Site Selection Strategies for Franchises with a Large Real Estate Footprint | International Franchise Association

Site Selection Strategies for Franchises with a Large Real Estate Footprint

 

Site selection is not a science, but it’s all about finding the location that will work best for your business.

 

By Ken McAllister

When it comes to opening a business, the three most important decisions many franchise partners will make are “location, location and location.”

 

How else can you explain that identical stores of the same franchise system will achieve varying levels of success? Of course, you need to factor in store size, marketing budgets, management and so forth. However, these factors are all secondary to the importance of location.

 

How do you find the best location for your business? The key is developing a better site selection process. While there is no one-size-fits-all approach, there are steps franchise partners can take to lessen the likelihood of choosing an undesirable space to launch their next business venture. This especially holds true for concepts with a large real estate footprint.

 

If you are getting ready to lease a large retail space to open your next business venture, you will want to follow the steps below to ensure you find the best possible location.

 

Understand the Needs of the Business

The first step is to understand what makes your franchise concept tick.

 

To find out what makes the business successful, you will need to work closely with the franchisor to study target demographics and lifestyle data among other available research.

 

Here are a few questions to help you get started:

  • How and when do customers interact with the business?
  • Is it an educational childcare center that needs to be in close proximity to a residential community?
  • A fitness center that professionals frequent during their lunch break?
  • A destination concept?
  • Do your customers come to you? Or, do you go to them?
  • Does it rely on impulse sales, which would mean a highly visible location is a must?

 

Restaurants or clothing stores would prefer to be in a highly visible, central location in a major retail center. Our concepts, MY SALON Suite and Salon Plaza, are destination locations, meaning our customers will follow our members or stylists to a new salon or suite no matter where it is located. Because of this, the business is able to operate effectively on the second floor of a building or in a back corner of a shopping center. We are able to use space that the landlord will often have a hard time leasing.

 

Connect with your Franchisor

Building a strong relationship with your franchisor is key to selecting the right location for your business.

 

Each franchise has its own rules and regulations when it comes to choosing real estate. The information you need to know will be spelled out in the franchise disclosure document. It is often easier to review this information with your franchisor than combing through the 100-plus page document on your own.

 

Plus, many franchisors have already completed the market research for you. It's in their best interest to keep track of demographics, and they'll share this data with you. Reputable franchisors will be able to tell you how the business has performed in different areas, which can prove beneficial as you are vetting possible locations.

 

In some cases, the franchisor will accompany you on a site tour day. For MY SALON Suite and Salon Plaza, we kick-off a site tour day, which is focused on showing our franchise partners exactly what type of properties will work well for the business. It is critical for us to have boots on the ground from the franchisor and franchisee perspective, which helps with scouting out potential locations, keeping track of commercial development deals, and working with real estate brokers. Our relationships with local real estate brokers are essential. These contacts know the landlords in the area, as well as other brokers.

 

Typically, I will travel to the market and call on one of our local brokers soon after the franchise agreement is signed. We want to guarantee we are touching as many properties as possible before making our final decision.

 

Carefully Evaluate your Options

Once you have prepared a list of possible sites, it is important to begin comparing your options.

 

To start, franchise partners should study traffic patterns surrounding the location. If automobile drivers will have to cross a median in a major intersection to reach your business, then you may want to reconsider the location. Likewise, if your new space features large, floor-to-ceiling windows, the morning sunlight could pose discomfort for diners in a coffee or bagel shop.

 

In addition to studying traffic patterns, you should do your research on your co-tenants before moving into the space next door. If there are direct competitors in the same retail center or shopping plaza, it might be best to choose a different location. Similarly, if there is a popular restaurant or anchor store such as a Target or Whole Foods in the area, it could be a great fit.

 

It is equally important to be realistic about cost. If you can’t afford a space then it isn’t the “perfect location” for your business. The same holds true for parking. If the parking lot is overcrowded or non-existent, then you might want to re-evaluate your options.

 

Close the Deal with a Professional

When you have found the best location for your business, the next step is to close the deal with a professional.

 

A reputable franchisor will offer support in the final negotiations including carefully examining provisions surrounding extensions on the lease and unexpected rent hikes. Nonetheless, it is still recommended to hire your own attorney to review the lease. 

 

There are a number of factors that franchise partners tend to overlook in the final stages of securing a location. For instance, if the air conditioner needs to be replaced and the landlord expects the tenant to cover the costs, a new franchise partner could be required to pay major fees before even opening the business.

 

New owners should understand that every space has its issues. It is important for franchisors to train franchise partners on what to look for in terms of costs. Some problems are more costly than others such as mold remediation or structural issues with the building.

 

For our franchise, we tend to have an easier time than other franchise concepts because of our team’s extensive engineering background. We carefully inspect each building to minimize the number of surprises during demolition and construction. In addition, to avoid unexpected and costly inconveniences, we strip the building down to the studs before undergoing a complete build-out of the space.

 

No matter the size of the space, the bottom-line for new franchise partners is not to rely on the emotional, gut-feeling type of decision: "I just know this site will work!" Instead, it needs to be disciplined, rational, systematic process. And while site selection is not a science, it is all about finding the location that will work best for you and your business in the months and years to come.

 

Ken McAllister is CEO of MY SALON SUITE. Find him at fransocial.franchise.org.