Meet Jaimeen. 

He’s grown up in a family of franchisees, and now he’s using his inside knowledge of the industry to connect franchisees with their peers and with technology. As the founder of FranTable, Jaimeen Dalia brings a wealth of knowledge across franchises of varying sizes and industries. We sat down to talk to him about the advantages of purchasing a franchise and how emerging restaurant franchises can stake their claim in the current landscape. 

What is an emerging restaurant franchise?

The definition of an emerging restaurant franchise can vary depending on who you ask within the franchising industry. 

A commonly accepted definition is that any brand with fewer than 100 units is considered an emerging franchise, while enterprise brands are characterized by having over 500 units. Emerging franchises often have a larger pool of available territories, which can be an appealing prospect for potential franchisees. 

What are the pros of purchasing a franchise over opening your own independent restaurant?

There are several significant advantages to opting for a franchise as opposed to launching an independent restaurant. Firstly, franchisees benefit from the established brand equity of well-known franchises, which can be a game-changer for new businesses. Imagine a scenario where a new resident is deciding between a local eatery and a nationally recognized franchise; the trust associated with the familiar brand often sways the decision in its favor.

Another key advantage is the potential for more favorable rates with vendors.  Franchise brands tend to have more bargaining power with their vendors, given the large volume of supplies they purchase, from food ingredients to everyday items like paper towels. This leverage allows local franchise owners to access better deals on essential supplies, which can be challenging for small business owners operating independently.

Lastly, franchise ownership offers accelerated learning curves when it comes to business development. Independent entrepreneurs typically spend months, if not years, fine-tuning fundamental aspects of their business, such as understanding customer preferences, pricing strategies, and marketing tactics. By partnering with a reputable franchise brand, franchisees can tap into the wealth of knowledge and experience of the franchise brand. 

What challenges do emerging franchises face that are different from independent restaurants and enterprise brands?

I think the number one challenge for emerging franchises is their limited capacity to provide robust support to their franchisees. Unlike well-established enterprise brands with ample resources and a large workforce dedicated to operations, marketing, and sales, emerging franchises typically operate on tighter budgets and have fewer full-time people on staff. This can sometimes impact their ability to provide the necessary assistance and guidance to their franchisees.

Number two; emerging franchise brands often face a significant challenge when it comes to raising capital to support their franchisees. While established franchises have a track record of success and access to more traditional financing options, newer brands tend to lack the same level of credibility and may struggle to attract investment. This can affect their ability to expand, provide ongoing support to their franchisees, and develop effective marketing and operational strategies. To overcome this challenge, emerging franchise brands need to be innovative in how they pursue fundraising, explore alternative financing options, and demonstrate a clear and compelling vision for their business to attract potential investors and lenders.

The third challenge would be the tough competition they encounter from larger, more established brands. They can struggle to distinguish themselves in a market where a number of well-known names already dominate the consumer landscape. Something I’ve noticed often is how even small coffee franchises with just a handful of locations often tend to be compared to mid-tier and enterprise-level coffee giants. Emerging franchises need to get creative with their marketing and product innovation so they can carve out their niche.

What advantages do emerging franchises have over enterprise brands?

Emerging franchises can have some unique advantages over their enterprise counterparts. One notable advantage is their agility and speed in decision-making and support. As a franchisee within an emerging brand, individuals often enjoy direct access to the brand’s executive team, sometimes even the founders. This level of direct engagement allows emerging franchises to be more hands-on and responsive. This close collaboration with founders and experienced executive teams can be particularly beneficial for less experienced franchisees. Generally, such personalized support is not as readily available within the larger enterprise brands.

Emerging franchises are also typically more flexible in adapting to local market conditions and changing customer preferences. They can often customize their products, services, and marketing strategies quickly to better cater to the unique needs of their specific locations. This nimbleness and ability to pivot quickly helps form stronger connections with the local community and drive higher customer satisfaction.

In many cases, emerging franchise brands may also require a lower initial investment from franchisees compared to larger enterprise brands. This lower financial barrier to entry can make it more accessible for aspiring entrepreneurs and individuals with limited capital to become franchisees. 

What are the signs that an emerging franchise is succeeding? 

This can be tricky to answer. I think there’s a few factors involved. Firstly, the satisfaction of franchisees plays a pivotal role. Are the current franchisees happy? Are they getting along with the brand? Is their experience in line with the expectations they had before buying the franchise? 

Secondly, you can look at some of the quantitative indicators. That involves evaluating the financial performance of the brand. Are the franchisees profitable? Are they growing year over year? 

Lastly, the growth trajectory of the franchisees can also be a good way to assess how well the brand is doing. So you can look at whether there’s year-over-year expansion through increased same-store sales or the addition of new systemwide locations. I also like to see if the current franchises are adding more units. When existing franchisees show confidence in the system by investing in and opening additional territories, this can demonstrate the brand’s potential to establish itself as a category leader within the industry.

How important is it for franchisees to connect with their peers? 

I think establishing strong connections with fellow franchisees is very important for franchise owners, particularly with those who may be in similar business situations as them. In my view, this is one of the biggest advantages of being part of a franchise system. It provides a network of non-competitive peers who are willing to share their operating experience with you. 

Unlike independent business owners, who often lack a supportive community, franchisees can readily seek guidance from others who have likely encountered and addressed similar issues. 

FranTable plays a vital role in facilitating these interactions, enabling franchise owners from various brands and industries to engage in knowledge-sharing and ensure they are making informed decisions.

>> To learn more about Jaimeen Dalia and the ins and outs of operating a restaurant franchise, check out FranTable.

Meet Greg. 

As a veteran of the service industry, Greg Nasser has been a bartender, cooked, and eventually opened restaurants of his own. Over his long career in the industry, he noticed a common trend: restaurants often fail prematurely. And more often than not, failing restaurants seem to operate on intuition and impulse, rather than looking to the data.

That’s why he created Borne. At Borne, they’re focused on restaurant intelligence powered by AI and machine learning, with the goal of preventing premature restaurant closures. With data-backed insights, Borne provides restaurateurs with the tools and information they need to make the right business decisions and stay afloat.

What are the main reasons you see restaurants fail?

There are a lot of reasons that restaurants fail, but those reasons usually fall into one of two major buckets: wrong concept or wrong location. 

From the wrong concept side, a boring or forgettable concept in an already saturated market doesn’t make sense. There may be value perception issues — like a higher check average when there are 10 other burger restaurants that are all half the price. You need to understand what people want and need in a neighborhood, which is where tech can come in. AI allows you to pinpoint what people are searching for and offer them a concept that they want.

The other bucket is wrong location. In this category, a lot of restaurants fail because of a bad lease deal. Owners often find themselves signing an unfavorable lease based on unrealistic projections. People often overestimate the consumer value sentiment for their brand based on incorrect information or human intuition that isn’t complemented with data. That leads to failure because people don’t see value in your concept in the area. 

How are restaurants faring in 2023?

Restaurant closures overall are down in 2023 from 2022. But, first off, restaurant closures are not predictive of economic trends — they’re kind of a reaction to them. 

It’s a complicated question, because different service styles (counter service, drive-thru, full service) all have different metrics. You also have to consider differences between rural, urban, suburban, and destination restaurants. 

In the QSR sector, I know that they’re doing 30% better than they were prior to 2019. But in some urban sectors, restaurants in downtown corridors still haven’t recovered as well, especially in cities like San Francisco. 

Still, restaurants are definitely going in the right direction, and people are continuing to go out to restaurants and spend money and enjoy themselves. 

What are some of the blind spots for restaurant operators that can impact their success? 

If we’re talking about in-house operation, your biggest challenge is your prime costs. If you have a relatively fixed prime cost, you kind of know what your cost of goods will be. You can get into the theoretical costs of goods sold to control your cost there.

The one statistic that’s always evolving and changing is labor. With minimum wage increases, insurance increases, legality by city, by state forecasting and understanding how labor can impact your brand over a five-year window is really important. Labor is something that I think a lot of us take for granted. 

We also see owners having an idea and hoping to open a restaurant because they’re passionate about it. But does the data back up your idea? Where is the right place to open it? You have to plant seeds early on so that your restaurant can flourish. In the past, you would spend six months on R&D, standing outside of a location to see how many people are going to nearby restaurants and engineering the menu. That old-school methodology is pretty much out of use and only works if you really know the area. Otherwise you’ll get inaccurate information. 

The blind spot here is that we have data and AI tools that you can use to guide your human intuition, and that is invaluable for learning what customers will value about your cuisine and brand. You have to learn who your customer is and make sure it matches with your brand personalities.   

How important is real estate for the restaurant business? What can operators do to make your location successful?

I mean, it all starts with the location. So one thing to keep in mind is that when we talk about restaurant trip takers and market opportunity, restaurant trip takers will always buy brands that they feel are like minded. If they go to Whole Foods, Lululemon, Pete’s Coffee, then they’ll go to X Restaurant because it makes them feel like the other three.

From a real estate perspective, you need to understand how a brand should feel and how it should be presented to meet the restaurant trip-taker’s needs. That includes the right cuisine for the location. 

As I mentioned before, it’s also important to know what a reasonable lease deal is for your restaurant. I think a lot of restaurants fail because of unfavorable lease deals that leave no money on the bottom line. Usually this means they’re overpaying and underperforming. 

I think understanding revenue projection and matching occupancy budget for a specific address is really the key to the real estate piece. At the Borne Report, we help people get that and bridge the gap between real estate broker and restaurateur.

How can restaurateurs look more to data and AI rather than their own intuition to ensure that they don’t fail?

The Borne Report is a great resource to help guide human intuition. I don’t think AI should ever take away human intuition on the restaurant side, because the restaurant business is a human business dealing in a lot of human characteristics. 

When you look at the Borne Report in its totality, it gives you a really good understanding of cuisine recommendations, revenue projection, market profile of the restaurant trip taker, competitive landscape, and other key data. You also get an inside look into retail and restaurant trends and spend in that specific trade area around that address. It really saves that time that you would need to spend on R&D, allowing you to focus more on things that matter, like guest experience and design. 

You can think of the Borne Report as a way to guide your intuition but also as an insurance policy to avoid failing. 

What is the outlook for restaurants in 2024? What can restaurants do to stay on top?

Being versatile in service styles is important. Maybe you’re a counter service brand that offers dine-in with beer and wine. Or if you have a model that works well with adding drive-thru, breakfast, or late night, those can be beneficial depending on your location. That versatility will lead to faster growth and more success. 

Our models are also predicting that live music, farm-to-table, wine bars, and live fire will be huge trends in 2024. That experiential dining that we didn’t get during the pandemic is becoming more readily available and drawing people in. 

To learn more about Greg Nasser and data-backed restaurant recommendations, check out the Borne Report.