Becoming a franchisee can be a great opportunity. There are always successful franchise concepts that deserve your attention, make money, and can be the business you always wanted. So let’s get the ‘Where’ part of the equation right, and select the right location and negotiate the most favorable lease terms possible.
No problem, you say. I know a good location when I see it. In fact, I’m locating in my old neighborhood. I know all the people and most of the business owners. My kids graduated from the high school just down the street from where I’m going to put my store. The high school will be a great source of business for my new shoe repair store . . .
Consider these points:
- Once It’s There, You Can’t Move It! You can change your staff, you can change your menu board, you can change the colors of the walls—but once you’ve signed the lease and opened your store, you have a five to twenty year relationship with your Landlord, and it’s HIS four walls.
- Once You Sign the Lease, You Can’t Say you Didn’t Mean It! Once you sign your lease, you’re obligated to 5, 10—or even 20—years of rent, WHETHER YOU MAKE MONEY OR NOT! Think getting a loan modification on your home is hard? Wait until you try to talk to your Landlord about reducing your rent.
OK, so what’s the first thing to consider–the rent, right? Not necessarily. The first consideration is where would your customers expect to find you: behind the bowling alley (but the rent is only $0.89 per square foot . . . ), or on the corner next to Starbucks (where the rent is $5 per square foot). Here’s the questions you need to answer first:
- Am I a destination (like a health club, tutoring service, day care facility), or an impulse (yogurt, fast food, gift shop)? If you are a destination — a business that people plan in advance to go to — then you can compromise the corner location at high rent. If you rely on a percentage of you customers coming in because they happened to see you, then you are an impulse, and things like visibility, signage, and foot and car traffic are important.
- When do I do most of my business? If you are a lunch business, don’t locate in suburban neighborhoods where everyone has gone off to work. Likewise, if you’re a pizza operation that does 80% of your business after 5 p.m., don’t locate in a business park.
That’s just a start. It’s a complex equation; and many franchise owners get it wrong. Each week we’ll make sure you get it right. Please send me your comments and specific questions, and we’ll get it right together. You can contact me at firstname.lastname@example.org