HOUSTON — So many people are looking to start a small business in the restaurant space without the thorough knowledge and support needed to make that business a success. Many don’t understand the work involved in creating a product that a consumer will continuously buy, securing the necessary foot traffic for survival, technology and the part it plays in that space, in addition to all the other aspects that go along with running a small business restaurant. As a result, 60% of these restaurants (mom-and-pop or independent small businesses) fail in the first year and 80% fail within five years.
Mark Norman, Managing Partner for SHMARK Restaurant Group, says that what he learned in his 10 years of franchising is that most people in our community want “exterior recognition, meaning their name on the building,” more so than franchising or having someone else’s name on the building.
“They would rather forego the product support, marketing support, IT support, etc. from professionals in those fields, just to have their name on the marquee,” Norman stated. “What people should focus on entering the space is whose name appears on the bank account and where the money goes from the traffic flowing through the restaurant.”
At the end of the day, Norman believes people should be in business to make money, not for recognition with their name on the sign. Norman said he oftentimes speaks with people who don’t want to pay royalties and ad fund fees.
“I look at it differently,” Norman said. “I am more than happy to pay those fees and take that work off my plate and I can focus on the operation piece of my business. Again, trying to juggle too much will more than likely lead to a failure of a business, i.e. — the 80% number reference above.”
Norman says that franchising and name recognition can lead to an easier path of funding.
“When an entrepreneur goes into a financial institution to seek funding for the restaurant, it’s a lot easier. If you have an established brand behind you, then it goes in with your name on the building,” he explained. “For example, banks are more willing to lend. If Tony goes into a bank to finance a Burger King, it’s easier for Tony to get financing for a Burger King than it is for him to get financing for Tony’s Burgers, especially without an asset. Some of the excuses I hear, although some may have some value, generally are not necessarily true. Financial institutions are in the business to make money and without an asset, they lend based on the probability of them receiving repayment of that loan.”
Hence, with an established brand with a good succession rate behind you, there’s a greater likelihood you will get funded for that project, not to mention the established relationships that some franchises have with lending institutions that can weigh heavily in the entrepreneurs’ favor to secure funding.
By: Mark Norman, Managing Partner for SHMARK Restaurant Group
