Difference between chain restaurant and independent restaurant

There are two major categories of restaurants: independent restaurants and chain restaurants. Independent restaurant owners usually only have one or two restaurants in a small radius, and they manage those restaurants themselves. Chain restaurants are corporate restaurant chains with a board of owners and are found throughout an entire region or nation. When opening a new restaurant, it is important to check into the pros and cons of each restaurant type to decide which option is best for you.

Independent Restaurants

Independent restaurants are just what their name entails: independent. The owners, whether one person or a group of people, are in charge of all the financing, marketing, brand design and training involved with running a successful restaurant. Many former chefs or others with vast experience in the restaurant industry are ideal candidates for starting an independent restaurant. Owning an independent restaurant involves a lot of work, because you have to design everything yourself. However, any profits made are yours to keep, because you do not have to pay royalties to the owner of your concept.

Other characteristics shared by independent restaurant owners include:

• Trail blazers. Rather than buying into a franchise and opening another cookie cutter restaurant, independent restaurant owners use their creativity to design and develop a brand and concept that goes against the mold. Many of the most successful chain restaurants started out with one person thinking outside the box. Colonel Sanders, founder of Kentucky Fried Chicken, is an example.
• Entrepreneurs. True entrepreneurs not only want to own and operate their own business, they want it to be their own idea, too. Independent restaurant owners start with a concept idea and work hard to make their idea a reality.
• Type-A personalities. Independent restaurant owners often have many traits characteristic a Type-A personality. Many are aggressive, competitive stress-junkies that have to have everything their way. The workaholic attitude of someone with a Type-A personality allows them to do whatever it takes to make his or her restaurant a success.

Chain Restaurants 

In the chain restaurant system, the owner of a trademarked restaurant brand and logo allows another person to purchase the rights to use the chain’s brand and marketing materials for profit. Chain operators pay royalties and sometimes advertising fees to the trademark owner. In exchange, the franchisor provides training, marketing materials and other benefits that independent restaurant owners have to develop themselves. Ownership and management are usually separate in large chains; large firms assign management functions such as operations, marketing, human resources and financial accounting to specialists; the role of management changes as a firm grows in size; and large firms are geographically dispersed.

Chain restaurants are ideal for individuals that want to own a restaurant, but do not necessarily have a lot of experience operating a commercial kitchen. Characteristics of owners include:

• Personal wealth. In order to buy into a franchise system, most franchisors require a certain amount of startup capital to come from personal, non-borrowed funds. For example, if you want to open a new McDonald’s restaurant, McDonald’s requires a 40% down payment that “must come from non-borrowed personal resources.”
• Team player. Restaurant franchises have marketing, training and management systems already in place, which is what helps make the brand successful. Ideal candidates will know how to follow the rules for the betterment of the whole brand.
• Little food service knowledge. In some cases, the less knowledge a potential chain operator has about the brand and the restaurant industry, the better. This allows the franchisor to mold the franchisee to fit the brand perfectly.
• Former corporate managers. Many downsized or retired corporate managers are a perfect fit as chain restaurant owners because they have management experience Oftentimes, these people are tired of the rat-race associated with corporate life and want to venture out on their own.

The impression that a few huge quick-service chains completely dominate the restaurant business is misleading. Chain restaurants have some advantages and some disadvantages over independent restaurants. The advantages include:

■ Recognition in the marketplace allowing quick penetration into new markets
■ Greater advertising clout
■ Sophisticated systems development
■ Discounted purchasing by economies of scale regarding materials and supplies

However, independent restaurants are relatively easy to open. All you need is a few thousand dollars, a knowledge of restaurant operations, and a strong desire to succeed. The key advantage for independent restaurateurs is that they can “do their own thing” in terms of concept development, menus, decor, and so on. Unless our habits and taste change drastically, there is plenty 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 a larger company or will be able to acquire financing for expansion.

Reference: http://www.foodservicewarehouse.com/education/how-to-start-a-restaurant/opening-a-franchise-vs-starting-an-independent-restaurant/c28276.aspx