3.02 – Locating Your Franchise’s Habitat
Finding a good retail or restaurant location in today’s market isn’t always easy. Many prime spots are already taken, and competition for available real estate is brisk. With rapidly changing consumer patterns, opening your franchise in the right location is crucial. A great location combined with excellent operations gives you the best of both worlds.
Although a good location is important, it won’t compensate for poor operations. Given the choice between “location, location, location” and “operations, operations, operations,” prioritize the latter.
Defining your location is a vital part of your business plan. Anyone financing your venture, even family members, will want to know where the cash is going, what the site will look like, why it will attract customers, how much traffic will pass the site, whether there’s adequate parking, and who your neighbors and competitors will be.
While you might find a site by driving around looking for ‘FOR SALE’ or ‘FOR LEASE’ signs, a better approach is to use a local commercial real estate broker familiar with your market. Many of the best sites never have signs; local brokers often discover them through their networks and experience.
Make sure your broker understands your franchise system and any site requirements or restrictions imposed by your franchisor. Another resource is exhibitions where shopping center developers present their construction plans, such as those hosted by the International Council of Shopping Centers (ICSC).
Finding Out What Constitutes a Good Site
First, understand the criteria important for your type of business from your franchisor. While high-traffic areas like shopping malls or busy highways might seem ideal, changing consumer patterns and the fortunes of major retailers can affect these locations.
There’s no one-size-fits-all definition of a “good” site. Retail franchises benefit from high-visibility locations near commuter routes, entertainment venues, or office complexes. Conversely, service providers like carpet cleaners, janitorial services, and pest control businesses don’t need high-visibility retail space. They require good-looking trucks, delivery access, and warehouse facilities rather than high-rent, high-visibility locations.
Consider your potential neighbors and nearby competitors. For example, a child care center shouldn’t be next to a liquor store. Being near a strong anchor store like Target or a grocery store can help drive traffic to your location, provided they don’t monopolize parking or offer similar products. Avoid direct competitors in the same retail center unless your site is more visible or convenient.
Using the Franchisor As Your Compass
Most franchisors offer significant advantages through their experience. They can help identify suitable locations and know what types of sites work best for their franchisees. Discuss viable options with your franchisor, who can provide valuable demographic insights:
- Who are the target customers, and where do they live?
- How many customers of a particular age and income level can drive to your business in a given time?
- How far are customers willing to travel?
- How and when do customers interact with the chain?
- How much are target customers willing to pay?
Good franchisors use mapping software to locate areas best suited for your business type. However, double-check any information against your own research for accuracy.
Franchisors typically provide site criteria, outlining specifications like square footage, parking spaces, seating, and equipment. They may require franchisees to find and research locations before presenting them for approval. Franchisors usually approve or reject a site but do not guarantee its success.
Crunching Data to Evaluate a Site on Your Own
Investigating a site involves gathering data in four primary categories:
- Demographics and Employment: Understand the population and employment trends in the area.
- Activity Generators: Identify nearby businesses or venues that attract foot traffic.
- Physical and Traffic: Consider accessibility, visibility, and traffic patterns.
- Competition: Evaluate the presence of competitors and potential market saturation.
Use demographic studies based on census tracts, zip codes, or drive-time polygons. For retail and restaurant franchises, drive times are often more relevant than simple radius measurements.
Red flags include locations that turnover frequently or have been on the market for a long time. Avoid sites with accessibility issues like difficult traffic patterns or limited parking.
Be cautious and thorough in your site selection process. Do not rush into a substandard location due to eagerness to open your store. Your franchisor’s support, combined with your diligence, can help you find a successful site.
