How to Choose a Good Franchise Location

In franchising, location is everything. But, despite being such a crucial factor behind franchise success, many franchisees overlook the importance of choosing a strategic location.

You can’t expect your franchisor’s brand recognition alone to ensure business success. The location for your franchise plays a major role, so it’s important to choose one with good visibility, that is easily accessible, and meets the requirements of your specific business goals.

In this guide, I’ll run through the key things to consider when choosing a good location for your franchise.

Key Takeaways

• Franchisees and franchisors usually collaborate to find a suitable location within a predefined territory.
• The location of your franchise can have a dramatic impact on your ability to generate revenue.
• When choosing a location for your franchise, you should look at local market conditions, accessibility, lease terms, and growth potential.

How Much Control Do Franchisees Have Over Location Selection?

Most franchisors give their franchisees some control over their franchise location, but how much control depends on the nature of your franchise agreement. 

In most cases, franchisors predefine franchise territories based on factors such as population, market demand, and consumer habits. It’s unlikely that you’ll be able to change the terms or boundaries of your territory, though that’s not always the case. That said, you will probably have some input over your franchise’s exact location within the territory.

Choosing a location for your franchise is usually a collaborative process between you and your franchisor. You’ll need to find a location that complies with your franchisor’s guidelines, and your franchisor will provide the final approval.

Lean on Your Franchisor for Help with Choosing a Good Location

Your franchisor is an excellent resource that will likely offer some assistance during the process of choosing and securing a location. After all, it is in their best interest for you to choose a franchise location that maximizes your chances of success. For example, they may have data on local demographics, market conditions, and growth forecasts for specific areas. They might also have in-house professionals to assist with negotiations and permitting. 

Compliance regulations vary in different regions. Get in touch with us at Franzy if you need help navigating the franchise regulatory landscape.

Some franchisors may offer services such as financial feasibility reports and site evaluations.

I suggest raising the issue of choosing a location when negotiating your franchise agreement. If you can demonstrate how additional support could potentially benefit both parties, your franchisor may be inclined to reward your commitment.

Give Yourself Plenty of Options

I know how challenging it can be to pace yourself when you just want to get your business up and running. However, your choice of location could make or break your business, regardless of how well-established the franchise brand is. I recommend shortlisting multiple location options. Thoroughly research the local market, competition, and growth trends of each to make the most strategic choice for your franchise’s location.

Besides the matter of business potential, shortlisting multiple locations gives you fallback options if you face any regulatory issues. In some cases, you might be able to negotiate better lease terms with your preferred choice if you have plenty of alternatives.

Things to Consider When Choosing a Franchise Location

Over the course of decades as a franchising expert, I’ve learned that you can never be too thorough when researching locations. Here are the most important factors that deserve your attention.

Competition

Look for a location with plenty of demand for your franchise’s products with as little direct competition as possible. While you’ll inevitably face some competition, it’s still essential to research your competitors’ services, prices, and customer loyalty to assess your ability to successfully compete and claim a healthy share of the market. Perform competitor analysis of your franchise territory before landing on a location.

Don’t forget to check the terms of your territory rights in your FA, as this could impact your choice of location. If you have exclusive territory rights, you don’t need to worry about internal competition in your territory. However, if you have non-exclusive territory rights, you need to keep in mind that another franchise for the same parent company could open in your area.

Demographics

Don’t assume that a high and growing population automatically equates to plenty of demand. Before settling on a location, you’ll need to research the age, lifestyles, income levels, and preferences of the local population to make sure there is a demand for your franchise. 

Accessibility

Your franchise must be as visible as possible to your target market to succeed. That means not just choosing an area with a high population of your target audience but also a location that’s easily accessible.

Accessibility factors to keep in mind include proximity to public transport, highways, and main roads.

Also, as many of your customers will be driving from nearby locations, drive time is an important factor to consider. If your target customers live in the northern suburbs of your city, make sure your franchise is in a central location that is quick and easy to drive to. I also suggest choosing a location in a well-signposted area that’s easy to find using GPS.

Foot Traffic

Foot traffic is an essential consideration for franchises in industries such as retail and fast food. Choosing a location hidden down a side street based on its attractive price tag might cost you dearly in the long run, since it will cause you to lose customers to your more visible competitors. Try to find out how many pedestrians walk by a prospective location on a daily basis. You should also research local development and infrastructure plans that could reduce or divert foot traffic in your area.

Zoning Laws

Finding a good location is just half the battle. You’ll also need to make sure your franchise complies with the zoning laws of your location. Otherwise, you will not be able to legally operate your franchise there. For example, certain business types may be restricted in certain zones due to local regulations. Zoning laws may also impact elements of your business, like signage and access. Depending on your franchise industry, you’ll need to obtain permits and licenses from your local municipality.

Parking

Is there ample parking near your potential site so your customers can conveniently visit you? In my experience, parking is a detail that franchisees often overlook. However, if your customers have difficulty finding a spot, it will negatively impact their experience and ability to visit your franchise.

Property/Real Estate Costs

Naturally, cost will be a significant determining factor when it comes to choosing a franchise location. However, rather than search for a bargain, I recommend that you strike a balance between cost and location desirability. A low-cost lease might reflect the site’s poor visibility and accessibility, meaning you’ll lose more on potential earnings than you’ll save on rent. On the other hand, paying too much for a desirable location can hamper your ability to turn a profit.

Lease Terms and Flexibility

Make sure to go through the terms of the lease with a fine-toothed comb; many novice franchisees unwittingly enter into contracts without checking terms like rent increases, exit clauses, termination rights, exclusivity clauses, and hidden costs that can include property taxes and common area maintenance fees.

Also, find out where your lease allows for any flexibility regarding extensions and revamps – and make sure you’re permitted to renovate and decorate the place in line with your franchisor’s guidelines.

Growth Potential

Last but not least, yet often overlooked, consider the growth potential of a location to decide if it’s the right fit for your business goals. The last thing you want is to open a franchise in an area with stagnant growth or, worse, signs of economic downturn.

Start by exploring trends using the U.S. Census Bureau website to see whether an area’s population has grown over recent years. I also recommend looking into future developments that could impact the population and demographics of your area.

Location Red Flags to Look Out for

If you spot any of these red flags, you might want to search for a different location or discuss your concerns with your franchisor at the very least.

• Oversaturation: If there is already an abundance of businesses offering similar services to your franchise in a certain area, you may struggle to capture a large enough market share to turn over a profit. 
• Low or Declining Population Growth: A declining population, or low growth numbers compared to neighboring regions, could indicate an area is economic decline and losing desirability.
• Confusing or Vague Lease Terms: If the lease contains hidden costs in the fine print that haven’t been discussed upfront, or if there are non-specific phrases such as “price increases subject to prevailing market conditions,” you might want to steer clear.
• High Vacancy Rates: If a site has been vacant for a long time or has a high turnover of renters, it could signal a lack of local demand, inconsistent foot traffic, a declining economy, or even an unstable landlord.
• Condition of the Property: Make sure the property’s renovation and repair costs won’t hamper your ability to make a profit. I also recommend checking out the condition of the local roads and infrastructure.

Why Location Matters for Franchise Success

At the end of the day, location is one of the most significant determining factors of the success of a franchise, or any business for that matter. Your choice of location impacts everything from brand visibility and site accessibility to your growth opportunities. Ultimately, your location directly impacts your bottom line, for better or worse.

Many franchises fail due to a lack of strategic thinking when choosing a location. It’s not just about meeting your franchisor’s minimum requirements – it’s about maximizing your profit and growth potential while transforming your franchise into a local landmark.

A location with plenty of pedestrian and vehicle traffic in a highly visible location will dramatically increase your already high chances of success as a franchisee. Whatever stage you’re at in the process, we’re here to help. At Franzy, our franchise experts are here to guide you through the process of choosing a location and getting your business off the ground. Let us help you find a site that sets you up for long-term success.