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

Operating locations themselves increases their liabilities. More resources are required not just at the on-site location but at HQ in the planning and development stages and on an organizational level.

There’s also a saying, cash is king and being able to open up more locations simultaneously than you would’ve been personally handling every new location and acquiring a large upfront franchising fee increases immediate cash flow.

There are drawbacks to moving to a franchise heavy business model – franchise owners are now external stakeholders and have their own collective power against corporate. There’s also risks of low or inconsistent quality control which can be a key feature for fast food. But overall, franchising on some level tends to be hugely practical for large scale fast food operations.