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Location is often the last thing that people think of when they buy a franchise, however 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, it cannot succeed. Your business needs to be somewhere accessible and visible, and it needs to really stand out from the crowd. Your location should help you to draw customers in.
You have to address the issue of location before you buy the franchise. Having an exclusive territory in the franchise agreement based on mapping or population density is a great option. A franchise territory is the area that the franchisee will be given to operate in. The rationale behind having a specific area for the franchise is so there won’t be undue competition for the franchisee when another franchise of the same brand opens in the same city or region.
It is also important that encroachment on your territory is carefully defined in the agreement. For example, the franchisor might agree to not open another store within a fixed radius, but may offer branded products in a nearby supermarket. Know your rights regarding exclusivity and what constitutes encroachment on your region. If the franchisor does not offer exclusivity then you need to speak with current franchisees to determine how the lack of exclusivity has impacted their franchise sales and profitability.
Many franchisors provide guidance with location selection and lease negotiations, This is a big advantage over having to do all the footwork yourself. Since the franchisor already knows from proven experience the right type of location that will draw customers, this is a head start on 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.
When choosing a location, establish the profile of your customers, then conduct market research and compile a demographic breakdown of the geographical area you want to franchise in. Who will your customers be? Where will you most likely find them? In a shopping centre? Near a university? Town centres? On a commuting route? Or possibly in off-street specialised venues like airports and other transportation terminals, sports stadiums or convention centres? How do they use your product? Do you go to them or do they come to you?
There are several key factors to consider when choosing a location:
- Accessibility – is it easy to find and get to? Is it on Google Maps?
- Traffic – is there a continual flow of pedestrians or cars nearby? Are the streets laid out for easy access to the site? Is it convenient for public transportation? Is it easy to park nearby?
- 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.
Other essential criteria for finding the right location are the area's demographics – not only do you need a concentration of customers, you may require a pool of prospective employees too.
Study what activities typically generate traffic in the area you wish to set up your business and how often, at which times of day, and during which seasons of the year people frequent the area. Is there a weekly market or football match that people religiously attend? Would these kinds of events attract your target market?
You also have to research your competitors and know who they are, their strengths and weaknesses and of course their products. How close is the nearest similar store, and how well established is it in the neighbourhood?
Once you have found the right area and know what to expect from the competition, then start looking for actual storefronts. Does it have enough space and the right layout for the business? Often the franchisor will stipulate requirements as to floor space and your location choice must meet that criteria. Even if the location is good, it must offer the right kind of space to accommodate franchise procedures. Will it need much remodelling to match the franchisor’s layout requirements? Don’t forget that construction costs can create high overheads which might not justify the location.
To sum up, when looking to locate a franchise business, you must think about the four “Cs” – customers, community, competition and construction.
Once you have identified a suitable location, one that meets the needs of your franchise, you are one step closer to achieving your business goals!
Check out our full list of franchise opportunities right here!