As a seasoned franchise professional, I've seen firsthand how the right location can make or break a new franchise business.
Whether you're a first-time franchisee or an experienced multi-unit operator, choosing the perfect spot for your new venture is crucial to your success.
In this post, I'll share three valuable and helpful tips to help you find that ideal location for your franchise business.
3 Tips for Finding a Great Franchise Location
1. Understand Your Target Market Inside and Out
The first step in finding the perfect location is knowing exactly who your customers are. This goes beyond basic demographics – you need to dive deep into their behaviors, preferences, and lifestyles.
Start by analyzing local data.
Some of this data may be provided by your franchisor.
Many established franchise systems have a wealth of information about their typical customers. This might include age ranges, income levels, education, and even psychographic data like interests and values.
But don't stop there. Conduct your own market research in the areas you're considering.
How? By getting help from local business resources.
For example, if I were looking to buy a franchise in my local area, I’d contact my closest SBDC.
Funded by the U.S. Small Business Administration, Small Business Development Centers (SBDCs) have a wide range of the type of information you need to do a market study of your area. Go here to find an SBDC near you.
One more thing. The services they provide are free!
Next, I’d talk to local business owners and potential customers, if possible. Try to find patterns in where your target market lives, works, and spends their leisure time.
Remember, the goal is to position your franchise where your ideal customers are most likely to encounter it in their daily lives.
For a quick-service restaurant, for example, this might mean a busy commercial area with lots of office workers. For a children's education franchise, it could be near schools and family-oriented neighborhoods.
2. Analyze the Competition – But Don't Be Afraid of It
When scouting locations, it's natural to want to avoid areas with direct competitors.
That said, the presence of similar businesses isn't always a bad thing – it can actually mean that a strong market already exists for your products or services.
How do you analyze competitors?
Start by listing out all the competitors in the areas you're considering. This includes direct competitors (businesses that offer the same or similar products or services) and indirect competitors (those that might compete for your potential customers' time or money).
Next, evaluate how saturated the market is.
Do you feel there’s room for another business of the type of the franchise you’re thinking about opening?
Note: You can ask franchisees in other areas of the country about market saturation (you can find a list in the franchise disclosure document). Plus, you should ask how many competitors they have and how they deal with them.
Finally, don't forget to check your franchise agreement for any territorial restrictions. Some franchisors prohibit opening too close to existing franchisees of the same brand.
3. Think Long-Term: Evaluate Your Growth Potential and Lease Terms
When you find a location that seems perfect for your new franchise business, it's easy to get excited and want to sign on the dotted line right away. However, it's crucial to take a step back and consider the long-term implications of your choice.
First, look at the growth potential of the area.
Are there plans for new residential or commercial developments nearby? Is the local population increasing? Have new businesses been moving in?
With those things in mind, a location for your franchise that's good now but great in five years could be a smart and valuable investment.
Next, carefully review the commercial lease terms. Why?
Because commercial leases are complex documents, and the details can significantly affect your business's profitability and flexibility. Here are a few key points to consider:
- Lease duration: How long are you committing to this location? Is there an option to renew? What are the terms?
- Rent increases: How often and by how much can the landlord raise the rent?
- Maintenance responsibilities: Who's responsible for repairs and upkeep? You’ll need the details.
- Exclusivity clauses: Can the landlord lease space to your competitors in the same complex?
- Signage rights: Are there certain restrictions on the size or type of signs you can display?
Additionally, don't hesitate to negotiate your terms. A good location with unfavorable lease terms can quickly become a huge burden on your business.
Finally, find a franchise attorney who’s familiar with commercial leases. Their expertise can be invaluable in navigating the complexities of commercial-0and helping you negotiate good terms.
To Sum it Up
Finding a terrific location for your franchise business is a critical step in your entrepreneurial journey.
By understanding and analyzing your target market, carefully evaluating the competition, and thinking long-term about growth potential and your commercial lease terms, you'll be well on your way to selecting a location that sets your franchise up for long-term success.
Good luck in your search!
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The Franchise King®, Joel Libava, is a top franchise expert. He’s written over 2,000 different articles on franchise ownership and personally consults with people who are looking to buy a profitable franchise. Go here to find out how The Franchise King® can help you become your own boss.