Location, Location, Location. Location is everything! These sayings are popular for very good reason. The right location for your franchise will be the difference between success and disaster.
Who Chooses the Franchise Location?
In many cases, the location or site of the franchise is already established after thorough investigation and thought by the franchisor. Because the success of a franchisee’s franchise is just as important to you, the franchisor, as it is to them, the franchisor will play a large role in helping a franchisee select a prime location for the business. As a franchisor, you more than likely have a standard set of preferred site criteria that you expect franchisees to adhere to when choosing a location and you will give the final approval on the location before any lease agreements are concluded.
Factors that Affect the Viability of a Franchise Location
Characteristics of your franchise
- Different franchises will thrive in different locations. Franchises that rely on steady traffic like restaurants will do well in high footfall areas where rent might be higher, but it would be better than hiding away where you can’t be found. High visibility is essential for these types of franchise’s success. If a franchise doesn’t rely on walk-in business, then they don’t need to pay high rent costs and can choose locations in less populated areas such as franchises that travel to customers, like cleaning services. There are also franchises that don’t justify using small rental spaces and can trade from a warehouse or industrial park where customers don’t mind travelling to the franchise for the products or services offered – it is also easy to deliver/courier the franchise’s products.
- Does your franchise operate only in the day (business hours), or does it also operate at night (e.g., a restaurant or fast food)? How much traffic does the desired site receive in the hours required by the franchise – Is the rented space open at that time?
- Do you or don’t you need parking space, and will that increase your rental cost?
Demographics of the target market
This plays a very important role in the selection of a location for a franchise.
It could be worth employing a professional company to gather information about the demographics of the area you are interested in or to possibly advise on what area would do well for the franchise. The social structure and different groups of people within a population can help pinpoint customer bases that apply to the franchise. This could also steer you in the right direction as to whether you are looking at a customer base that is of value.
Neighbourhood stability – what kind of houses are there and what are the living conditions like of the people living in the area?
Who is your franchise targeting? What type of customers need to be reached and served and are those customers in your chosen location?
- Does the franchise need to be near major roads or highways, in shopping malls, near restaurants, close to schools or gyms? These places create convenience and in turn with a steady flow of customers. The benefits of location and rent that needs to be paid should be weighed out.
- Does the franchise need to be visible or is it a travel to client/work from home type of franchise?
- A location in a traffic-congested area where it isn’t easy to locate simple entry and exit points would obviously not be ideal.
- Having competition around you could benefit you or it could ruin you. This needs to be evaluated. For example, if you are in a location where people would like to go to have a selection of restaurants, then your restaurant could thrive. Grocery stores that offer the same sort of products would not benefit from this sort of location tactic.
- Does the franchise need to be located in close proximity to anchor businesses to draw customers to see your franchise?
- If the franchise thrives on seasonal business, like tourism, food and retail. During off-seasons, the franchise as a whole will experience declines if it isn’t placed in a location that can sustain for both in season and out of season.
- Due to the COVID-19 pandemic which has forever changed a lot of practices in business:
- Sales have heavily shifted towards online/e-commerce platforms and has even opened up a new and popular trend such as the ‘dark kitchen’ concept (food delivery business) has boomed, and this will impact location needs and costs.
- Large malls have taken a knock as the convenience of strip malls increases in popularity with people working from home and finding it easier to ‘pop out’.
- A reduced amount of traffic in office space due to cost saving and working from home. Convenient meals or snack shops located for office park employee convenience have lost their captive market and business and is therefore not advisable for a location of a franchise.
Do the research and help your franchisees make a success of the brand you created!