A common misconception about owning a franchise business is that the number one cause of failure is due to poor management. Make no mistake – that is a frequent cause, but another leading cause in determining success or failure of a new franchise business is the location. This is particularly true for businesses that rely on walk in customers.
On a basic level it makes sense; businesses in a highly trafficked area are more likely to see an increase in customers. After you have established a few of these areas where your new business is likely to get the best exposure, the key is to narrow your focus to locations that attract the demographics that most frequently buy your franchise’s products. There are additional factors that should be weighed before you make a decision as well and they are discussed later in this article. The bottom line is that a franchise business will generally do better in a lease-friendly, minimally competitive environment where customer traffic is brisk.
Real estate costs play a big role in choosing the site for your franchise because if you sign a lease that cuts too deeply into your revenue, you may not be able to grow or make the changes needed to remain competitive as the market around you grows. Many times franchisees can go to the parent company for referrals to help you connect with a realty group that understands the business landscape you are attempting to enter. These realty groups can help you negotiate a fair price and terms that benefit you most in the early stages of your franchise growth to help keep more money in house.
Know your competition
Competition can be fierce for new franchise businesses entering the market. Many established businesses in the same market will offer incentives to retain their customers in order to prevent new entries from gaining a foothold. Knowing the market and your competition (as well as their proximity) will help you make an educated decision when it comes to where you’re going to set up shop. Also, if you plan to open your business where there is already competition, you are going to need a decent customer base. Spending a little time in the area where you plan to open your business will help you decide if there is enough of your target customer base to warrant the competition.
Construction and design
Another obstacle that does not always make itself known in the initial planning phase is the permit process for construction or design. You may find a space is ideal for customer traffic but not quite up to the design you’ve envisioned. It is a good idea to look into the local building codes prior to beginning the franchise business so you’ll have a better idea if the building can be used for your investment. Since some franchises have very specific design and architectural requirements – a subpar structure could be a deal breaker.
As you can see, it is very important to consider site selection as a top priority when planning your franchise business launch. Your franchisor will help you of course – but being armed with a little knowledge yourself can put you on the path to choosing the ideal location for your franchise business.