Why do fast food companies usually franchise their restaurants instead of operating the locations themselves?
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If they operate the restaurant themselves, they have to either own or rent the building.
The actual building is the biggest risk with opening a new restaurant. Your company already exists and already sells food, so you know your name, your brand, your menu, are all good. The main thing that makes a new restaurant fail is a bad location. There are so many reasons this can happen – bad road access, bad parking, bad public transport, not enough people nearby to work there at the price you can afford to pay them, bad area for crime, area that just has people who don’t want to buy your food, etc etc.
So, if it turns out that where the building is is a really bad location (which may not be something they can know before opening), then they are stuck paying for a location they don’t want and that possibly neither does anybody else.
If they franchise, then the franchisee takes this risk and uses their money for this part.
Simple as that.
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