Opening a restaurant chain is often a natural step for all successful restaurant owners. Before you decide to open a new location, however, it’s important that you understand how the best in the business have done it.
In this article we’re going to discuss:
- What is a chain restaurant
- What are the most popular restaurant chains (and what we can learn from them)
- How did the most popular restaurant chains start
- What to consider when starting a restaurant chain
- What is the best restaurant chain business model
- What are the best types of restaurant chains to consider
What Is a Chain Restaurant?
A chain restaurant is a set of related restaurants in many different locations that are either under shared corporate ownership or some sort of franchising agreements. Typically, the restaurants within a chain are built to a standard format (through architectural prototype development) and offer a standard menu and/or services.
The concept of chain restaurants is rooted in the system of franchising. The franchisor maintains a brand that is familiar to all who see its advertising and physical construct; the franchisee operates a local business that benefits from the reputation of the brand the franchisor maintains.
What was the First Chain Restaurant?
The honor of being the first restaurant chain goes to “White Castle”, which was founded in 1921 in Wichita, Kansas. The founders, Walter A. Anderson and E.W. Ingram, aimed to change the public’s perception of the cleanliness of the industry. They built their restaurants so that customers could see the food being prepared, establishing the first fast food restaurant and creating the concept of the “chain” restaurant.
What Are the Most Popular Restaurant Chains
Determining the most popular restaurant chains depends on one’s criteria. If we’re talking about sheer number of locations, then Subway, with more than 40,000 locations worldwide, is the largest. However, if we’re considering brand value and revenue, then McDonald’s is the clear winner, being worth over $214.64 billion.
McDonald’s, known for its golden arches and Big Macs, is also arguably the most recognizable restaurant chain in the world. Then we have Starbucks, the world’s largest coffeehouse chain that seems to be in a league of its own when it comes to serving coffee. Also, did you know that KFC, Pizza Hut, and Taco Bell are all owned by the same parent company?
These chains have become the most recognizable brands around the world, not just for their food, but for the dining experience they offer. They’ve become a part of global culture, a common thread that connects people across different countries and cultures.
In the next section, we’ll delve into the origins of these popular chains and how they grew to dominate the restaurant industry.
Learn From the Best: How Did the Most Popular Chain Restaurants Start?
There’s no need to reinvent the wheel when some of the biggest restaurant chains have already come up with solutions that work wonders. Let’s get inspired by some of the biggest franchise restaurants.
McDonald’s
McDonald’s is arguably the most popular restaurant chain franchise. The story of the fast food giant began in 1940 when Richard and Maurice McDonald opened a barbecue drive-in in San Bernardino, California.
However, it was their introduction of the “Speedee Service System” in 1948, a concept that established the principles of the modern fast-food restaurant, that truly set the stage for their success. The “Speedee Service System” was a pioneering concept introduced by the McDonald brothers in their first restaurant. This system revolutionized the fast-food industry and set the standard for future chains.
- Standardization and Efficiency: The McDonald brothers took inspiration from Henry Ford’s assembly-line production of automobiles. They applied similar principles to their kitchen, creating a system where each member of their 12-person crew specialized in specific tasks.
- Preassembly and Speed: Much of the food was preassembled, allowing McDonald’s to prepare its food quickly—and even ahead of time—when an order was placed. This emphasis on speed and efficiency was a key part of their business model.
- Simplified Menu: They simplified their menu to just nine items—hamburgers, cheeseburgers, three soft drink flavors in one 12-ounce size, milk, coffee, potato chips, and pie. This allowed them to focus on doing a few things well and serving them quickly.
- Uniformity: All hamburgers were served with ketchup, mustard, onions, and two pickles, and any customers who wanted food prepared their way would have to wait. This ensured consistency across all orders.
The Speedee Service System formed the foundation of what Ray Kroc would later leverage to create the world’s largest food chain. It emphasized speed, lower prices, and volume, and it revolutionized the fast-food industry.
The first franchised McDonald’s, opened by Ray Kroc in Des Plaines, Illinois in 1955, marked the beginning of McDonald’s as a major fast-food chain. In 1961, after purchasing the company from the McDonald’s brothers for $2.7 million, Kroc was free to expand aggressively and would soon become the owner of the biggest fast-food chain in the world.
- Standardization and Consistency: McDonald’s established a system that ensured the same high-quality product and experience at every location. This consistency built trust with customers, who knew exactly what they would get at any McDonald’s restaurant.
- Efficient Operations: The introduction of the previously-discussed “Speedee Service System”, a concept that established the principles of the modern fast-food restaurant, allowed for quick service and high turnover of customers.
- Franchising Model: McDonald’s growth was fueled by its franchising model, which allowed it to expand rapidly with less capital. Franchisees also brought in local market knowledge, which was crucial for success in new markets.
Starbucks
Starbucks, now the largest coffeehouse chain in the world, had humble beginnings. It was first opened in 1971 in Seattle by three partners who met while they were students at the University of San Francisco. Initially, they sold only whole roasted coffee beans.
However, the business began to take off when Howard Schultz joined the company in 1982 and, inspired by the espresso bars he saw on a trip to Italy, decided to sell brewed coffee. The concept was a hit, and Starbucks has been synonymous with coffee ever since.
- Quality Products: Starbucks’ commitment to serving high-quality coffee set it apart from other coffee chains. This commitment to quality extended to all areas of their business, from sourcing beans to barista training.
- Third-Place Concept: Howard Schultz envisioned Starbucks as a ‘third place’ – a comfortable space between home and work where customers could relax, enjoy a cup of coffee, and feel a sense of community. This concept was revolutionary at the time and played a key role in Starbucks’ success.
- Employee Treatment: Starbucks was one of the first companies to offer comprehensive benefits, including health insurance and stock options, to all employees, including part-time workers. This led to higher employee satisfaction and lower turnover rates.
Subway
Subway’s journey began when 17-year-old Fred DeLuca borrowed $1,000 from family friend Dr. Peter Buck to open a submarine sandwich shop in Bridgeport, Connecticut in 1965. Their goal was to earn enough money to pay for DeLuca’s college education.
The first store was called “Pete’s Super Submarines,” and the name was changed to Subway in 1968. Today, Subway has more locations worldwide than any other restaurant chain.
These stories illustrate how these popular chains started from modest beginnings and, through a combination of innovation, excellent food, and savvy business strategies, grew to become arguably the largest restaurant chain in the world.
- Healthy Image: At a time when fast food was synonymous with junk food, Subway differentiated itself by promoting a healthier image. Its low-fat menu options and the ability for customers to customize their sandwiches appealed to health-conscious consumers.
- Franchising Model: Like McDonald’s, Subway also adopted a franchising model, which allowed for rapid expansion with less capital. The relatively low cost of opening a Subway franchise made it an attractive option for many entrepreneurs.
- Location Strategy: Subway’s strategy of opening outlets in non-traditional locations, such as gas stations, convenience stores, and hospitals, helped it reach customers in areas that were underserved by other fast-food chains.
Things to Consider When Planning to Start a Restaurant Chain
Reading about success stories of other restaurants can be really motivating. However, chances are you won’t succeed by just copying what the most popular chain restaurants have done. The idea is for you to understand what the best in the business have done right and accommodate it to your business model.
Scenario 1: Spreading your business to multiple locations
If you already have opened your first location and are considering expanding it into a chain, you’re already in a good position. Let’s look at the key variables inherent to all great restaurant franchises.
- Replicability: Your current restaurant’s success might be due to its unique charm or a specific location. Consider whether the restaurant’s concept, menu, and business model can be replicated in different locations. For example, McDonald’s was able to replicate its Speedee Service System across all its locations, ensuring consistency in its products and services.
- Standardization: Consistency is key in a restaurant chain. You need to ensure that the quality and experience are uniform across all locations. This involves standardizing recipes, decor, service, and more. Your customers have to know that each branch belongs to the same company. Starbucks, for instance, maintains a consistent brand image and service quality, regardless of their geographical location.
- Expansion Strategy: Think about your strategy for expansion. Will you use a franchising model or own all the locations yourself? Have you done your market research when selecting the space for your second location? Each has its pros and cons and requires different resources and management styles. Subway, for example, adopted a franchising model, which allowed for rapid restaurant expansion with less capital.
- Brand Development: As you expand, your brand will become increasingly important. Consider how you will develop and protect your brand as you grow. McDonald’s golden arches and Starbucks’ green mermaid are examples of strong, recognizable brand identities. Learn more about restaurant branding.
Scenario 2: Starting a Restaurant Chain from Scratch
If you’re a businessman with an idea of starting a restaurant chain from scratch, you’re going to have to carefully turn your ideas into a solid restaurant business plan. Below are the key factors to consider.
- Excellent Food: If you’re looking to start a restaurant chain, you obviously have something special up your sleeve. High quality food is absolutely essential to running a successful restaurant and even more so when considering starting a restaurant chain.
- Market Research: Before you start, conduct thorough market research. Understand your target customers, analyze your competitors, and identify trends in the restaurant industry. Starbucks, for instance, identified a market for high-quality coffee and a third-place concept, which was largely untapped at the time. Learn how to develop a restaurant marketing plan.
- Business Model: Develop a solid business model. This includes identifying your unique selling proposition, deciding on the type of cuisine, price range, size and location of your restaurants, and the type of service you will provide. Subway, for example, differentiated itself by promoting a healthier image, appealing to health-conscious consumers.
- Pilot Restaurant: Consider starting with a single restaurant to test your concept and make necessary adjustments before investing in a full-scale roll-out. This is how many successful chains, including McDonald’s and Starbucks, got their start.
- Capital: Starting a restaurant chain requires significant capital. Ensure you have a clear understanding of the costs involved and have a plan for financing your growth.
In both scenarios, it’s important to remember that running a restaurant chain involves ongoing efforts in areas like supply chain management, staff training and retention, marketing and branding, and legal compliance. And in both cases, you’re going to need a solid food ordering system that you can rely on.
- Franchising: This model allows individuals or entities to open a restaurant using the chain’s brand, operational model, and support in exchange for a franchise fee and ongoing royalties. Franchisees benefit from the brand’s established reputation and operational support, while the franchisor expands their brand’s footprint with lower capital risk. Examples: McDonald’s, Subway, and KFC are some of the largest and most recognized global franchises. Check out this article for more information on how to start a franchise.
- Company-Owned Outlets: Some chains prefer to own and operate all locations to maintain direct control over operations, quality, and the customer experience. This model requires more capital investment and operational oversight by the parent company. Examples: Starbucks has a mix but significantly owns many of its outlets directly.
- Hybrid Model: A combination of franchising and company-owned outlets, where the chain may start with company-owned restaurants to establish the brand and then expand through franchising. This model allows for flexible growth strategies and capital investment. Examples: Chick-fil-A operates a hybrid model, with a unique approach to franchising that involves more significant control over franchise operations than typical.
- Licensing: Similar to franchising, but generally involves less control and support from the licensor and more freedom for the licensee in operations. Licensing is often used for expanding a brand into new markets or product categories rather than opening new restaurant locations. Examples: Many brands license their names to food products or smaller food service operations within larger stores or venues.
- Joint Ventures: Collaborations between the chain and local partners to open new locations, often used to enter international markets with a partner familiar with the local business environment. Examples: Yum! Brands, the parent company of KFC, Pizza Hut, and Taco Bell, has entered many international markets through joint ventures.
What Is the Best Restaurant Type for Chain Restaurants?
The best type of restaurant for a chain can depend on a variety of factors, including the target market, location, and competition. However, some types of restaurants seem to be particularly well-suited to the chain model. Let’s take a look at the most popular chain restaurant types.
Fast Food
Fast food restaurants are perhaps the most common type of restaurant chain. They offer quick service, standardized menus, and often, drive-thru options. Examples include McDonald’s, Burger King, and Buffalo Wild Wings.
Casual Dining
Casual dining restaurants offer a more relaxed dining experience than fast food restaurants, with a broader menu and table service. They can also be successfully developed into chains, as evidenced by restaurants like Applebee’s and Olive Garden.
Coffee Shops
Coffee shops can also make successful chains, offering a consistent product and a comfortable space for customers to relax or work. Starbucks is the most notable example of a successful coffee shop chain.
Fast Casual
Fast casual restaurants are a hybrid of fast food and casual dining, offering high-quality food in a more relaxed environment than fast food restaurants, but with quicker service than casual dining restaurants. They often feature a more modern, trendy atmosphere and focus on healthier, premium ingredients. Examples include Chipotle and Panera Bread.
Family Style
Family style restaurants focus on serving large portions of food on platters meant for sharing. They provide a relaxed, family-friendly atmosphere. An example of a successful family style chain restaurant is Buca di Beppo.
Fine Dining
Fine dining restaurants offer the highest quality food and service, often with a high-end, sophisticated atmosphere. They typically have more expensive prices and a formal dress code. While less common as chains due to their high operating costs and unique offerings, there are some examples like Ruth’s Chris Steak House.
Theme Restaurants
Theme restaurants build their brand around a specific theme or concept, which is integrated into their decor, menu, and overall dining experience. Examples include Hard Rock Cafe and Rainforest Cafe.
Each type of restaurant has its own unique considerations when it comes to developing a chain, including target market, operational complexity, and cost structure. It’s important to choose the type that aligns best with your business goals and brand concept.
Key Takeaways
- A chain restaurant is a set of related restaurants in many different locations that are either under shared corporate ownership or franchising agreements. They offer a similar menu and dining experience across multiple locations.
- The first restaurant chain was White Castle, founded in 1921. Some of the most popular restaurant chains include McDonald’s, Starbucks, and Subway, which have become some of the most recognizable brands in the industry.
- Starting a restaurant chain, whether from an existing restaurant or from scratch, requires careful planning and consideration. Key factors include the business model, standardization vs. localization, supply chain management, staff training and retention, marketing and branding, and legal considerations.
- The best model for a restaurant chain can vary greatly, but franchising, company-owned, and hybrid models have proven to be particularly successful. The best type of restaurant for a chain can depend on a variety of factors, but fast food, casual dining, and coffee shops seem to be the most prevalent ones.
- If you’re planning on opening a chain of restaurants, you’re going to need a food ordering system.
Frequently Asked Questions (FAQ)
Why are chain restaurants so popular?
Chain restaurants are popular because they offer consistent quality and service, familiar menus, convenience, and often competitive pricing. Their recognizable brand and widespread locations make them a go-to choice for many customers, offering a reliable dining experience.
What is considered a chain?
A chain restaurant is considered to be any dining establishment that operates multiple locations under the same name, offering a standardized menu, ambiance, and level of service across all outlets. These restaurants are typically owned and operated by a single company or through a franchise agreement, allowing for a consistent customer experience no matter the location.
What is the difference between a chain and a restaurant group?
The main difference between a chain restaurant and restaurant groups lies in the variety and operation of their establishments:
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- Chain Restaurant: Refers to multiple restaurants operating under the same brand name, offering a standardized menu, decor, and dining experience across all locations. These restaurants focus on consistency and replicability, often seen in fast-food or fast-casual dining. Chain restaurants can be company-owned, franchised, or a mix of both but maintain a uniform brand identity. The easiest example is McDonald’s.
- Restaurant Group: Is a collection of distinct restaurant brands or concepts owned and operated by a single company. Each restaurant under a restaurant group can have its unique theme, menu, and dining experience, catering to different culinary tastes and market segments. Restaurant groups manage a portfolio of diverse dining concepts, rather than replicating the same restaurant format. This allows for broader market appeal and opportunities to innovate within the culinary space. The prime example would be Yum! group that manages several fast-food chains, including KFC, Pizza Hut, and Taco Bell.
In essence, chain restaurants emphasize brand consistency and uniformity across locations, while restaurant groups manage a variety of restaurant concepts, each with its own identity and market positioning.
Is McDonald's a chain or franchise?
McDonald’s operates as both a chain and a franchise. It is a chain in the sense that it has multiple locations worldwide offering a standardized menu and dining experience. Simultaneously, many of its restaurants are franchised, meaning they are owned and operated by individual business owners under the McDonald’s brand and operational guidelines. This hybrid model allows McDonald’s to expand its global presence while maintaining consistency in quality and service.
