What they say about real estate also applies to franchises: Location, location, location! If your business is not sited in a place that will draw customers, your business cannot succeed.
Many franchisors provide guidance with location selection and lease negotiations; and this can be a big boost to finding an optimal site at the right cost. The more help you get from the franchisor in selecting a site and negotiating a lease, the better your chances at success.
Most franchisors, even if they don’t provide that support, will still reserve the right to approve the location you choose so at least you’ll know you’re on the right track.
In choosing a location, think about who your customers will be and where you will most likely find them. In a mall? Near a university? Town centres? Or possibly in off-street specialised venues like airports and other transportation terminals, sports stadiums or convention centres.
There are several key factors to consider when choosing a location:
- Accessibility – is it easy to find and get to?
- Traffic – is there a continual flow of pedestrians nearby? Are the streets laid out for easy automobile access to the site? Is it convenient to public transportation?
- Visibility – can the site be easily seen and from how far away?
- Community – is this an up-and-coming neighbourhood, or one in decay?
- Local competition – how many other similar businesses are in the neighbourhood?
- Size and layout – does it meet the operational requirements of your business? This is where franchisor approval of the site is critical.
- Condition and construction – how much remodelling will be required, and what will it cost?
Other essential criteria for finding the right location are the demographics – not only do you need a concentration of customers, but a pool of prospective employees too.
Study what activities typically generate traffic in the area – sporting events, movie theatres, retail shops etc. – and how often, the times of day, and the seasons of the year people frequent the area.
You must also verify if your territory is exclusive in terms of mapping or population density, which should be stated in the Franchise Agreement. It is important that “encroachment” on your territory be carefully defined in the Agreement. For instance, the franchisor might agree to not open another store within a fixed radius, but may offer branded products in a nearby supermarket. Know you rights regarding exclusivity and what constitutes encroachment on your territory.
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