Most franchisors provide their franchise unit owners with a territory in which they can own and operate a business. For on-the-go franchise businesses, such as roofing companies, concrete designers, or cleaning businesses, a facility’s location is important. A central location in close proximity to customers can reduce the time between appointments and minimize wear-and-tear on company vehicles. For fixed-location franchises, such as retailers, restaurants, and operations dependent on foot or vehicular traffic, location is critical.
In this article, we focus on the considerations that are important to fixed-location franchises. However, owners of on-the-go franchises can find some important takeaways, too.
What do I need to consider?
There is a host of factors to consider when selecting a franchise location. These include:
Think about your target customer base. Is that population growing or shrinking in your area? How many people within your market have enough disposable income to become frequent customers?
Try to determine which parts of your assigned territory see the most foot and vehicular traffic. Look for pockets of activity, and try to stay focused on those areas as you search for vacant land, buildings, or storefronts.
Proximity to Popular Roadways or Points of Interest
Find the parts of your city in which your target customers tend to spend their time. What hobbies or routine activities would they be doing that might compel them to stop by your location? Would proximity to a hospital, office park, mall, or another site benefit your business?
Proximity to Other Franchise Locations
Study the locations of franchise units in territories adjacent to your own. Are any of those units located near the border of your territory? How much distance do you believe you need from a neighboring unit to avoid inter-franchise competition?
Proximity to Competitors
Identify the businesses in your territory that compete directly with your own. In which parts of your territory are they located? Can that part of your territory support multiple similar businesses? Would close proximity would help or hurt your bottom line?
You should also try to determine which competitors are succeeding and why. Look into the kinds of buildings in which they operate, the businesses that neighbor them, and the traffic patterns around their site. Are there ideas you can borrow in finding your own site?
Proximity to Complementary Businesses
Think about the kinds of businesses your target customers might already be visiting that could entice them to stop by. For instance, would your coffee shop perform well near a gym? Would your fast-casual restaurant do well in a mid-range shopping plaza? Would your car wash see a steady stream of traffic near a high-volume car dealership?
Map out the roadways and areas that a large percentage of people in your assigned territory use on a regular basis. Are properties available along that route? How much more do those properties cost than less visible locations? Do you and your franchisor believe that you can make up for the price premium by being in your customers’ line of sight? Or, could a lower sales volume at a less costly site put your business in a better position for profit?
Building Capacity Requirements
Work with your franchisor to determine how much space you need to operate your franchise unit. Will you require a large amount of space to house an oversized kitchen or dining tables? Can you operate from a small storefront instead of a larger space, or will you need a large retail space?
Think about how customers tend to access businesses like yours. Do many rely on foot traffic? If so, you may want to focus on buildings that are sited along commonly traveled sidewalks or paths. Will your business depend on automotive traffic? Here, you’ll need to find locations that cars can easily enter and exit without working against traffic. Will you need a pass-through window or a drive-through bay? If so, you’ll need to look into freestanding buildings or end units of multi-unit complexes.
Determine how many parking spaces you’d like to have available for your customers. Can you find a site with a dedicated parking lot? Would your customers be willing to park in a nearby garage and walk to your site? Would a lack of parking turn your customers away?
Calculate how much you can afford to spend on your lease or commercial real estate loan each month. Be sure to factor in the out-of-pocket site improvement costs you’ll need to pay before determining how much you can afford.
Future Development Concerns
Contact the land use office in your assigned territory and ask questions about plans for commercial developments. Are any competing businesses breaking ground in the area? Are any new points of interest being constructed? Or, are there plans to remove nuisance structures?
Find out which parts of your assigned territory are zoned for your type of business. Your commercial real estate agent should help you identify properly zoned options and explain the local process for having other promising properties rezoned for commercial or retail operations.
Talk to a commercial real estate professional about the turnover that storefronts in your area experience. Are there parts of your territory that experience frequent vacancies? Can you determine whether those vacancies are related to a store’s concept or the location itself?
Determine if there are other qualities you hope to find in a building or parcel of land. For instance, is it important to you to find a site that needs minimal improvements, or are your design specifications so specific that you’ll need to invest significantly in any location you choose?
You’ll need to consider two other important factors, too:
Whether to lease, buy, or build your franchise unit.
Depending on the real estate that’s available—and a host of other factors—you’ll need to determine whether you should lease a storefront, buy a freestanding building, or acquire land and build your location from the ground up. Acquisition costs, construction costs, renovation costs, permit needs, tax considerations, and timelines are some of the many factors you’ll need to consider. Our guides, Lease or Buy: How to Make the Right Call for Your Franchise and How to Attain Financing for Construction or Renovation, can help you with this important decision.
Whether to operate from a stand-alone structure or a multi-unit facility.
Your franchisor may have requirements for the type of structure from which your business operates. Some may require a freestanding structure or a location within or near another kind of facility, such as a mall, university, or hospital. If your franchisor doesn’t have these kinds of requirements, they may still have data on which types of facilities tend to perform best. Be sure to follow your franchisor’s advice and find a structure that will set you up for long-term success.
Will my franchisor help me choose a site?
Most franchisors offer support in site selection, but this help usually won’t occur until you’ve made a firm commitment to opening a franchise unit.
If your franchisor offers site selection help, they’ll likely use their research, site analysis tools, and experiences with other franchise unit locations to recommend options that meet their criteria for parking, distance to other franchise units, capacity, and other factors. They may provide you with a list of options or ideal areas within your assigned territory, or they may simply offer advice on sites you propose.
Important note: Many require owners to attain their approval for a site before proceeding with a purchase, and they may want to see and agree to lease terms before authorizing a location.
Does my lender get a say?
If you’re using bank financing to cover any portion of your startup costs, you should share your proposed franchise location with your lending officer before making an offer. This is especially important if you plan to use their funds to buy land, acquire a building, or make renovations. Many banks want to ensure that the location you choose is favorable and likely to succeed. A great location gives them more reason to believe that you’ll see traffic and generate enough cash to make your loan payments and live up to the terms they provide.
Who else should I talk to before deciding on a franchise location?
Several other people can offer valuable insight as you search for a franchise location. These include:
Your real estate agent
Your real estate agent may know about properties soon to hit the market, and they may help you make sense of the turnover that’s taken place at any site you consider. Further, they can advise you on how to position an offer in light of local economic conditions.
Local real estate developers
Local real estate developers can be an invaluable source of information. Major developers in your area will know of commercial developments in the works that may fit your criteria, and they’ll be able to tell you about the availability they have in their existing developments.
Local zoning and planning boards
Your city’s zoning and planning boards may be able to help in two ways. First, they can share information on the sites of future and existing developments in your territory, which may include sites that haven’t been on your radar. Second, they will be able to advise you on the process of having a property you’re interested in rezoned for commercial or retail use.
The local chamber of commerce
Your region’s chamber of commerce can help you connect with local government officials and business leaders who can serve as resources through your startup process. The chamber may also help you learn about area laws and regulations affecting businesses in various parts of your assigned territory.
The city engineers may have a wealth of information on the projects that are taking place in your assigned territory. They can share insights on how new bridges, roads, or infrastructure projects may redirect traffic flows through the region. This critical information can help you discern which sites are valuable today and which may be valuable in the future.
The area’s transportation bureau
Your city or county transportation office may have statistics on traffic patterns, traffic counts, and pedestrian traffic near your preferred site. Depend on their expertise to pinpoint traffic concerns and areas of opportunity.
Other franchise unit owners
Talk with other franchise unit owners about their franchise location searches. Ask why they chose their current site, what they learned, what they’d do differently next time.
People who live or work in your territory
Whether or not you live in your designated territory, you can benefit from talking with others who spend time in it. Ask about crime and traffic problems in the area, the kinds of businesses they’re interested in seeing in vacant storefronts, and their perspectives on why other businesses have failed or succeeded in the area.
The local police department
Your city’s police department will have valuable information on any site you consider. Ask about crime history, crime rate trends, or traffic concerns that could impact your business’s success.
Your attorney may not help with site selection, but they can help you review the terms of any lease you consider and point out anything that’s out of the ordinary. They can also help you negotiate the price and terms of your lease agreement.
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What if I can’t find a franchise location I like?
If you have trouble finding a property worth pursuing, you can take one of three actions:
- You can ask your franchisor for additional site selection assistance.
- Ask your franchisor for additional time to find a property.
- Ask your franchisor for a different territory or to expand the one you were given.
I think I found a good franchise location. What should I do?
First, spend a good deal of time at the site you’ve selected. Visit the location on multiple days of a week and during various hours of a day to gauge the traffic patterns, foot traffic, and frequency of customer visits to neighboring businesses.
If you’ll be leasing a site, ask the site’s owner about any restrictions that are in place for construction or modifications to the building. Landlords may have strict requirements about renovations, so it’s important to know whether you’ll be able to make the improvements your franchisor will require.
Then, obtain and review the property specs and lease agreement. Share this information with your franchisor and ask for the steps you need to take to attain their approval for the site and proceed with the purchase. Your franchise representative might walk the site, or they may use their site analysis tools to approve or veto a location. If you receive their approval, you can negotiate the terms of the deal and begin thinking about the steps you need to take to set up your franchise unit.
This article can help you learn about key terms, red flags, and opportunities for negotiation:
Next, you should attain the financing you need to begin construction or site renovation. Read this guide to review your options and proceed with the choice that’s right for your business:
Looking for help as you start up your franchise? Log into your owner’s portal for expert advice, checklists, and articles that can help you start your franchise strong and ensure its long-term success.