Redesign Your Site Selection Process to Expedite Finding and Closing New Sites

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How making changes over time can maximize efficiencies and brand development without shocking the entire system.

By Kyomi Reinhard

Brick and mortar franchisors often share best practices with one another in hopes to redesign their site selection process while striving to balance speed with “the perfect site” syndrome, all to create a process each franchise partner follows. These brands understand real estate is a core value of any location-based company in the franchise industry. Unfortunately there is not a singular formula for this process; instead, building a system for site selection is more like braiding DNA strands that are different for each system, but lay an integral framework for the development process. Similar to DNA, each framework is comprised of the same essential factors; however, the final product is proprietary to each concept based on the depth of the franchisor’s understanding of success factors, the amount of support and personnel involved in implementation, and flexibility for real estate solutions. To evolve the site selection process, great care and timing must be considered or brands face certain system disruption and possible extinction. Staging the mutation of any site selection process eases transition for franchisees currently in development, and encourages best practices for the brand and future brand partners. The quickest route to identifying possible viruses in your site selection DNA is to ask your franchisees which parts of their onboarding and real estate process caused the most challenges. These conversations will help franchisors identify not only necessary changes, but also the priority of such changes. Timing is essential to any franchise system, so initiating changes without total system-wide restructuring limits the potential for internal problems.

Immediate Restructuring

An immediate change to aid the progression of development is how personnel work together along with the quality of the franchisee prospect. A well-financed franchisee candidate working with a sales team member who sells vetted territories, in coordination with the real estate department, allows the process to start quickly, circumvents financing hold-ups, results in better deals and avoids cannibalization of the brand. Setting a high standard for franchisee quality and worth greatly increases the probability of better rental rates, quicker landlord approval, lower personal guaranty time and higher likelihood of landlord concessions; which in turn speeds the process and decreases risk for the franchisee and brand as whole. Up-front coordination of the real estate and sales teams benefits the sales team by increasing their understanding of which markets to concentrate efforts. Franchisees join the system confident their area has already been vetted before they start expending capital on their new investment, consequently increasing trust in and excitement for the brand. This type of system also requires the separation of sales and real estate, though they are commonly joined together and called the development team. Sales and real estate both require significant diligence, specific expertise and daily progress to succeed, so if the same person spearheads both departments, the progress of both are negatively impacted. If your system is still in a major growth phase, and hiring internally is not an option, outsourcing adds significant benefits to franchisees, and can either be folded into franchise fees or paid for by the franchisee preventing increased overhead to corporate. This simple reorganization of personnel will show franchisees and potential franchisees that your brand is committed to aiding their success and addresses the question: “Why can’t I sign a lease before my franchise agreement?”

Short-Term Redesign

Whether your franchise is an established concept or a start-up, standardizing documents is a short-term goal essential to ensuring certain business terms, franchisor rights and potential franchisee liabilities are set, upheld and mitigated. This also applies to uniform site criteria, site acceptance packages and the process for site acceptance. Success for negotiation is directly reflective of the documentation infrastructure and the management of these documents. Be sure to limit deal-breakers for negotiation and avoid terms thrown in because of “what if” or “what happened once” circumstances as those terms can stifle the process or cause franchisees to lose out on good locations. If letters of intent and leases are not handled by a franchisee team member or project manager responsible for driving the process, negotiation can drag on for months, potentially for reasons easily compromised. In the event your brand is unsure of the quality of the established site criteria, analysis with the aid of real estate consultants of the top and bottom performing five-to-10 locations can expose what is and is not suitable with relation to physical space, demographics, visibility and deal economics. For further analysis, implementation of an analytics program will drill down further to reveal positive and negative correlations.

Long-Term Initiatives

Now that short-term goals are in place, any brand should continue to evolve and create immunizations to process hindrances system-wide. These long-term modifications to the process can be much more labor intensive and require the coordination of many parties. For example, gathering all signed leases both new and old, and possibly creating abstracts of each, can be integral to system-wide changes such as rebranding initiatives, new model initiatives (changes to types of sites possible), and allow the franchisor to understand the potential effects of these changes before implementation. Before implementing these system-wide changes to types of real estate, testing new strategies with successful multi-unit franchisees not only provides the opportunity to learn much needed lessons, but also gives the initiative clout if endorsed by a well-known and respected brand partner. Franchisees are much more likely to coalesce with corporate when a strategy has been proved. Another lengthy goal is to create initiatives based on site investigations of all current locations. Like the short-term goal of analyzing 10-to-20 locations, this exercise is much more in-depth and can aid in such programs such as co-branding or complementary co-tenant ventures.  Again, hiring an analytics company may help with gathering this information, but can be costly and limited to certain factors and output. Be sure to consider operator performance in doing so since operations play a key role in the success of a particular location. Once immediate, short-term and long-term approaches have been established, based on the needs and feedback from the system, be sure to implement softly so personnel and franchisees adopt new initiatives with ease. Change is a vulgar word in franchising since each brand strives for consistency; however by simply shifting perspective to the idea of evolving a system to flow with the cycles of real estate markets and brand modifications, franchisors can redevelop their site selection DNA to provide new infrastructureone strand at a time.

Kyomi Reinhard is the vice president of Javelin Solutions, an outsourced real estate and lease negotiation firm exclusively in the franchise industry. Find her fransocial.franchise.org.            

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