more profitable sooner they also operate at a higher cost because of royalties and other fees.  While this may certainly be true in some instances, it is not always the case.  In fact, even taking royalties into account, there are several factors which may drive down the cost of doing business as a franchisee.

One of these cost reducing factors lies in the fact that franchise operations are streamlined over time.  The franchisor has a vested interest in helping its franchisees find better and more efficient ways of doing things.  The better their franchisees do, the better the franchisors do.  Whereas one independent owner may find numerous cost and time saving approaches over the life of his or her business, imagine the acceleration of tens, hundreds, even thousands of owners across the world all operating under the same franchisor and each helping to streamline operations in ways applicable by all the rest.

It is easy to see that a franchise may hope to develop more quickly and to eliminate more of the waste inherent in running a business more quickly than an independent owner.  Each advancement within the company helps to drive down costs for the individual franchise owner.  However, this is not the only way that franchising helps to reduce the cost of operating a business.

Most franchisees find that they are able to purchase the products they need for the daily operation of their businesses at costs much lower than the independent business owner can.  In many instances these supplies come directly through the franchisor.  In other instances, franchisors establish working agreements with suppliers who then supply all franchisees within a region at discounted bulk prices.  In any case, the individual owner can hardly hope to match the buying power of the franchisee.

It can easily be construed how the cost saving benefits of franchise ownership could quickly overshadow the cost of ongoing royalty fees, advertising fees and other costs not associated with independent ownership.  Of course, whether the savings outweighs the cost of franchise ownership will vary from franchisor to franchisor.  This is why it is important to thoroughly research a franchisor before become contractually commited.

Franchising offers a lot of benefits to investors looking to go into business.  The many positive aspects of franchise ownership can all be essentially condensed into one simple core benefit – the assumption of less risk by the investor.  This isn’t to say that franchise ownership is completely risk free.  As with any investment, there is a chance of loss.  However, the chances of succeeding with a franchise and of turning a business into a profitable venture quickly is much greater than the chances of doing so with an independent business.
Over one half of businesses fail within the first 5 years.  By and large, the majority of new businesses that do not make it through those first critical years are those that operate independently.  Franchises succeed more often and begin showing profits earlier.  So just what is it that gives franchises so much of an edge over those independent businesses?
There isn’t just one reason that franchises are usually safer investments than going into business independently.  Rather it is an accumulation of several contributing factors that, when put together, create a picture of a safer and more solid investment.  While each of this factors contribute in their own right, it is only when all are well represented by a franchising organization that the effects are felt most by the franchisee.
Probably one of the best known benefits to franchising is brand recognition and loyalty.  When an independent business is started up, the owner has to work very hard to reach his or her intended customers, to let them know what products and services are offered by the new business and to arouse interest in them.  The franchise owner has little of this concern.  If the franchisor has been around for any period of time then the public is most likely well aware of the products and services offered and probably has a good impression of the business.
This good impression engenders brand loyalty.  It’s a simple product of human psychology.  People are more amiable to what they know and less inclined to try something they are unfamiliar with.  This means that when confronted by a decision to use a franchise of a known and trusted name or to use an unknown independent, the average customer will go with the familiar franchise.  This means the franchise owner has to work much less to bring in customers than the independent does.
Brand recognition and brand loyalty are created by means of another benefit of franchising – marketing.  Franchisors are usually able to advertise on a much grander scale than any independent owner could ever hope to.  In essence it is very much as if all franchisees were pulling their resources to advertise together.
Franchise owners also benefit from buying into a solid business plan.  Much of the failure that occurs during those first tumultuous 5 years of business ownership occurs because of owner error in establishing a business model.  Even someone with a lot of business sense can make an error in judgment.  For the franchisee, those errors have already been made and overcome by previous franchisees and by the parent company.  What remains is a tried and true plan of business.

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