This is a guest blog post by Steven Bryan, vice president of franchise development for Lovin’ Spoons.
When it comes to the success of a franchise, the old real estate adage rings true: location, location, location! While many factors play into a company’s ongoing success, where you decide to locate may make or break your business.
As a Certified Franchise Executive, I’ve spent the past 30 years researching real estate development on behalf of chains including Lovin’ Spoons, Mrs. Fields Famous Brands, Kilwins Franchise, and Texas-based Deblan Corporation, the largest franchisee of Great American Cookies. While each company is different, all have benefited from locations in high visibility areas with the appropriate demographics. The fact is, a great franchise concept in a bad location will simply not succeed.
Looking to lease commercial or retail space for a franchise business? Here are some tips to help you select the right location.
Know Your Concept: Before making any real estate decisions, it helps to understand the concept of your business – and what the formula for success might be. Work closely with the franchisor to determine factors including what drives traffic to the business and who the target customers are.
Does it attract adults or families with small children? Is it a destination concept or does it rely heavily on impulse sales? A frozen yogurt chain, for example, might be more likely to thrive in a family-friendly neighborhood in a warm weather environment.
Do Your Homework: Once you have a good grasp of the concept, think about your ideal location. A prime spot will have high visibility, easy access, lots of customer traffic, and minimal nearby competition. On the flipside, if you find the area lacks an adequate pool of potential employees or major highways that could impact supply delivery, you might want to move on to another location.
Research potential sites, pinpoint competitors, and find complementary businesses in the neighborhood that might boost your own success. Study traffic patterns to determine what activities typically generate congestion nearby — sporting events, schools, nearby tourist attractions, or malls, for example — and how often and when people frequent the area.
An in-depth location analysis should also cover demographics, zoning restrictions, and the average cost of utilities and rent. Check with the local municipal office to find out about any new building projects and what impact they might have on future business.
Utilize Franchisor Resources: From strip malls to highway frontage, it’s important to identify the best environment for your business to succeed. That analysis requires the insight of an experienced franchisor, one that already has scouts working with real estate brokers and lease attorneys in various regions. Fortunately, most franchisors offer assistance — but that support varies from company to company.
In the case of Lovin’ Spoons, we provide site selection experts, a list of qualified architects, prototype plans, guidelines for choosing proper contractors, equipment requirements, recommended suppliers, extensive operational and marketing manuals, and on-site training to ensure a smooth opening of your store.
Don’t Procrastinate: Give yourself enough time to avoid making decisions under pressure. Typically, new franchisees should start the site selection process at least six months in advance of when they plan to open. You may need several months to finalize the lease offer, have the formal lease documents reviewed, and build out your store.
After you have found one or more acceptable potential locations, you will move on to lease negotiations.
Negotiate Wisely: Lease agreements often come with hidden charges and fees, so it’s important to retain legal counsel to review all materials and protect your best interests.
Also, don’t hesitate to create competition in order to secure a better deal. One way to do this is to request lease proposals from multiple properties, and play those proposals against each other.
When doing site selection, remember that lease rates can vary within the same building, depending on desirability and demand for a particular space, visibility, traffic, accessibility, the quality of the neighboring tenants, and the strength of the franchisor’s name.
Doing your own due diligence, while benefitting from a supportive franchisor and commercial real estate broker, gives you the best opportunity to find, negotiate, and lease the best location.
Don’t Reinvent the Wheel: Remember, you are not the first business to go through a site selection process. In fact, other franchisees — particularly those belonging to the same brand who would benefit from the addition of another successful unit — can provide great insight and assistance.
Ask them what makes their location successful, what lessons they learned during negotiations, and what advice they might have for you. Finally, make sure to find out how long the process took and whether the franchisor met their expectations. This type of insight will help arm you with the knowledge you need to select the ideal location.