When Franchising Becomes a Shortcut, Those Who Follow Pay the Price
“Everyone wants to be the next McDonald’s. Almost no one wants to build McDonald’s.”
As an entrepreneur with a solid background in the electronics and electromechanical industries involving the management of production lines, whenever I evaluate new projects or meet ambitious founders, I inevitably start with a rigorous data-driven analysis. This precedes any assessment of empathetic connection, which nevertheless remains an essential value in building a professional relationship.
This approach can sometimes feel like a burden because it reveals dynamics that contradict the prevailing storytelling, shifting the conversation to a level that many “consultants” try to avoid—certainly not in the best interest of the investor or the entrepreneur—thus generating a market distortion that jeopardizes effective growth.
The sustainability of a project is proven by validating its structure rather than seeking third-party appreciation of the idea, requiring a path of sacrifices and inevitable mistakes that build the experience and the sustainability model of a format. The greatest availability of specific data naturally comes from mature markets governed by more robust metrics than those currently expressed by the Italian industry. Therefore, pointing out opportunities well in advance is not clairvoyance; it is the result of constant study aimed at providing resources to strengthen the distribution of Italian brands, challenging consolidated practices that have built nothing tangible for the global market.
There is an undeniable appeal to Italian dining—which upcoming events like the Milano-Cortina Winter Olympics are crystallizing through viral social media content—yet we often fail to capture and transform it into real business value.
Italian Chain Restaurants and Unstructured Franchising
Let’s dismantle the comforting statistic that has circulated for decades at industry fairs and conferences: the myth that a significant portion of franchises survive while independent businesses drop like flies. This is a white lie, a storytelling device born within North American corporate environments and the consultants trained there, which the International Franchise Association (IFA) formally retracted back in 2005, yet it continues to be propagated by those looking for shortcuts.
The reality, if one has the stomach to look at updated 2026 data in mature markets like the US, discounting the lack of realistic sources on franchising in the Italian market, is that the failure rate between franchises and independent businesses is statistically similar when comparing real metrics. If the ambition is to transform a local brand into a national chain, one must abandon the “restaurateur” mentality—focused on the product and the regular customer—and adopt the less romantic mindset of an industrial structuralist.
A full restaurant is not inherently a replicable format; it represents a job done well, thanks to your human and organizational skills within the current dimensions of your brand. It might be the sheer luck of a location that seemed good but turned out to be exceptional, where traffic and a thousand other variables spun the wheel on your lucky number.
To ask a third party to invest capital, life, and reputation into your brand, the model must rest on precise technical pillars, supported by a financial architecture that goes far beyond the quality of the sandwich that makes you the boss of your neighborhood.
There are essential structural conditions, stripped of the rhetoric of franchisee recruitment, that must be followed.
1. Unit Economics: Sustainability Beyond the “Royalty Trap”
The first structural error that kills networks after an encouraging start is projecting the margins of your “pilot” store onto the franchisee’s P&L.
In your company-owned location, you don’t pay corporate fees, you often don’t pay market rent because you own the walls, and you might not count your operational hours as labor cost. The franchisee does not have this luxury: they must pay for everything, plus your fees, including goodwill and the selection of staff, which historically constitutes a much more impactful business risk today than in the past.
Various legal and economic analyses, including those promoted by the American Bar Association (ABA) within its Forum on Franchising, highlight that the economic risk for the franchisee is not exclusively represented by explicitly contracted royalties, but by a series of indirect economic flows generated along the supply chain.
These flows do not take the form of declared fees, but rather mechanisms of value transfer embedded in supply prices, such as: exclusive or quasi-exclusive conditions imposed on suppliers to access the network; commercial contributions requested from suppliers and passed on to franchisees; markups on mandatory supplies that directly impact the local operator’s Cost of Goods Sold (COGS); and the use of proprietary software with its maintenance costs.
Anglo-Saxon literature defines these flows as “supplier income” or “rebates,” but the phenomenon is also detectable in European systems, where such components are not always transparently disclosed in pre-contractual documents.
In the Italian context, where supply chain management is often largely delegated to franchisees and framework agreements are less structured, this risk is amplified. In the absence of truly industrial supply agreements—with clearly defined prices, volumes, and margins—these indirect costs can significantly impact the economic sustainability of the point of sale.
When a significant portion of the parent company’s profitability depends on these supply chain flows rather than on the overall performance of the network, a structural asymmetry is generated: the franchisor’s economic success is no longer aligned with that of the franchisee. In these cases, the model does not transfer know-how and competitive advantage, but shifts a structural economic burden onto the network, progressively reducing the local operator’s ability to generate sustainable margins over time.
If your business model only holds up due to the absence of these structural costs in your pilot location, you are not selling a business opportunity; you are selling financial debt.
2. Supply Chain: The Difference Between a “Friendly Supplier” and an “Industrial Partner”
This is where the line is drawn between a true brand and a license disguised as a franchise. Many aspiring Italian franchisors think that managing the supply chain simply means passing their trusted supplier’s phone number to the franchisee, hoping they “treat them well,” without investigating their distribution capabilities, delivery times, or ability to scale discounts to distant locations. This is pure amateurism.
The essential condition for scaling is having negotiated Master Supply Agreements (MSA) upstream. According to the ABA, without an ironclad framework agreement (MSA) that fixes prices, volumes, and guarantees of continuity, you expose the entire network to market volatility and the whims of local suppliers.
The consolidated practice in Italy, instead, delegates significant supply chain management to franchisees, with local negotiations and no franchisor control over the quality of products processed or resold by the local operator. Conversely, supplying part of the format’s products from the parent company is the central aspect of affiliation policies, overshadowing the overall vision of the revenue structure that guarantees the network’s sustainability and scalability.
In mature industrial models, the franchisee is not expected to be a restaurateur or a buyer, but an entrepreneur-investor managing a system. The centralization of supply and its processes serves precisely to relieve them from operational activities outside their expertise, guaranteeing standards, continuity, and replicability of the format.
There is an even more insidious aspect you must govern: rebates. It is common practice for franchisors to collect commissions from suppliers based on the network’s purchasing volumes. However, this practice, if opaque, leads suppliers to raise wholesale prices to compensate for the commission paid to the parent company, with markups on mandatory supplies reaching 20-50% above market price.
If your profit comes from the markup on mozzarella sold to the franchisee and not from royalties on their success, you are a distributor disguised as an entrepreneur, creating a conflict of interest that will implode at the first consumption crisis.
3. Operational Support: The Core of Network Development
The high road for operations management is the adoption of a performance-based “Tiered” support model:
- A “Tier 1” franchisee (Top Performer) does not need operational inspections, but strategic mentoring to open their second or third location.
- A “Tier 3” franchisee (Under-Performer) requires an intensive, almost surgical action plan to be saved.
If the success of the offering still depends on the founder’s “touch” rather than a replicable procedure, or if support is limited to sending a PDF via email, you are not ready to scale.
4. The “Accidental Franchising” Trap
In Italy, the illusion of bypassing franchise regulations by masking the contractual relationship under seemingly harmless labels like “trademark license,” “commercial partnership agreement,” or “collaboration between independent entrepreneurs” is widespread. It is a dangerous shortcut because in our legal system—just like in the United States—it is not the name of the contract that matters, but its economic and operational substance.
When analyzing commercial affiliation relationships, the central point is almost never the name given to the contract, but how the relationship functions in practice. In the presence of trademark use, imposed operational rules, and economic flows that go beyond a simple supply or collaboration between peers, the relationship tends to be evaluated for its economic and organizational substance, rather than its formal label.
Attempting to structure models that reproduce typical franchise dynamics while avoiding explicitly calling it such does not represent a simplification, but introduces further risk areas, especially when disagreements arise between parties.
In short, “not calling it a franchise” does not change the nature of the system being built, but it can make its long-term stability more fragile.
5. Benevolent Advisors or Opportunistic Partners
The true accelerator of these failures, however, is almost never just the entrepreneur; it is the consulting model often adopted in the early stages of development.
A consulting model “incentivized by growth” rather than sustainability is now widespread in the franchise market: advisors and intermediaries who monetize point-of-sale openings (entry fees) but remain unexposed when operational problems begin.
When the consultant’s compensation depends on the number of contracts signed and not on the industrial stability of the system over time, the recommendation is not neutral. Franchising becomes a commercial output, not a structural consequence. In these cases, the entrepreneur is not guided to ask whether the model is ready to scale, but only how quickly it can be sold. The result is an artificial acceleration that anticipates revenues for the advisor while postponing the—often devastating—cost for those who remain inside the system.
6. Marketing Fees: A Budget, Not a Corporate Piggy Bank
Finally, the thorny issue of the marketing fund. “The brand will build itself” is one of the most expensive phrases in the industry, but even more expensive is the improper use of funds collected from franchisees. Often, franchisors use the marketing fund not to drive traffic to existing stores, but to finance campaigns aimed at selling new affiliations, or worse, to cover central headquarters’ administrative costs.
A serious format must guarantee that every euro paid by the franchisee into the marketing fund comes back in the form of traffic and receipts, not glossy brochures to recruit new victims.
Synthesis
Building a restaurant chain does not mean photocopying a successful menu: it means designing a platform of legal, logistical, and technological services that allows a third-party investor to replicate your results without possessing your talent, your time, or your maniacal dedication.
If the system requires your physical presence in the kitchen to function, or if margins only exist because you forget half the hidden costs in your P&L, stop! The market is a graveyard of “good formats” that failed in their attempt to become “great chains”.
— Michele Ardoni
Ready to scale your foodservice brand? Contact Experviser for a structural assessment.