Hi,
I'll be the boring one! I'll answer KFdancer's question
The general UK population will understand the Cost of Living, Standard of Living indice's. Related to this is the 'Cost of Doing Business' in the UK. For the most part, the UK's buying public don't understand the costs of running a business in the UK. In short, it's very, very expensive, mired in red tape and the law heavily biases the Consumer over the Business.
I've previously looked at taking on a franchise and yes, the potential profits to make do sound great. With more evaluation, I've decided not to continue (this was all amongst family and selected friends as well).
Mcdonalds want between £200-500K for a restaurant, put up 25% minimum up front, a one off £30K fee upfront to 'join' them and then recurring monthly charges of between 10-18% based on that months sales, 5% to use Mcdonalds' systems and another 4.5% to contribute to the corporates marketing costs. Also delving a bit more although this may have changed (or could have been complete porkies), a full restaurant re-vamp/fit out is needed every few years, which the franchisee pays for and also, you sign an agreement that as a franchisee you have no other source of income whatsoever. Also, prime locations cost significantly more, into the million(s).
Now smaller franchises do cost less usually, but even the cheapest one I looked at, which was a chain of a handful of outlets (fast food again) was £80K upfront. I only did a little more research into places like Starbucks, Costa etc and a few other non food type sectors.
So, in London, I can easily see why that 5 Guys 'meal' cost over £11! Ground rents and rates are stupidly high, insurance is similarly expensive, and then taxes on your profits are also 'relatively' high. Usual costs such as utilities and of course employee salaries/wages are similarly high.
There is of course the ratio of the cost of the meal compared to 'actual' business costs - the profit. 5 Guys does portray itself as a higher quality food place than mcdonalds, BK, KFC etc etc and hence add their 'profit margin' as well. I'd suspect the actual margin is relatively small, perhaps a modest amount more. I don't think they'd have large or big margins which is fashionable for many non business people to say/believe.
In addition to the above, one other forum I'm on, there's semi regular discussions about the potential of having/bringing a USA franchise 'over here'. I know many people on this forum often lament the unavailbility of specific brands, foods, products etc and believe me, plenty of people (including myself!) look into if and how to potentially do that! In short, its extremely difficult to do for a variety of reasons not just costs - for the 'food' sector, the UK palette is significantly different to the much more varied US one along with the fact that only a few regions in the UK, 'might' be interested in a certain food type group.
Right, I'll shut up - should I open a IHOP? or a In N Out Burger?!
Sorry for the boringness!
Cheers, DtM! West London & Slough UK!
