TL;DR version: Starting a vegan fastfood chain along the American highways can turn into a very profitable franchise concept.
The current landscape for fastfood is dominated by restaurants that mainly, if not only, serve meat in their meals. For the growing number of vegans worldwide, not knowing where to order from, or what to order, after a night of heavy drinking is an all too familiar situation. This is your opportunity to create a vegan option to differentiate yourself from the fastfood competition, as well as make the world a better place by serving food that emits less Co2 per lbs.
My girlfriend and I had to take many journeys along the Californian highways when we studied at Berkeley. Going from LA to Berkeley often gave us good knowledge of the food offering, and from my girlfriend’s vegan perspective, it wasn’t very enticing. Today, many people live the vegan or vegetarian livestyles. Making an attractive fastfood option for them would surely be a hit, especially today, where people are concerned with the environmental impact of flying.
Between Southern California and Nothern California there is a small city that used to be an army outpost named Tejon. The town has, besides the ranch, several outlets and fast food restaurants. For people traveling on the I-5 up to, or down from, San Francisco, this is a well-known stop for food and gas on your journey up and down the state. According to Tejon Ranch’s website, more than 14 million people (!) visit every year, with 25% of travelers from LA, Orange, and Ventura counties making a stop. If the concept is successful, it is not hard to imagine it being broadened out on a national scale.
Today, drivers have to take a major detour to get to nearby cities that serve vegan food. Most people are just not going to do that! Instead, vegans seek out scarce options like plant-based substitutes at existing fast-food chains or do with granola bars from a gas station. Obviously, the current state does not provide for the ideal experience. Major cities have options, such as LA-based Monty’s Good Burger - a chain started in 2018 that offers all vegan and vegetarian options. While hugely popular in LA, already having sold over 2.5 million burgers just a few years on, it provides little hope for the people on the highways.
Other options in the bigger cities are Veggie Grill and Meta Burger. Your angle is catering to the volumes of traffic on the highways. The nearest competition you face is therefore the existing fastfood chains and small shops. The US has over 164,000 miles (ca. 263,932 km) of highway. With a proven concept, you can become a franchiser, paving the way for an empire of vegan fast food restaurants, and the return on investment that follows.
A little napkin math
We don’t have access to numbers for the restaurants, so we will have to make some approximations for the number of customers for our vegan fastfood venture. Tejon Commerce state that 10 million of the aforementioned 14 visits to shop and eat. Let’s say that 50% of visitors only stop for gas, 25% only for food, and 25% for both. This means that 75% of visitors will stop for food. There are 25 restaurants in Tejon, according to Tejon Commerce, with not a single being a predominantly vegan option.
So, all else equal:
- 10 million visitors to the commerce area
- 7.5 million comes for food (and gas)
- 300,000 visits per restaurant
According to Plant Protein, 6% of US consumers are vegan. For simplicity, let's say that - of the 7.5 million visitors for food - around 6% will be vegan, which is 562,000 visitors. It is not hard to imagine that most of these will go to the vegan option, but let’s stick with the 300,000 figure, based on the average per restaurant.
300,000 visitors ordering a $12.5 meal (could likely jack that number up now, with inflation) = $3,750,000 a year in revenue from one restaurant.
6 to 9% profit margin means that you are netting upwards of $337,500 a year on this one restaurant, after all expenses are paid. Now, imagine if this becomes a success – then you can turn it into a franchise with relative ease. Scale this up to 3, 5, 10 or 20 franchisee-owned restaurants, and you grandkids won’t need to find a job.
According to Sage Accounting, it costs $275,000 on average to open a restaurant, if you are renting space. This covers one-time costs, like permits and legal fees, as well as recurring expenses like leasing a building and paying employees.
While the restaurant obviously will not have full capacity and reach potential the first year, it could turn into a very profitable venture just a few years after starting up. Global fastfood chains like McDonald's charge startup costs, monthly service fees, franchisee fees and rent. For a prospective, future franchiser like yourself, this equates to the sound of dollars.
Once you have a proven concept, the next phase involves setting up an administrative center, where you are supporting and managing relationships with franchisees. One of the advantages of operating multiple restaurants, through franchisees or not, is that you achieve economies of scale; buying in bulk is cheaper than buying single items. If you can keep costs down, such as by introducing a few items on the menu (standardization) as famous California-burger chain In-n-Out has succeeded in doing, you are well on your way to financial independence.
And according to Towards Data Science, California is lacking in vegan offerings. At least when comparing to the interest by consumers, as gauged through search volumes. Search volumes, not only in California but nationwide, have been on an upwards trend for years. This is unlikely to be a “fad” or something temporary. Veganism is here to stay.
So, to execute, I would start by:
1) Gauge interest. Could be as simple as a Google Form you get your network to share, or setting up ads inexpensively on Social Media.
2) Envision a concept. It should be novel, but keep it simple – at least in the beginning.
3) Find a suitable location. The location could be anywhere along the major highways. Look into statistics about the amount of traffic coming by, as well as ease of doing business in terms of expense level in the area and the availability of labor.
4) Make an initial budget. Specify the one-time fees and the recurring costs.
5) Set a team. While entirely possible to do one man in the beginning, having a solid team is always an advantage. Scout people in your network that would be interested in joining the project with capital or labor, preferably both.
6) Figure out financing. Raise money if you don’t have the sufficient capital to cover start-up costs.
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This is not financial advice. Proceed with caution when making financial decisions, and always contact a financial advisor when considering starting a business venture.