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Franchising a restaurant means licensing your concept — name, systems, training — to another entrepreneur, who opens their own location under your brand and pays you a one-off entry fee plus an ongoing percentage of revenue.
It almost always happens the same way. A regular who eats there three times a month says, half-joking, one evening: "You should really open one of these in our town." Or a former employee who wants to strike out on their own asks if they can do it under your name. Or a stranger with capital messages you after a glowing write-up of your place. It feels like a compliment — and it is. But it isn't an answer. It's a question that needs numbers before it earns a "yes."
Franchising is fundamentally different from opening a second location. With a second location, you invest, you carry the risk, and you keep 100% of the margin — minus repayments on whatever you borrowed to open it. With a franchise, someone else invests, someone else carries the day-to-day risk, and you keep a small percentage of revenue that isn't yours. That sounds like less work for less money, and sometimes it is. But it can just as easily earn you more than a second location — or both can earn you less than you expect, if you don't know the seven numbers below before you sign.
This guide walks through them one at a time: what you charge upfront, what you collect every month, what it costs you just to become "franchise-ready" in the first place, how much time the law gives you before anyone can sign, how many franchisees you need to break even, and the risk nobody can put a euro figure on but that weighs heaviest of all. At the bottom, plug your own numbers into a calculator that puts the two paths — opening a second location yourself, or franchising — side by side over five years.
One thing upfront: this is not legal advice. Franchise law varies enormously across the EU, and the legal cooling-off period in step 5 is exactly the point where you need a lawyer who specialises in franchise law, not a blog post.
Why "yes, of course" can be the most expensive answer
A franchise request feels like money arriving without you having to do anything for it: someone else invests, someone else runs the shift, and you collect a cheque. That picture is wrong. Before a single euro comes in, you have to write a full operations manual, build a training programme, and pay a lawyer to draft a watertight contract — budget several tens of thousands of euros, real money, spent on a maybe.
And afterwards the risk doesn't disappear, it just changes shape. You no longer carry operational risk on that one extra location, but you do carry reputational risk on every location you already have — including your own, original restaurant. One badly run franchise location with your name over the door doesn't just damage that one site.
That's why this article starts with numbers instead of enthusiasm. Do the maths first; decide after.
The ultimate guide Restaurant Finance: 6 Numbers That Decide Your Profit From food cost to financing: everything that decides whether anything is left at year end, in one guide. Read the guideThe 7 numbers behind the question
They're listed in the order you'll usually meet them: first what you charge and collect, then what it costs you personally, then the legal limit on how fast you can move, and finally the two things that only become visible after you've already signed.
1. The entry fee
The entry fee is the one-off amount a franchisee pays to start trading under your name. It's worth being honest with yourself about what that fee actually covers: not your recipe. Anyone can copy a good dish from a photo and three attempts. What a franchisee is really buying is the fact that they don't have to invent your playbook themselves — your brand name with an existing reputation, your operating systems, your supplier relationships, your training, and the right to be the only operator under your name in a given territory.
For an independent, single-concept hospitality business in Europe — not an international chain with dozens of locations — a realistic entry fee for one of your first franchisees sits between €10,500 and €42,000. That's substantially lower than what a large chain charges, precisely because your brand recognition is local or regional rather than national.
Don't think of this fee as day-one profit. In practice it barely covers what you've already spent to be able to take on that first franchisee — the manual, the training days, the legal costs. Number 4 below runs those figures.
2. The royalty percentage
The royalty is the ongoing percentage a franchisee pays every month on their own revenue — not their profit, their revenue. In hospitality it typically runs 4% to 8%.
This is the number that really decides whether franchising earns you more or less than opening a second location yourself, and the comparison often runs counter to intuition. With your own second location you keep, in theory, 100% of the margin — but that margin is thin, often 5 to 12% of revenue after labour, rent and purchasing, and a loan still needs paying down on top. With franchising you keep a small percentage, but of revenue, not of what's left after every cost, and without carrying the staff, the rent or the risk.
A 6% royalty on a franchisee's revenue can, across several locations, outperform the net margin on the one location you finance yourself. It isn't about which percentage sounds bigger — it's about how much revenue sits under that percentage, and how many locations that percentage adds up across. The calculator further down runs that comparison with your own numbers.
The same 100% of revenue, two completely different outcomes for you — with your own second location every euro of margin is yours, with a franchise it's a small share of someone else's revenue.
The small green slice on the franchise side comes from revenue that isn't yours and carries none of your costs — which is exactly why a small percentage across many locations can outrun a large margin on one. Run the numbers for your own business in the tool further down.
3. The marketing contribution
Alongside the royalty, almost every serious franchise concept charges a separate marketing contribution, usually 1% to 3% of the franchisee's revenue, on top of the royalty. That money doesn't go straight into your pocket: it's pooled with every other franchisee's contribution into a shared marketing fund, which pays for adverts, a shared website and brand campaigns that benefit every location.
This is the figure most easily overlooked when doing the sums — a franchisee experiences it as "I pay the brand 8%", while you as the franchisor actually only collect 6% of it and have to spend the remaining 2% straight back out on shared marketing. In every projection, count the two percentages separately, never as one combined figure you later mistake for pure income.
4. What it costs you to become "franchise-ready"
Before anyone ever signs, you have to invest yourself — and this is the cost that eventually stops most small, independent operators from franchising at all. You need to write an operations manual: everything that's currently in your head — recipes, portion sizes, purchasing procedures, shift planning, quality control — on paper, detailed enough that a stranger can follow it without ever calling you. You need to build a training programme that gets a franchisee and their team ready for opening day. And you'll have legal costs for drafting the franchise agreement and the mandatory pre-contractual disclosure document (see number 5).
Budget realistically for €15,750 to over €52,500 in setup costs, spent before a single entry fee comes in. That's real money, spent on the assumption that franchisees will actually materialise — and that's exactly why this is the number that quietly kills most franchising ambitions. It isn't a risk you run in future; it's an invoice already sitting on your desk.
If you'd rather finance this amount than pay it out of cash flow, run it through the loan calculator — the same method you'd use for any other investment in your business.
5. The legal cooling-off period
Across most of the EU, a franchise agreement can't legally be signed the moment you agree terms. Most countries require a pre-contractual disclosure period: you must give the prospective franchisee a detailed disclosure document — covering the concept, the financial terms, the risks — and then a minimum period must pass before the agreement can be validly signed. In Belgium, for example, the "Wet Precontractuele Informatie" sets a minimum period of one month; France's "Loi Doubin" carries a similar obligation of around twenty days. The European Code of Ethics for Franchising, which most national franchise federations subscribe to, sets out comparable minimum periods as good practice.
This number isn't a suggestion — it's a hard floor on how fast you can scale, and you can't simply "skip" it because a candidate is in a hurry. An agreement signed outside the statutory period is voidable in many jurisdictions, with real exposure to damages for you as the franchisor.
The exact rules — how long the period runs, exactly what the disclosure document must contain, and which law applies — differ by country and change over time. This article explains the principle, not your country's law: always get advice from a lawyer who specialises in franchise law before drafting or signing any agreement.
The path every serious franchise request follows — and why you don't set the pace yourself.
The one step you can't personally speed up is the legal cooling-off period. You can prepare everything before it as thoroughly as you like; that period is fixed.
6. The break-even number of franchisees
Every franchisee you take on also costs you time and money: answering calls, running quality checks, keeping the manual up to date, legal support, brand policing. For a small, independent franchise concept, the royalty income from one or two franchisees usually doesn't cover that support cost yet — in practice, you're subsidising your own franchisees.
The tipping point where royalty income overtakes your own overhead cost (the time and money you spend on support) typically sits at 3 to 5 franchisees for a small, independent franchise concept. Below that number, franchising is structurally a cost that dresses up as income; above it, the model starts paying for itself.
That's exactly why "start with one franchisee and see how it goes" is a more expensive test than it sounds — that one franchisee will almost certainly run at a loss for you as the franchisor, even if their own location performs perfectly.
7. The reputational risk nobody prices
This is the only number on this page that isn't a number, and precisely why it's the one most often underestimated. The moment someone else is cooking, serving and billing under your name, you lose day-to-day control of execution — but not of reputation. One badly run location colours the search results for your entire brand.
Picture it: a guest in another city gets bad food or rude service, and posts a one-star review that opens with "[Your Brand Name] on Church Street is a disgrace." That review doesn't stay attached to that one location — it colours what a prospective guest sees when they search your brand name, including guests on their way to your very first, original restaurant, where you're still on the floor every night yourself.
There's no reliable formula for converting this risk into euros, and any attempt to slap a number on it would be a false sense of certainty this article has no intention of selling you. What does work: choose your first franchisee on character and work ethic, not capital alone; visit new locations unannounced; and build oversight rights into the contract — the right to step in when execution is structurally poor ends up mattering more than one extra percentage point of royalty.
Run the numbers: franchise, or open a second location yourself?
Enter your own numbers and compare two paths over five years: financing a second location yourself with a loan, or franchising your concept to a number of franchisees. Both columns show only what the new location(s) add — the performance of your existing business is identical in both paths, so it doesn't affect the difference.
One assumption keeps the model fairly comparable: every new location — your own second site or a franchise location — runs at 70% of your current site's revenue in its opening year, and 100% from year two onward. That's a simplification, not a forecast: every real opening plays out differently.
Franchise scan: 5 years ahead
The same five years, two paths. Everything runs in your browser; nothing is sent or stored.
Your own second location
Franchise
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This model only counts what each new location adds, not the performance of your existing business. It doesn't account for the reputational risk in number 7 or the time you personally spend supporting franchisees (see number 6) — both weigh heavily on the real decision, but neither can be captured in euros.
Two things the tool deliberately does NOT count, and that you have to weigh yourself. The time you spend running a second location versus supporting franchisees isn't the same kind of work, and the model only counts euros. And the reputational risk from number 7 has no price tag, but it can genuinely cost your existing business euros if things go wrong.
So use the tool as the start of the conversation, not the end of it — and if you want, work through your own setup costs for a second location in more detail with the startup capital & financing plan, or get a valuation done if you're considering taking over an existing business instead.
What to do before you say "yes"
Five steps, in this order, before any signature.
- Run the tool above first to see if the numbers actually work for you. — Before you have a single conversation with a prospective franchisee, know whether franchising or a second location earns more for your business.
- Write the operations manual before you promise a prospective franchisee anything. — Everything currently in your head, on paper — that's the investment from number 4, and it comes first.
- Have a lawyer who specialises in franchise law draft the franchise agreement and disclosure document. — Not you, and not a general business lawyer — franchise law is a specialism, exactly because of number 5 above.
- Start with one trusted "pilot" franchisee before scaling further. — Chosen on character, not just capital — the first location tests your manual and your reputational risk at the same time.
- Build the legal cooling-off period into your planning. — It's not a delay you can engineer away, it's the law — and it differs by country, so check it with a lawyer before you promise a date.
Franchising isn't a compliment, it's a business model
When a regular asks if they can open your restaurant in their city, the first right answer is neither "yes" nor "no" — it's "let me run the numbers." The seven figures above aren't designed to discourage you; they're designed to show whether the compliment is also a good business model for your specific business, your specific margin, and your specific willingness to carry reputational risk on something you no longer run yourself.
For some operators, the answer is a clear yes: a strong, well-documented concept with a royalty that adds up across several locations can earn more than a second site of your own — with less operational risk for you. For others, opening a second location yourself is the more honest path: you keep full control over execution, and therefore over your own reputation.
And for anyone thinking more about the end of their hospitality career than the start of it, franchising is the wrong question entirely — that conversation is about succession, a completely different decision on a completely different timeline. Know which conversation you're actually having before you answer your customer's question.