| Many different types of restaurant franchises are to | | | | reporting period. Typically, weekly reports on sales at |
| be found on our high streets and in our shopping malls. | | | | each franchise location are received by the head |
| There are fast-casual outlets, where made-to-order | | | | office and revenue is calculated directly from those |
| sandwiches, panini, salads and desserts are prepared, | | | | reports. Franchisees are usually required to contribute |
| catering for the busy office, factory or construction | | | | to an advertising fund, typically at a rate of up to 2% |
| worker or shopper. Cheap and cheerful fast food | | | | of total franchisee gross sales. |
| outlets are always plentiful, offering burgers, kebabs, | | | | Restaurant franchises market their menus primarily |
| fried chicken or pizza for those on a budget or in a | | | | through targeted local store marketing efforts, mail |
| rush. There are specialist coffee houses, offering an | | | | drops, media advertising, and print campaigns. The |
| array of freshly brewed coffees from around the | | | | franchising company relies on the cash deposits from |
| world, along with a tempting selection of muffins, | | | | franchise sales as well as royalty fees from existing |
| cookies and cakes. Then there are restaurant | | | | restaurant franchises to support the expenses of the |
| franchises offering more substantial and up-market | | | | business. Revenue is derived from the sale of |
| cuisine, often specialising in food from a particular | | | | franchises, from royalties paid by franchisees and |
| country such as China, Italy or Japan. Although still | | | | from the sale of food and drinks at the franchised |
| reasonably priced, a meal at such an outlet will cost | | | | restaurants. Revenues can be increased by adding |
| more than at other restaurant franchises, with | | | | new company-owned restaurants, selling new |
| marketing strategies directed principally at white collar | | | | franchises and expanding the range and consumption |
| workers and premises often sited near government | | | | of food and beverage products sold. |
| complexes, universities and hospitals. | | | | The unprecedented economic conditions of 2008 have |
| Restaurant franchisors enter into franchise | | | | resulted in a significant reduction in the sales of new |
| agreements, which grant franchisees the exclusive | | | | restaurant franchises and many companies have had |
| right to develop and operate businesses at certain | | | | to reduce corporate overheads. The ability of the |
| locations. Initial franchise fees are recognized as | | | | smaller franchises to fund their operations will depend |
| revenue when all material services and conditions | | | | on the length of time of the current economic |
| required to be performed by the head office have | | | | downturn, future performance and the ability to |
| been substantially completed, which is generally when | | | | successfully implement business and growth strategies. |
| the restaurant opens. Franchisees are required to pay | | | | However, food related businesses tend to hold up well |
| royalties to the head office, based on a percentage of | | | | in a recession, especially those at the bargain end, and |
| gross sales as reported through the franchisees' point | | | | there is every reason to be optimistic that this trend will |
| of sales systems. The royalties are recognized as | | | | continue. |
| revenue in the period corresponding to the sales | | | | |