Broadly speaking, restaurants could be segmented into a number of categories:
1- Chain or independent (indy) and franchise restaurants. McDonald's, Union Square Cafe, or KFC
2- Quick service (QSR), sandwich. Burger, chicken, and so forth; convenience store, noodle, pizza

3- Fast casual. Panera Bread, Atlanta Bread Company, Au Bon Pain, and so forth
4- Family. Bob Evans, Perkins, Friendly's, Steak 'n Shake, Waffle House
5- Casual. Applebee's, Hard Rock Caf�e, Chili's, TGI Friday's
6- Fine dining. Charlie Trotter's, Morton's The Steakhouse, Flemming's, The Palm, Four Seasons
7- Other. Steakhouses, seafood, ethnic, dinner houses, celebrity, and so forth. Needless to say, some restaurants fall into more than one category. For instance, an Italian restaurant could be casual and ethnic. Leading restaurant concepts regarding sales have already been tracked for a long time by the magazine Restaurants and
Institutions.

CHAIN OR INDEPENDENT
The impression a few huge quick-service chains completely dominate the restaurant business is misleading. Chain restaurants involve some advantages plus some disadvantages over independent restaurants. Advantages include:

1- Recognition in the marketplace
2- Greater advertising clout
3- Sophisticated systems development
4- Discounted purchasing

When franchising, types of assistance can be found. Independent restaurants are relatively easy to open. All you have to is a few thousand dollars, a knowledge of restaurant operations, and a strong desire to
succeed. The advantage for independent restaurateurs is they can ''do their own thing'' in terms of concept development, menus, decor, and so on. Unless our habits and taste change drastically, there's a lot of room for independent restaurants in certain locations. Restaurants come and go. Some independent restaurants will grow into small chains, and larger companies will buy out small chains.

Once small chains display growth and popularity, they are likely to be bought out by way of a larger company or can acquire financing for expansion. A temptation for the start restaurateur is to observe large restaurants in big cities and to believe that their success can be duplicated in secondary cities. Reading the restaurant reviews in New York City, Las Vegas, Los Angeles, Chicago, Washington, D.C., or SAN FRANCISCO BAY AREA may give the impression that unusual restaurants could be replicated in Des Moines, Kansas City, or Main Town, USA. Due to demographics, these high-style or ethnic restaurants won't click in small cities and towns.

5- Will choose training from underneath up and cover all areas of the restaurant's operation Franchising involves minimal financial risk for the reason that the restaurant format, including building design, menu, and marketing plans, curently have been tested available on the market. Franchise restaurants are less inclined to go belly up than independent restaurants. The reason is that the idea is proven and the operating procedures are established with all (or most) of the kinks exercised. Training is provided, and marketing and management support can be found. The increased probability of success will not come cheap, however.

There exists a franchising fee, a royalty fee, advertising royalty, and requirements of substantial personal net worth. For all those lacking substantial restaurant experience, franchising may be a way to get into the restaurant business-providing they're prepared to start at the bottom and have a crash program. Restaurant franchisees are entrepreneurs who would rather own, operate, develop, and extend an existing business concept by way of a type of contractual business arrangement called franchising.1 Several franchises have were left with multiple stores and made the big style. Naturally, most aspiring restaurateurs want to do their very own thing-they have a concept at heart and can't wait to do it now.

Here are examples of the costs involved with franchising:

1- A Miami Subs traditional restaurant includes a $30,000 fee, a royalty of 4.5 percent, and requires at the very least five years' experience as a multi-unit operator, a personal/business equity of $1 million, and a personal/business
net worth of $5 million.

2- Chili's takes a monthly fee based on the restaurant's sales performance (currently something fee of 4 percent of monthly sales) in addition to the greater of (a) monthly base rent or (b) percentage rent that's at least 8.5 percent of monthly sales.

3- McDonald's requires $200,000 of nonborrowed personal resources and an initial fee of $45,000, and also a monthly service fee based on the restaurant's sales performance (about 4 percent) and rent, which is a
monthly base rent or perhaps a percentage of monthly sales. Equipment and preopening costs range from $461,000 to $788,500.

4- Pizza Factory Express Units (200 to 999 square feet) require a $5,000 franchise fee, a royalty of 5 percent, and an advertising fee of 2 percent. Equipment costs range from $25,000 to $90,000, with miscellaneous costs of $3,200 to $9,000 and opening inventory of $6,000.

5- Earl of Sandwich has choices for one unit with a net worth dependence on $750,000 and liquidity of $300,000; for 5 units, a net worth of $1 million and liquidity of $500,000 is necessary; for 10 units, net worth
of $2 million and liquidity of $800,000. The franchise fee is $25,000 per location, and the royalty is 6 percent.

What do you get for several this money? Franchisors will provide:

1- Help with site selection and overview of any proposed sites
2- Assistance with the look and building preparation
3- Help with preparation for opening
4- Training of managers and staff
5- Planning and implementation of pre-opening marketing strategies
6- Unit visits and ongoing operating advice

There are a huge selection of restaurant franchise concepts, and they are not without risks. The restaurant owned or leased by way of a franchisee may fail though it is section of a well-known chain that's highly successful. Franchisers also fail. Good example may be the highly touted Boston Market, that was based in Golden, Colorado. In 1993, once the company's stock was first offered to the general public at $20 per share, it was eagerly bought, increasing the price to a high of $50 a share. In 1999, after the company declared bankruptcy, the share price sank to 75 cents. The contents of several of its stores were auctioned off at
a fraction of their cost.7 Fortunes were made and lost. One group that didn't lose was the investment bankers who put together and sold the stock offering and received a big fee for services.

The offering group also did well; they were in a position to sell their shares as the stocks were high. Quick-service food chains as well-known as Hardee's and Carl's Jr. also have gone through periods of red ink. Both companies, now under one owner called CKE, experienced periods so long as four years when real earnings, as a company, were negative. (Individual stores, company owned or franchised, however, may have done well through the down periods.) There is absolutely Additional resources that a franchised chain will prosper.

At one time in the mid-1970s, A&W Restaurants, Inc., of Farmington Hills, Michigan, had 2,400 units. In 1995, the chain numbered a few more than 600. After a buyout that year, the chain expanded by 400 stores. Some of the expansions took place in nontraditional locations, such as kiosks, truck stops, colleges, and convenience stores, where in fact the full-service restaurant experience isn't important. A restaurant concept can do well in one region but not in another. The style of operation may be highly compatible with the personality of 1 operator and not another.

Most franchised operations require a lot of effort and extended hours, which lots of people perceive as drudgery. If the franchisee lacks sufficient capital and leases a building or land, there is the chance of paying more for the lease than the business can support. Relations between franchisers and the franchisees tend to be strained, even in the biggest companies. The goals of every usually differ; franchisers want maximum fees, while franchisees want maximum support in marketing and franchised service such as employee training. Sometimes, franchise chains try litigation with their franchisees.

As franchise companies have create a huge selection of franchises across America, some regions are saturated: More franchised units were built compared to the area can support. Current franchise holders complain that adding more franchises serves and then reduce sales of existing stores. Pizza Hut, for instance, stopped selling
franchises except to well-heeled buyers who can take on numerous units. Overseas markets constitute a big source of the income of several quick-service chains. As might be expected, McDonald's has been the leader in overseas expansions, with units in 119 countries.

Using its roughly 30,000 restaurants serving some 50 million customers daily, about half of the business's profits come from outside the United States. A number of other quick-service chains likewise have many franchised units abroad.While the beginning restaurateur quite rightly concentrates on being successful here and now, many bright, ambitious, and energetic restaurateurs think about future possibilities abroad. Once an idea is set up, the entrepreneur may sell out to a franchiser or, with a lot of guidance, take the format overseas via the franchise. (It is folly to build or buy in a foreign country with out a partner who is financially secure and well versed in the neighborhood laws and culture.).

The McDonald's success story in the United States and abroad illustrates the importance of adaptability to local conditions. The business opens units in unlikely locations and closes the ones that do not do well. Abroad, menus are tailored to fit local customs. In the Indonesia crisis, for example, french fries that needed to be imported were taken off the menu, and rice was substituted. Reading the life span stories of big franchise winners may claim that once a franchise is more developed, just how is clear sailing. Thomas Monaghan, founder of Domino Pizza, tells another story. At once, the chain had accumulated a debt of $500 million. Monaghan, a devout Catholic, said that he changed his life by renouncing his greatest sin, pride, and rededicating his life to ''God, family, and pizza.''

A meeting with Pope John Paul II had changed his life and his feeling about good and evil as ''personal and abiding.'' Fortunately, in Mr. Monaghan's case, the rededication worked well. There are 7,096 Domino Pizza outlets worldwide, with sales of about $3.78 billion a year. Monaghan sold most of his interest in the business for a reported $1 billion and announced that he would use his fortune to further Catholic church causes. Recently, most food-service millionaires have already been franchisers, yet numerous would-be restaurateurs, especially those enrolled in university degree courses in hotel and restaurant management, are not very excited about being truly a quick-service franchisee.

They prefer owning or managing a full-service restaurant. Prospective franchisees should review their food experience and their usage of money and decide which franchise would be appropriate for them. Should they have little if any food experience, they are able to consider starting their restaurant career with a more affordable franchise, one that provides start-up training. For all those with some experience who want a successful concept, the Friendly's chain, which began franchising in 1999, may be a good choice. The chain has more than 700 units. The restaurants are considered family dining and feature ice cream specialties, sandwiches, soups, and quickservice meals.

Let's emphasize this aspect again: Work in a restaurant you love and perhaps would like to emulate in your own restaurant. For those who have enough experience and money, it is possible to strike out on your own. Better yet, work in a successful restaurant in which a partnership or proprietorship may be possible or where in fact the owner is thinking about retiring and, for tax or other reasons, may be willing to take payments as time passes.
Franchisees are, in place, entrepreneurs, many of whom create chains within chains.