Why do fast food companies usually franchise their restaurants instead of operating the locations themselves?

Question

Why do fast food companies usually franchise their restaurants instead of operating the locations themselves?

In: 101

Answer 1

It’s generally considered less risky and allows for faster expansion.

The actually logistics of opening a new location fall onto the franchise owner, who is presumably more familiar with the local business climate. This saves corporate the time of having to familiarize themselves with each individual local area that they want to expand into. Saved time = faster expansion

In addition, if the expansion is too fast or not well thought-out, then a lot of stores will have to close. With a franchising business model, that risk falls onto the franchise owner rather than corporate.

Companies that do not franchise also tend to expand slower and take fewer risks as a result. For example, Chick Fil A stores are all owned by corporate, so they only expand when the risk is low enough. They also heavily recruit store managers from the local area that are very familiar with the local business climate, so they don’t have to learn themselves, and offer store managers a cut of the store profits as incentive to run the store well.