A Comparison of Advantages and Disadvantages of Opening a Sole Proprietorship to Open a Restaurant

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When people decide that they want to open up a restaurant or something similar, there are a lot of important decisions that they need to make. One of the most important decisions that need to make is whether they want to open up a franchise restaurant or a sole proprietorship and make their own restaurant. There are a lot of contributing factors that determine which would be the best option because they both have advantages and disadvantages, however, for most people, a franchise is probably the best option. A large benefit of the sole proprietorship is that you get to keep all of the profits, however with a franchise, you have to pay the company a percentage of your sales. You also have to pay to be able to open one of their stores, which can cost a lot. The company can also restrict who you buy your products from. The average cost of opening of mcdonald’s is around 1.3 million dollars. The cost of opening your own restaurant would be much cheaper, however in most cases, it is worth it to open a franchise. Opening a franchise gives your business a name that a lot of people will recognize and you will get a lot of business from that alone. Not a lot of advertising will be required for a franchise.

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Another downside to a franchise though is that they usually only last a certain period of time, which is agreed to in the contract when someone decides to open one. A sole proprietorship is better though in cases like specialty food or for a high end restaurant. Specialty restaurants like Japanese or Mexican restaurants tend to do much better with a sole proprietorship because the franchise restaurants for any type of foreign food are usually not considered authentic or good. 

Another benefit of a sole proprietorship is that the owner gets to keep all of the profits and doesn’t have to give some to the company that owns the brand, like a franchise restaurant has to. Due to the fact that the name of the restaurant won’t be known right away though, business will be slow in the beginning because most people will be unfamiliar with it and will prefer to go somewhere that they know the food will be good, rather than take a chance at your restaurant. Much more advertising is needed for these types of businesses to be successful than it is for franchises. This also limits the size that your business could be. Overall, the answer for most people that want to open a restaurant would be to open a franchise, but for some a sole proprietorship will be the way to go.

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A Comparison of Advantages and Disadvantages of Opening a Sole Proprietorship to Open a Restaurant. (2022, Oct 04). Retrieved January 29, 2023 , from
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