Restaurant Build-Out How To Guide for Franchisees

If you’re interested in franchising, there’s a significant list of to-dos and steps, including considerations for location, construction, and an efficient kitchen system. Whether planning to open a mid-sized or large-scale restaurant, understanding the construction process is important to ensure your business meets brand standards, adheres to local regulations, and is completed on time. This guide will walk you through the essential steps to successfully manage the construction phase of franchise build-out.

1. Financial Requirements and Franchise Costs

Franchise costs vary depending on multiple factors, ranging from $250k to over a million. According to franchise consultant Tamika Franklyn:

“Each franchise brand has its requirements around restaurant size, design, and equipment, and these will have a major impact on the overall investment. […] Potential franchisees also need to account for at least 3-6 months of working capital for operating costs, etc.”

Tamika Franklyn, Precision Franchise LLC

Using Papa Murphy’s and McDonald’s franchises as an example, here’s what franchise costs for a mid- to large-sized franchise would look like:

• Initial investment: If you want to open a brand franchise, franchisors should see that you have the financial capacity to cover the initial investment costs, which include franchise fees, real estate, construction, equipment, inventory, and working capital. At the lower end, Papa Murphy’s requires a franchise fee of $25k and a total investment ranging from $367k to $670k. On the other hand, at a higher end, McDonald’s requires a $45k franchise fee and a minimum investment of $1.3 million to $2.3 million. 
• Net worth: Most brands require a specific net worth range from potential franchisees to sustain the business. To continue the example, Papa Murphy’s requires a net worth of $350k, while McDonald’s requires a net worth of $1 million.
• Liquid Capital: Franchisees are required to have a certain amount of liquid assets to cover the initial costs and operational expenses until the franchise generates profit. Papa Murphy’s, for instance, requires at least $125k in non-borrowed personal resources, while McDonald’s requires non-borrowed personal resources worth $500k.

2. Site Selection and Approval

Selecting a location for your franchise build-out and following through with the brand’s design layout requires effort and careful planning. It is important to understand each brand’s specific requirements for their site approval and building design. While it may vary from brand to brand, here are some of the common requirements you should take note of:

• Site selection and Approval: During the initial process of applying for a franchise, the franchisor will ask for a site selection before the pre-construction planning begins. Site selection is important since this is where you’ll build your franchise. Some things to consider when selecting a location are visibility, accessibility, and demographic suitability. Generally, the ideal store location is densely populated with good vehicle/foot traffic and accessibility. When picking site locations, it’s also advisable to check its neighboring establishments to understand the market competition, local demand gap, and zoning considerations that might inhibit you from getting permits approved.
• Building Design and Layout:  When building a restaurant, it is important to adhere to the brand’s structure and architectural design. Most brands have a specific architectural design to maintain their brand voice. For example, a standard fast-food restaurant requires a standard layout of 4,500 square feet, which includes a drive-thru, seating arrangement, and a kitchen setup designed for seamless flow and speed. Meanwhile, small to mid-sized franchisors provide their potential franchisees with a smaller footprint, between 600 to 1,600 square feet, maximized for speed and service efficiency. 

3. Hiring a skilled Architect

Hiring an architect is as important as hiring a professional construction team. It’s crucial to look for and hire an architect with specific experience in franchise restaurant build-outs to ensure the design meets the franchisor’s requirements and local building codes. While some franchisors provide complete plans or have corporate-required architects, others only offer general guidelines on the design they want to be implemented. Here are some helpful tips for hiring the right architect:

• Research: Start by researching local architects specializing in commercial or restaurant projects. Websites like AIA (American Institute of Architects) and BuildZoom provide directories of certified architects, including those specializing in restaurant design. 
• Check Experience and Portfolio: Look up the contractors you researched and review their portfolio to see if their previous work aligns with the franchise’s image. 
• Conduct Interviews: Once you have narrowed your list, conduct phone interviews to discuss your project needs, budget, and timeline. 
• Check Credentials: Check the architect’s credentials, license, and insurance. Request references from previous clients to learn how they worked with the architect, notably how they complied with schedules, budgets, and design quality. BuildZoom and NCARB (National Council of Architectural Registration Boards) can confirm an architect’s licensing status.
• Discuss Fees and Contract: Before hiring, make sure you understand the architect’s pricing structure, which may be a fixed fee, an hourly rate, or a percentage of the project cost. Architect costs for restaurant construction typically range between 8% and 15% of the total project cost. Ensure that the contract includes the scope of work, timeline, deliverables, and payment terms.

4. Design and Layout Considerations

A franchise restaurant’s design and layout are crucial for operational efficiency and customer experience. Creating a well-thought-out layout can optimize staff movement, reduce service times, and create a welcoming atmosphere that aligns with the brand’s voice. 

• Kitchen Layout: A well-planned kitchen layout is essential for efficient operations. In a franchise like Nautical Bowls, the kitchen is visible to consumers, emphasizing transparency and cleanliness. The kitchen should be designed in such a way that it minimizes the number of steps required by employees while also reducing congestion. Efficient kitchen design also includes designating different zones for preparation, cooking, and cleaning to optimize productivity and assure compliance with food safety regulations. 
• Dining Area: The dining room should represent the brand’s image while providing customers a comfortable and welcoming environment. Nautical Bowls, for example, has a modern, clean, and minimalist eating space that incorporates natural elements such as wood and flora to create a fresh and healthy atmosphere. The layout should allow for easy client flow from entering to ordering to dining.

5. Obtain Necessary Permits and Licenses

Whether they are franchises or not, restaurant build-outs require several types of permits and licenses, which may vary per location. Without licenses and permits, you can obtain penalties or get prevented from opening your location. Some of the most common requirements include:

• Building Permits: Building permits are required for any construction, renovation, or major modification. The fees vary widely, depending on your location and project size. 
• Health Department Approvals: Restaurants should comply with local health and safety standards, which involve inspections from local health departments. 
• Signage Permits: A permit is often required if the build-out includes new signage. 

For example, getting permits and approvals for opening a small to mid-sized franchise in Los Angeles may look like this based on the LADBS and County of Los Angeles Department of Public Health permit calculator and fee schedule:

*Note: Estimate numbers are based on the 2024 fee schedule and calculator. Values may increase or decrease based on new regulations and the project scope. 

6. Hire a Professional Construction Team

Working with a construction team experienced in restaurant build-outs, particularly for franchises, is crucial. Before hiring, you should consider the following when looking for a contractor:

• Find a reliable contractor: A contractor experienced in quick-service restaurant build-outs will ensure compliance with brand requirements and local codes. You can start your search by requesting recommendations from reputable construction websites like BuildZoom. Look for reviews and past projects to help narrow your search in your local area. 
• Phone Interviews & Request Quotes: Based on your initial research, take your top candidates and initiate a phone interview. During this time, you can also request a detailed quote and compare their pricing, scope of work, and proposed timelines. Make sure that their numbers meet and match your requirements. Asking contractors specific questions about your project will help you determine their reliability and ability to manage construction projects.
• Meet with a Contractor: After conducting a phone interview, choose carefully and meet with your top contractors. Meeting contractors face-to-face will allow you to assess their professionalism, communication style, and overall attitude toward the potential project.
• Negotiate Payment and Finalize Contract: Once you’ve decided on a contractor, negotiate payment and finalize the contract terms. This should also include payment terms, warranties, and timelines. Make sure that you have a written contract in place before construction begins.
• Construction Project Management: Assign a construction project manager to oversee the construction process, coordinate between the franchisor, contractor, and suppliers, and manage any unforeseen issues.

Franchise restaurant build-out is a complex process that requires careful planning, brand standards adherence, and compliance with local regulations. With thorough preparation and focus on each step of the design and construction process, you can ensure that your restaurant meets brand standards and provides an efficient and welcoming atmosphere for customers. Whether you are franchising a large or medium-sized restaurant, a well-executed build-out lays the foundation for a thriving franchise that attracts customers and drives growth. 

Sources:

• How to Franchise a Restaurant: A Step-by-Step Guide | CloudKitchens
• https://www.mcdonalds.com/content/dam/sites/usa/nfl/us-franchising/MCD_FranchiseGuide.pdf
• Restaurant Franchising: A Brief Guide and Opportunities – Escoffier
• How To Build A Restaurant Brand And Franchise: Five Strategies
• County of Los Angeles Public Health 
• LADBS 
• Franchise Opportunities – Nautical Bowls 
• Papa Murphy’s Franchise