How to Choose the Ideal Location for Your Franchise

We’ve all seen them; the iconic franchise signs that announce our favourite coffee shop, burger joint or pet supply store is straight ahead. And while the brand you align yourself with will be an important determinant for your success, so will finding the right location for your franchise.

If you buy into a turnkey franchise, your franchisor will locate, then purchase or lease the commercial real estate space you need, plus design, construct and outfit your franchise. Once the work is done, they’ll hand it over to you ready for staffing, training and ribbon-cutting ceremonies.

If your franchisor doesn’t offer a turnkey option, you’ll have to address the location issue before you buy the franchise or risk wasting valuable time afterwards while you look for an appropriate space that may not materialize for months.

Understanding Location Exclusivity

One of the most important agreements to finalize with your franchisor is the issue of location exclusivity. Having an exclusive territory based on population density or mapping is what most franchisees prefer. No matter where you’re located, you’ll be competing with other businesses for attention – that’s a given. But the last thing you want is to compete with another franchise of the same brand that’s located close enough to cannibalize a portion of your sales.

Of course, it’s unlikely that you’ll be the only brand franchisee in an entire region, but before you choose your location, you’ll need to know what boundaries other franchisees must respect and what happens if they encroach on your territory. If your franchisor doesn’t offer exclusivity, one of your first tasks will be asking other franchisees if and how the lack of exclusivity has affected their gross sales and net profits.

Franchise Location Types

Locations come in different forms, including:

• Traditional locations, where the franchise is the only business operating on the property, with dedicated parking spaces/ or a drive-through area provided for customer use.
• Non-traditional locations, where the franchise operates from a storefront, kiosk or booth within a shopping centre, mall, airport, hospital, educational campus, etc., or from a counter in a specialized retail or food court within any of the previous.
• Cart or food truck locations, where the franchisee is free to move to multiple locations throughout a day or week, so long as the space they land in is approved by the city, town, event or business that hosts them.

Gathering Information on Your Location

No matter what type of location your franchisor favours, before you settle on it, you’ll need to be confident it has all of the elements you’ll need for success.

Factors affecting your franchise’s success include:

• The right customers, and lots of them
  You could situate your business smack in the middle of a large metropolis and never log a single sale if your target market isn’t present. Creating a target market customer profile will help you identify who’s most likely to frequent your business and what characteristics and behaviours – or demographics – they share. Once you have an idea of who you’re looking for, it’ll be easier to abandon prospective locations whose demographics don’t line up with your target market customer profile.For example, if you buy into a franchise that operates after-school music instruction that lets kids rock it out together, and all the locations you review are stacked with seniors with nary a grade or high school in sight, there’s a good chance your franchise will fail.
• The potential to be seen by passing auto and foot traffic at the right time of day
  If your franchise sits tucked away on a street that no one uses, you’ll need more of a marketing budget to attract customers than if you’re close to the corner of a busy intersection. That’s because automobiles, streetcars, motorcycles and bicycles that stop at an intersection tend to look around while they’re waiting for the light to change, giving them the opportunity to spot your business.But not all traffic consumes products and services the same way. Before COVID-19 upended our daily routines, commuters tended to buy coffee on their way to work, not on their way home. Lunch crowds emptying out of large office buildings only had an hour to eat, so they didn’t stray far for takeout and may not have made it to the street at all if their building had a robust food court. Weekend shoppers’ purchasing power tended to peak in the middle of the day. The latest data suggests that because of the proliferation of remote work, consumers’ daily routines are being disrupted to such an extent that weekday traffic is starting to look more like weekends.

Not only do these changes underscore the need to utilize the most up-to-date data sets for location research, but they also indicate that in the wake of COVID-19, franchisees may need to rethink their franchise purchases altogether. If remote work remains the dominant model for businesses, and your franchisor doesn’t adjust its product or services accordingly, you’re sunk.

Vehicle and foot traffic reports you’ll need to examine include:

• Average Annual Daily Traffic (AADT)
• Day of Week Traffic
• Time of Day Traffic
• Side of Street Traffic

And since you could be deciding between multiple prospective locations, you’ll want a report or service that allows you to compare at least five but up to 10 locations at once.

• Visibility and access to your business
  If your customers can’t see or get to your business, they can’t buy what you’re selling. If you’re able, it’s best to visit prospective locations in person to understand how adjacent buildings, signage of all types, transit shelters and even trees affect the location. Having a transit stop nearby could be a valuable source of customers, and trees can create a welcoming environment plus cool down your premises. You can often remedy line-of-sight issues by moving business signage lower to the street or to the side and asking your municipality to prune overgrown trees appropriately. You can also preview prospective commercial real estate locations by using free online tools such as Google Street View.
• Checking Out the Competition
  If you plan to buy into an eco-friendly dry-cleaning franchise, you probably won’t say “Yes!” to a location where another dry cleaner – even an old-school one – is located just a few doors away and on the better side of the street for traffic. But if you’re buying into a gourmet doughnut-making destination, almost every business nearby has the potential to drive walk-in traffic to you and might even inspire new doughnut creations. Smoked-meat deli or mid-day meltdown donut, anyone?
• Picking A Location That Maximizes Your Rent-To-Sales Return
  In order to make a decision between locations that score similarly across all factors or to find a hidden gem that misses on a few but can easily be upgraded, you’ll want to work out the occupancy cost ratio for each location. Defined as the total annual occupancy cost as a percentage of prospective total annual sales, you’ll want something between five and 10 per cent.

The Better the Data, the Easier the Decision

You can’t understand the story of a neighbourhood with old data under any circumstance, but because of pandemic-driven changes to consumer behaviour, data even a year old could be a dealbreaker. No matter who provides it – your commercial real estate broker, franchisor or an independent company specializing in data collection and analysis – the data you delve into needs to be as fresh and accurate as possible. If you can access location analysis and territory planning software for franchises – or better yet – designed specifically for location hunting for franchises like restaurants, warehouses, fitness centres, etc., you’ve got gold at your fingertips.

How Your Franchisor Can Help

Because franchisors have a stake in the success of your business in the form of the ongoing royalty fees they’ll receive from you, many provide incoming franchisees with access to up-to-date research on the demographic, traffic, growth projection and even competition and site analyses they’ve already done. They might also be able to aggregate data from existing franchisees to round out the research.

Setting Realistic Expectations About Time to Launch

Even if your new franchise location is easy to find and your buildout straightforward, you could still be looking at six months or more before you can open your doors. Locations like franchised hotels can take a year or longer to launch due to zoning and permitting requirements, in addition to construction and outfitting.

You’re about to be part of something big. Take the time to find the right franchise location so you can get your business out of the starting blocks and off to the races.