When it comes to opening a restaurant in Malaysia there are 2 options – Opening your own restaurant or taking a franchise. If you want to take a franchise and are not sure if it is a good idea or not, then this blog is for you. In this blog we have discussed the advantages and disadvantages of taking a franchise. Read more to decide if you want it for you or not?

What is a Restaurant Franchise?

Before diving into the pros and cons, let’s clarify what franchising is. A restaurant franchise allows you to run a business that follows an established brand’s model. Instead of starting from scratch, you pay for the rights to use a company’s name, products, and business strategies. You’ll find that multi-chain restaurants like McDonald’s and KFC operate on this model across Malaysia.

What are the advantages of franchising in the restaurant industry?

1. Brand Recognition

One of the biggest advantages of owning a franchise restaurant is instant brand recognition. Customers already know the brand, so you don’t have to work hard to build trust. According to a report, about 60% of Malaysian consumers prefer eating at familiar restaurants. This gives franchise owners a head start in attracting customers compared to independent restaurants that are trying to establish a name.

2. Proven Business Model

Another key advantage of franchising in the restaurant industry is the business model. You don’t have to figure out what works and what doesn’t. The franchisor provides you with a detailed guide on how to run the business. From training staff to managing the kitchen, everything is laid out for you. This minimizes the trial-and-error phase that independent restaurant owners often face when opening a restaurant.

3. Marketing Support

Franchise owners benefit from ongoing marketing support. Big brands invest in national or even global advertising campaigns, which helps bring customers to your door. Local restaurants usually struggle with marketing, but when you open a franchise restaurant, you can leverage these large-scale campaigns. This is especially useful in Malaysia, where digital marketing is gaining popularity. In 2023, Malaysia saw an 11% increase in online food marketing strategies, which directly benefits franchisees.

4. Easier Access to Financing

Banks are more likely to lend money to franchisees than independent business owners. Since a restaurant franchise has a proven track record, financial institutions see it as a safer investment. Many franchisors also have partnerships with banks, making it easier for you to get funding.

What are the 3 disadvantages of owning a franchise

While franchising offers numerous benefits, it’s essential to consider the downsides. Every business model has its challenges, and owning a franchise restaurant is no exception.

1. High Initial Costs

The first big disadvantage is the high initial investment. You’ll need to pay an upfront franchise fee, which can range from RM100,000 to RM500,000 or more, depending on the brand. Additionally, you will have to cover the costs of setting up the restaurant, buying equipment, and training staff. For instance, opening a McDonald’s franchise in Malaysia can cost up to RM2 million. This is much higher than what it would take to start your own restaurant.

2. Ongoing Royalties

Franchisees are required to pay ongoing royalties to the franchisor, usually around 5-10% of their revenue. While this may not seem like a lot, it adds up over time and cuts into your profits. In comparison, independent restaurant owners get to keep all their profits, except for standard business expenses.

3. Limited Creative Control

If you’re someone who likes to be creative, franchising may not be the best option. The franchisor controls most aspects of the business, from the menu to the restaurant layout. You won’t have the freedom to make major changes or introduce new dishes that aren’t approved by the franchisor. This lack of control can be frustrating for some restaurant owners who want to put their own stamp on their business.

Is a Franchise a Good Idea?

You might still be asking yourself, “Is a franchise a good idea for me?” The answer depends on what you’re looking for. If you want to take fewer risks and have the support of a well-known brand, franchising could be a great option. However, if you want full control over your restaurant and prefer lower costs, opening an independent restaurant might be better.

Opening a restaurant franchise in Malaysia offers both exciting opportunities and challenges. You get the advantage of working with an established brand and a proven business model, but you also face high initial costs and limited control. The decision boils down to your personal preferences and financial capabilities. Are you ready to follow a structured plan, or do you prefer to take full ownership of your restaurant? By weighing these pros and cons carefully, you can choose the right path for your restaurant journey.

Franchising is not a one-size-fits-all solution, but it can be a highly rewarding venture if it aligns with your goals.