The Ultimate Guide to Franchise Restaurants

Franchise restaurants are establishments licensed to operate under a brand name using specific products and business models. We’ll provide insight into what these restaurants are, the benefits and drawbacks of running a franchise, and how to launch and operate your franchised restaurant successfully.

What Is a Franchise Restaurant?

A franchise restaurant is a dining establishment that operates under a franchise agreement, entitling the owners to use a brand name they don’t own. The franchisee, or owner of the individual location, pays for the rights to use the franchise’s brand name, logo, business model, and products.

A franchise business structure allows individual franchise restaurants to benefit from the larger brand’s established reputation, best practices, and customer base. While they have to adhere to guidelines set by the franchisor regarding food quality, service standards, and restaurant decor, franchisees also get support in areas like marketing and supply chain management.

Pros and Cons of Investing in a Franchise Restaurant

As with any restaurant, franchises have advantages and disadvantages. Understanding the pros and cons of investing in a franchise can give you a better idea of what to expect from franchising and whether the franchise business model may be right for you.

Pros

Proven business model: Franchise restaurants operate on an established business model. This considerably reduces the risk of failure compared to starting a restaurant from scratch. As a franchisee, you can leverage the franchisor’s experience and expertise, learning from their best practices.
Brand recognition: Buying a franchise means investing in a known and trusted brand. This instant brand recognition can attract customers right from the start, giving you a head-start on marketing that can be expensive and time-consuming.
Ongoing support: Most franchisors provide continuous support to their franchisees. This can range from initial training, site selection, and construction support to long-term operational and marketing assistance. This support can be invaluable, especially for first-time operators.
Greater purchasing power: Being part of a franchise network often means benefiting from the franchisor’s purchasing power. Franchises often negotiate lower inventory, equipment, and supplies prices, saving individual franchisees money.
Easier access to financing: Financial institutions are often more willing to lend to franchisees due to the lower risk associated with the business model. This can be a significant advantage when covering the considerable costs of building out and equipping a restaurant.

Cons

High initial investment: Franchise restaurants often require a substantial upfront investment. This can include the franchise fee, construction costs, equipment, and inventory purchases. These costs can be considerable and may take two years or more to recoup.
Ongoing fees: As a franchisee, you must often pay the franchisor ongoing royalties and other fees. This is usually a percentage of your gross sales, regardless of your profitability.
Limited creativity and flexibility: While a proven business model is a plus, you have less freedom to make decisions. The franchisor sets the menu, decor, uniform, and operating procedures. This lack of control may not suit entrepreneurs who prefer flexibility in running their businesses.
Dependence on the franchisor’s reputation: Your success as a franchisee is closely tied to the brand’s overall reputation. Any negative press or scandal involving the franchisor can harm your business, even if your specific restaurant is performing well.
Potential profit sharing: Some franchisors require franchisees to share a portion of their profits. You’ll need to review the franchise agreement to understand all the obligations carefully.
Rigorous standards and rules: Franchisors often have strict rules and standards to ensure uniformity across all locations. Compliance with these standards can be challenging, and failure to meet them could lead to penalties or even termination of your franchise agreement.
Termination risk: Franchise agreements typically have termination clauses. If a franchisee doesn’t meet certain performance standards or violates the agreement, the franchisor has the right to terminate the contract.

How Much Does It Cost to Buy a Franchise Restaurant?

The cost of buying a franchise restaurant varies greatly depending on the specific brand you choose to affiliate with, the location of your restaurant, and the buildout required. Generally speaking, you’ll be required to pay a franchise fee of at least $10,000 to $25,000, the cost to acquire and renovate a property, staff costs, marketing fees, and ongoing expenses like royalties.

Here’s some detail on what you can expect to pay when opening a franchise:

Franchise Fees

A franchise fee is the initial cost a franchisee must pay to gain the rights to operate a franchise. These fees typically cover the franchisor’s administrative expenses, training, site assistance, and the right to use the franchisor’s trademarked brand, including their name, logo, and other materials.

Franchise fees can vary significantly based on the brand’s recognition, success, and the resources provided by the franchisor, but generally range from $10,000 to $50,000. However, some high-profile restaurant franchises can command fees of $100,000 or more.

Real Estate Costs

Real estate costs are the expenses associated with securing a physical location for your franchise to operate. These costs vary greatly depending on the size, location, and whether you buy or lease the property. Also included are costs associated with renovating the space to meet the franchisor’s specifications, which include interior design, signage, and equipment installation.

If you are leasing, monthly rental rates could range from a few thousand dollars to tens of thousands. If you are purchasing a property, you can expect to pay several hundred thousand dollars to a few million. However, if you buy and later close or move your franchise, you can often recoup a large portion of your real estate costs by selling the property.

Marketing Fees

Marketing fees charged by some franchisors contribute to the brand’s regional and national advertising efforts. These fees are sometimes a percentage of your gross sales – often between 1% and 4% – and are used to promote the brand through various marketing activities such as social media advertising, TV commercials, print ads, and promotional campaigns.

While you benefit from the franchisor’s marketing efforts, you may still need to budget for local marketing to raise awareness of your specific location.

Royalties

Royalties are ongoing payments that franchisees make to franchisors in return for the continuous use of the franchisor’s brand name and business model. The royalty fees also often cover the franchisor’s support services, such as training, operational support, and updates to the business model.

Royalty fees are typically calculated as a percentage of the gross sales of the franchise restaurant and often range from 4% to 8%. Some franchisors may also have a minimum monthly royalty fee, which franchisees must pay regardless of their sales volume.

How To Open a Franchise Restaurant

Opening a franchise restaurant typically requires following a well-formed process established by a franchisor. While the process is exciting, it’s often much more complex than opening a standalone restaurant.

Here’s an outline of the process for establishing a new franchise restaurant:

Thoroughly research franchise opportunities. Start with extensive research into available franchise opportunities, industry trends, and market demand in your planned location. Analyze the success rate, brand reputation, and support system each franchisor offers before making a decision.
Hire a consultant with experience opening franchise concepts. If you’re new to franchises, consider engaging a professional consultant with experience opening franchise restaurants. These consultants can provide valuable advice, prevent costly mistakes, and help streamline the process. For example, consider consultants like Monte Silva, who have a proven track record in this field.
Understand the financial commitment. Familiarize yourself with all the costs of opening and operating a franchise restaurant. This includes franchise fees, real estate costs, marketing fees, and royalties. Review the specific costs of individual franchisors and prepare a business plan to manage these expenses.
Arrange your finances. Ensure you have adequate funds to cover the initial investment and running costs until the restaurant becomes profitable. This typically involves arranging debt financing as saving or raising equity funds to cover part of your upfront costs.
Meet compliance requirements. Consult an attorney to understand the legal requirements, franchise agreements, and other regulations related to owning a franchise restaurant in your desired location.
Choose a location. Decide on a location that ensures high traffic and easy accessibility for your target audience. It should also be in line with the brand image of the franchisor.
Recruit and train staff to follow brand standards. A well-trained team can enhance customer experience and ensure smooth operations. Make adequate provisions for their training as per the guidelines of the franchisor.
Make the most of marketing and promotion. Use online and offline marketing strategies to create brand awareness and attract customers. This could involve social media advertising, local radio spots, hosting a grand opening event, and other steps recommended by the franchisor.

Owning a franchise restaurant is a significant commitment. It requires a strong dedication to a brand and its operational standards, as well as a relentless focus on customer satisfaction. However, if you follow the process carefully, partner with a strong franchisor, and manage your location effectively, it can be a rewarding and satisfying experience.

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Restaurant Management

Tip Pooling: Pros and Cons

For restaurant owners looking to boost teamwork and make sure every employee gets their fair share, a tip pool or tip share seems like a natural solution. But like there are pros and cons to tip pooling that every operator should be aware of.

Of course, it doesn’t always make sense to pool tips. (And when it does make sense, tip pooling policies are definitely not one-size-fits-all!)

If you’re on the fence, check out our tip pooling pro-con list below and consider how they would affect your restaurant’s unique dynamics.

What are the pros of tip pooling?

It takes a lot of hard work and collaboration to deliver an excellent guest experience. For most restaurants, the primary goal of tip pooling is to ensure all employees are fairly rewarded for their contributions.

Here are a few of the benefits that tip pooling offers restaurant teams.

1. Improved performance

When executed strategically, tip pooling can bring your team together around a shared goal — delivering a top-notch guest experience — and reward them for doing so.

And when employees are all working toward a common goal, they’re much more likely to work together and go out of their way to lend a helping hand or fill in gaps. This can be particularly true for tip pools that include employees who generally aren’t directly tipped, like bussers, hosts, and back-of-house employees.

2. Reduced competition among servers

Does one section get all of the large parties (aka all the large tips)? Or does your patio section get too hot for most guests during the summer? When employees aren’t sharing tips, your workplace culture might start to feel (overly) competitive and even lead to tension or disputes. When servers start feeling slighted or get hung up on who-got-which-table, not only does that affect morale — it slows everyone down.

An equitable tip pool can keep servers from feeling like they need to keep score, so they can focus on providing top-notch service to all of the guests in the restaurant.

3. Increased focus on training

When you bring on new staff, you typically have them train with your best veteran servers. And when those vets know that their trainee will be part of their future tip pool, they’ll be more invested in the training, making sure to give them a master class in upselling and customer service.

4. More equitable distribution

Unfortunately, customer biases — conscious or not — can impact tip amounts. Whether based on race, gender, or other factors, this kind of discrimination can affect your employees’ livelihoods.

While restaurant operators can’t control if some employees receive preferential treatment, they can help to compensate for those injustices by pooling and fairly distributing tips.

Cons of Tip Pooling

While most restaurants these days run some form of tip pool or tip share, there are some common drawback and pitfalls to tip pooling, which are worth considering before you implement a new policy

1. Top performers may feel negatively impacted

If your best servers are consistently bringing in far more than the standard 18-20% in tips, they might not be so pleased to share with employees who may not have the same experience, talent or work ethic.

Couple that with the fact that some servers can turn tables much quicker than others, resulting in a higher volume of sales and a whole lot more tip income — well, your top earners could start feeling cheated by the tip pool.

And in a tough labor market, if a hardworking employee isn’t happy with their earnings, they likely have other options.

2. Under-performers can slip through the cracks

On the flip side of that: a tip pool could allow lower-performing employees to slip through the cracks. If you’re not closely evaluating the average tip amount (and average check size!), you may miss that one of your employees is struggling with their customer service.

3. Compliance is an added consideration

Tip pooling is regulated at the federal and (usually) state level. Some municipalities also have their own rules around how to legally pool tips. These laws can get pretty complicated, making it all too easy to fall out of compliance without even knowing it. For example: managers can’t participate in a tip pool; but what happens if a manager is also performing server duties? Can you include back-of-house in your tip pool? Does your eligibility for the tip credit change if you operate a tip pool? It’s important to know the answers to all of these questions and fully understand the laws that apply to each of your locations. (Especially if you have locations in multiple states!)

Tip Pooling Pros and Cons at a Glance

That’s a lot of information to take in, so here it is a handy-dandy pro-con chart.

To Pool or Not to Pool?

The majority of restaurants in the U.S. operate some form of tip pool. At Kickfin, we’ve worked with thousands of restaurant teams who participate in tip pooling or tip sharing. We’ve found that often, the positives outweigh the negatives.

But that comes with a major caveat: the best tip pooling teams have been strategic and intentional with their policies — and as a result, no two tip pooling policies look exactly the same.

If you want to set yourself up for tip pooling success, here are a few general rules of thumb.

Evaluate your requirements: Ask yourself why you’re running a tip pool. What needs are you trying to address or problems are you trying to fix? Specifically consider your restaurant type, team size, org chart, and local market to find the best policy for you.
Don’t overcomplicate: It shouldn’t require a degree in calculus to calculate your tip pool. If you feel like it’s getting unwieldy, it’s possible you’re setting your team up for mistakes and tracking issues.
Get feedback for better buy-in: This shouldn’t be a decision-by-committee scenario, but it’s worth checking with management and even some of your team’s unofficial leaders to get their input before running with a new policy. This can help get the rest of your employees on board.
Write it down and run it by your counsel: Your tip pooling policy should be on paper, in black and white. You should also have your legal counsel review it to make sure you’re not inadvertently out of compliance with tip pooling regulations.
Communicate everything: Once you’re feeling good about your policy, share it. Make sure every tip-eligible employee understands how it works and has the opportunity to ask questions.
Ensure transparency by tracking everything: It’s not enough to share your policy. It’s important that every payout is tracked, including how those payouts were calculated. Not only does that streamline accounting and reporting; it also creates a culture of trust with your employees. If there is ever any question around a payout, having a digital paper trail is invaluable.

The best tip pools are automated

Tip pool calculations often happen in a spreadsheet, which is less than ideal. Kickfin integrates with your POS, so you can eliminate spreadsheet math, reducing the risk of human error and ensuring every payout is accurately calculated and tracked. Plus: Kickfin customers can send instant, cashless payouts directly to their employees’ bank of choice.

The result: All the benefits of tip pooling, without the hassles, risk, and time required. (In fact, many of our users can calculate and pay out tips at the end of each shift in under 60 seconds!)

Want to learn more? Request a demo today.

Product and Company News

Kickfin Recognized on the 2025 Inc. Regionals List

Kickfin has earned a top spot on the 2025 Inc. Regionals list in the Southwest region! This recognition places us among the fastest-growing privately held companies in America—and we couldn’t be prouder of what this means for our team, our customers, and the restaurant industry at large.

A Milestone Achievement

As the #1 tip distribution platform, Kickfin is trusted by thousands of restaurant teams to automate tip pooling and payouts. Since 2017, our technology has given managers hours back in their week while improving accuracy, visibility, and reporting for operators.

Only 951 companies made the cut across all regions, and in the Southwest alone, the businesses on this list contributed 13,809 jobs to the U.S. economy while achieving a median growth rate of approximately 106 percent from 2021 to 2023.

Powering the Future of Tip Management

In the past year, Kickfin has taken automated tip management to a whole new level. In addition to exciting new features that make our platform more robust than ever, we continue to add to the list of our direct integrations with the leading POS brands—which currently includes Toast, SkyTab, Square, Heartland, RPOWER, PAR POS, Oracle MICROS, NCR Aloha, and more.

→ See how the Kickfin-Toast integration “changed everything” for HOBNOB restaurants

Kickfin’s POS integrations give our customers the ability to auto-calculate even the most complex tip pools in just a few clicks, which eliminates unwieldy tip spreadsheets, saves managers even more time, and gives operators unprecedented visibility into payout calculations and history.

A Heartfelt Thank You

This achievement wouldn’t have been possible without the trust of our customers and the dedication of our team.

As Justin Roberts, co-CEO of Kickfin, puts it: “We’re incredibly grateful to our customers who have made this growth possible by trusting Kickfin with their tip management needs. This recognition is a testament to the value that automated tip management brings to restaurant teams—helping them save time, reduce risk, and take care of their people.”

We’re honored to be included in the 2025 Inc. Regionals list, and we’re excited to see what the rest of 2025 has in store!

Product and Company News, Technology and Software

Kickfin Integrates with RPOWER POS to Automate Tip Distribution for Restaurants, Bars and Nightlife

You heard that right — Kickfin has added yet another partner to our ever-growing list of POS integrations!

RPOWER POS has joined the list of leading POS systems that now integrate with Kickfin so users can fully automate tip calculations and payouts.

RPOWER is a trusted name in the restaurant industry known for its handheld devices, online ordering capabilities, and robust reporting. RPOWER’s dedication to staying on the cutting edge of restaurant tech makes the integration with Kickfin a perfect match!

With the RPOWER-Kickfin integration, restaurant operators can:

Easily build out highly complex tip policies
Calculate tip outs based on roles, shifts and hours worked
Distribute tips directly to employee bank accounts
Establish an electronic “paper trail” for every tip out

( …and more. Dive into the latest Kickfin updates for the full scoop.)

Like all of our integration customers, when RPOWER users activate the Kickfin integration, they’ll have access to our robust Customer Success team (at no extra cost!). We’re here 24/7 to review and build out your tip policy within the platform, so you’ll be up and running in a flash.

Collaboration with Riot Hospitality Group

This integration was especially exciting because we worked hand-in-hand with one of our longstanding customers, Riot Hospitality Group, to ensure the integration checked every box — and that it could handle their complex tip pooling policies.

“Kickfin has been an outstanding partner to Riot Hospitality Group for years,” said J Goldin, the systems director for RHG.

“They had already helped us go fully cashless, which eliminated a lot of risk for our teams. When we decided to completely automate tip payouts, they were a natural choice to help with that as well. We worked hand in hand with Kickfin and RPOWER to ensure the system could handle the intense complexity of our rules, while still being incredibly easy to use for our operators.”

“Kickfin is easy to implement and easy to use. If you’re thinking about trying it, you’ll be glad you did.”

As our co-CEO Justin Roberts puts it, this integration is a “no brainer for RPOWER users who understand how valuable their managers’ time is.”

RPOWER users, we’re ready for you! Schedule a demo to learn how you can activate your integration.

(Not an RPOWER user but want to take advantage of these time-saving features? See if Kickfin is integrated with your POS!)

Product and Company News

Kickfin Product Updates: New Year, New Features!

We kicked off 2025 with some major (!) updates to our Tip Calculator features.

It was a big release, and we’ll break it all down for you here — but the big headlines are:

More integrations
More speed
More flexibility

If you’re not already using Kickfin — or if you haven’t integrated Kickfin with your POS to automate tip calcs just yet — this is for you! Read on to see how you can use Kickfin’s newest tip calc features to un-clunk your tip pooling process.

More integrations, coming right up

We’re continuing to roll out integrations with the leading POS systems, giving restaurant teams the power to auto-calculate tip pools and shares in a matter of clicks.

(Side note: Kickfin only builds direct POS integrations — not using a third-party solution! — which streamlines your tech stack and keeps your costs lower.)

We were thrilled to add RPOWER to our growing list of integrations, which already includes Toast, Square, SkyTab, SpotOn, PAR and more.

If you’re an RPOWER user and you’re not yet a Kickfin customer, request a demo and we’ll show you the integration in action!

Handle autograts with ease

For servers and bartenders handling large parties, autograts can be great — but for managers, they can turn into a logistical nightmare. Now, Kickfin can help with that…

With this latest release, you can break tips and autograts into separate categories with their own set of rules for distribution. You have the flexibility to manage autograt tip splits completely separate from regular tip outs, so you can fairly reward a hardworking server-bartender-busser trio for a job well done on a 30-top.

Tips & Autograts Broken Out on Tip Data Page

Tips & Autograts Broken Out on Review Screen

With this new set up, you’ll also get more transparency in reporting. You’ll be able to see the breakdown of tips and autograts collected by each user in your reporting dashboards (more on that later!).

Include cash tips in your distributions

You heard that right — we can now distribute shares of cash tips digitally, directly to your employees’ bank accounts. Instead of doing the math on cash tips by hand, you can easily add cash to your tip pool, and we’ll calculate the share among employees for you.

Important note: cash distributions aren’t available for all of our integration partners. Contact us for more info.

Advanced Tip Rules (for even the unruliest policies)

Think your tip policy is extra tricky? Don’t worry — we’ve seen ‘em all. And there aren’t many Kickfin can’t handle, thanks to our Advanced Tip Rules feature.

If you have Advanced Tip Rules enabled, we’ve added a few new capabilities so you can further customize your tip share while we take care of the complicated math behind the scenes. Here are just a few examples of the new features we’re rolling out.

Not using Advanced Tip Rules? Reach out to us if you’d like to enable these features.

Per Segment Tip Sharing

We’ve been calculating tip shares on a check-by-check basis. For example, if you have servers sharing a percentage of tips with bussers, we would only calculate and deduct that percentage if a busser was working at the time that a check was processed. We call this Per Check Tip Sharing.

Now, we’re introducing Per Segment Tip Sharing, which gives you the option to deduct a tip share from every check processed during a shift. Let’s go back to our example — servers sharing a percent of tips with bussers. With Per Segment Tip Sharing, we would deduct a percentage of the server’s tip for every check processed, even if the busser gets cut two hours before the server.

Split Evenly

Would you prefer that all of your support staff take home an even share of their tip pool? We can now make that happen.

Previously, our tip shares entered a pool and were divided among beneficiaries based on how many minutes they worked during a shift, which we call splitting by Time Worked. With our new product update, we’re introducing the Split Evenly option, which enables you to send an equal part of a tip share to every beneficiary that worked within a segment.

More accuracy

In the past, cash autograt payments were lumped in with credit card autograts and credit card tips, resulting in credit card fee deductions on cash transactions. But that is no more!

Now we’re able to deduct credit card fees only where they apply, so you’ll no longer see credit card fee deductions attached to cash autograt transactions.

Plus, we’ve gotten even better at math. With our new update, we can prevent rounding errors, so our tip disbursal should match the tips collected in your POS to the penny.

Revamped and expanded reporting

We added new reporting views to give you more insight into each pay period, individual pay sets, and tip calculations. Here’s a quick look at your new pay period report with expanded filters:

Main Pay Period Report - Filter Bar Expanded

You’ll notice that there are now separate columns for tips and autograts, but you can still view the gross amount earned (tips + autograts = gross).

And it doesn’t stop at the main reporting page. You’ll see this more detailed reporting when you look at individual employee pay period reports, review a specific pay set, or export the information from any of your reporting dashboards.

We know this is a lot of new information to take in — but we’ve got you covered with our full Product Release Recap. Simply log in to Kickfin, click on your name in the upper left corner and select “Support” to access that portal.

Not using Kickfin? Dying to get rid of your old-fashioned gratuity management system? Drooling over these new features? We’d love to have you. Reach out to us today to see how our platform could save you time and money.