A large majority of franchise networks operate on site-based systems. This makes location one of the most important aspects to consider for prospective franchisees.
A poor location can have a negative impact on profitability and business expansion. As a prospective franchisee, you wouldn’t have sufficient experience in what makes an ideal location for your business.
A well-established company will always want to ensure that their franchisees choose good locations. Either they may provide location assistance or will involve some third party professionals to help the franchisee identify a prime location.
Most franchise networks provide some assistance to choose a location for any new franchisee. They also offer the latter the option to agree to a location that has been well researched and identified to be ideal for a successful franchise. This may prove to be a great option for prospective franchisees that are mobile and are fine with moving in order to embark on a new business.
However, in the case of people that already have homes and families established in some other location, this can prove to be quite difficult. They would prefer to set up a franchise in an area closer to their residence, rather than pick up and relocate to a completely new area. Most franchise networks would be okay with a new location if their research has determined that it can support this business without excessive competition from rivals.
Before the franchise location is finalised, it is necessary to conduct a demographic breakdown of the local population. This would include not just the residents in the target area, but the number of companies as well. The other important aspect to keep in view is proximity to target markets. Most franchises will select areas that will benefit from their services and products or ones that have regular foot traffic
If a particular franchise service or product is targeted to residential clients, and the area primarily has commercial buildings, it obviously wouldn’t be conducive to setting up a franchise there. In the same vein, if there are numerous industry rivals in that particular area, setting up a franchise option might not be a smart business decision.
In most franchise networks, approval will be given only to locations that meet specific market criteria. These criteria are determined by detailed analysis of the area, research on demographics and identification of commercial districts or residential locations. Some of the other aspects that will be taken into consideration include the proximity of these locations to facilities such as high traffic areas, overall site visibility as well as parking. A high visibility franchise is unlikely to give the go-ahead for a property that isn’t in a prime location, with regular vehicular and foot traffic.
Most franchises are likely to add a wide range of selection criteria that these locations are required to have. These could include available facilities, size of the property as well as the permission to make changes to floor plans as required. This is because most franchise networks want all their outlets to have the same layout.
The franchisor would have to approve the proposed location before you sign the agreement. This is exactly why you shouldn’t commit to any kind of agreement before the franchisor has given their nod for the location.
It’s a good idea to conduct due diligence when it comes to leasing any property for your franchisee business. Work with an experienced franchise lawyer who will go through all the details of the lease, before you sign on the dotted line. If you want to know more about franchising, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435