If you are set to do franchise in the Philippines, likely, the franchisor is not that proactive in giving you advice regarding the proposed business location. Although some may offer to help you in researching the feasibility of the place, it is still beneficial to know how to do this on your own.
Preliminary Research and Site Inspection
It is for sure that franchisors have researched some places prior to the agreement, but they do not share this unless you also have yours. They know where a franchised business is fit within a certain area.
In most cases, franchisors will ask the franchisee to conduct preliminary research on potential sites, getting information from property owners, real estate brokers, or shopping mall managers to provide the demographics and information about the place.
The franchisee and employees might have to spend some time at a location to do traffic or pedestrian count and to study the entire feasibility of the place in terms of audience and accessibility.
The Need for a Great Research Team
Finding a good location and negotiating a favorable lease is a serious challenge for franchisees when they opt to have a site-based franchise system.
Although most site-based franchises have support available for this, it is exceptionally subjective as it varies from one company to another. One of the critical issues to address in your research of prospective franchise offerings is the amount and type of such real estate support.
Hence, you need a team that has a strong foundation and background in location research. Such a group is responsible for finding the location, negotiating, and finalizing the lease. It usually consists of you, the franchisor, a local commercial real estate broker, and a reasonable lease attorney.
Site Approval by the Franchisor
Franchisors should approve only suitable locations or those places that accept company-owned leasing. However, some franchisors also approve not suited areas just for the sake of getting the franchise fee from the applicants, which is technically unacceptable. Hence, beware of this type of arrangement.
On the other hand, good franchisors turn down up to 90% of location applications to make sure the location is profitable for the franchisee.
Most franchisors have specific selection criteria for finding an excellent site. This information covers topics such as the following:
- Demographic characteristics
- Population density
- Traffic and parking parameters
- Check the importance of site visibility to the success of your business
- Tenant mix
Given the criteria, most franchise systems assume you will do most of the work in locating a prospective site. Often, the franchisor requires that they have consented to any site. They will ask you to provide specific information and supporting details such as pictures or videos before agreeing with the location.
For some franchisors, they send one of their personnel to your market to personally verify the acceptability of the site prior to consent.
How to evaluate a location?
Here are some useful criteria you can check while doing the research on your own.
Zoning: Check if the municipality or city allows that kind of business at a specific location
Visibility: Evaluate if visibility is essential to the success of your business.
Accessibility and traffic patterns: Check if it is easy to exit and enter into traffic? Are there complicated intersections, major road construction, or other impediments? What time of the day is traffic-heavy? Where is the traffic going? Also, check if the people are shopping or commuting to the places where they can see your product or avail the service from a more convenient store
Neighborhood development: Check if the neighborhood is stable. What kind of houses are there and evaluate the living conditions of the people.
Hours of operation: Make sure that the hour of operation matches the needs of your customer.
Competing outlets: Do you have competitors around the area? If this is the case, it will be better not to pursue the project to prevent loss in the future.
Parking layout: Check the parking vicinity and see if it is favorable for you, the costumers, and your employees.
Public transportation: Significant if it is a product for the "masses" that your outlet is in front of public transportation. Also, if you have a lot of employees in the franchised business who have to commute to work.
Size: Do you require a large space for selling, storage, production, or maintenance of the equipment? The larger the area, the higher the rent, electricity, and support. The franchisor shall recommend or require precise square meters as minimum space. Don't rent more than what is needed.
Lease term: Look for a lease whose term matches your franchise contract but can be renewed.
Utilities: Water supply, electricity, sewage, telephone lines play an essential role in determining the suitability of a location.
Tips in Choosing the Franchise Location
Understand the franchise's concept
Review first, the idea of your franchise before looking for places. The target customer is the main concern, so it is imperative to profile your target customers, specifically on where they live and work and what drives people to the business.
Do the research
Do thorough research of the area. Consider the following:
- How accessible is the city? What about traffic? Is it an out-of-the-way location? Is it visible from highly-traveled areas? How about those living in remote areas?
- Who are your competitors in the area? Are their locations advantageous compared to your prospected place?
- How about future constructions and developments? Remember that if a similar business is going to be built soon it may not be the best location for you.
Always ask for the layout assistance and supervision
Often, franchisors will provide layout assistance and supervise the construction of a new franchised store. They are specific in terms of the interiors, color schemes, and other identifying marks of the business.
Everything must follow the branding of the business for consistency, including indoor and outdoor signage, lighting, and decoration. The entire construction cost is covered by the franchisee. It must be paid as due to either the contractor or franchisor, depending on the arrangement.
Use Provided Resources from the Franchisor
Your franchisor should be able to provide help in choosing the best location. They already have volumes of information about what areas are best for franchises, and some franchisors even have realtor connections and legal help to make the process easier.
Negotiate a favorable lease
About the terms of the contract for the location, it can always be tricky. That is why it is beneficial to seek the help of the franchisor and/or their legal team to prevent mistakes that can hamstring a new franchise.
In any case that favorable conditions can't be agreed upon for a particular location, it may be an indicator that it is not the right place to choose.
Common Questions About Choosing a Franchise Location
Q: What are the common mistakes in choosing locations that franchisors and franchisees usually ignore?
A: Location is everything for a business. It can make or break a franchised unit or business. Failure to consider the quality and volume of a site's foot traffic before awarding a franchise is quite dangerous, and this might largely contribute to sales targets not being met. Quality of foot traffic means that the people in the area are within your target market. Volume, on the other hand, simply means the number of people in the chosen location.
Q: If there's an instance where a new franchisee wants to own multiple franchise locations immediately, what will you advise the franchisor? What do you recommend to the franchisee?
A: We usually encourage franchisors to look for multiple unit franchisees because it will be easier for them to manage fewer people given the same number of franchise units. We just advise our franchisor clients to do their due diligence and screen the potential multiple unit franchisees and their locations to ensure that the groups will be successful.
The ultimate point to remember when selecting a franchise location is to clarify first with the franchisor beforehand the type of support they can give when it comes to the real estate process.
Make sure to ask about each of the points mentioned above and find out whether there any problems with it. Finally, make sure to check the timeline and how long is it to finish the business.
This type of research takes time, but it will give you the knowledge you need to avoid untoward incidents as a franchisee. The point is to understand how the overall process of franchise location selection works and if it something that you should do together with the franchisor.
In the end, we hope that you find this guide useful in choosing the best franchise location for your dream business. Moreover, beware of the scams in franchising and make sure that the business has a trademark. Securing this two help in preventing problems in the future. Check more of other useful content and guides at Franchise Market and let us make your franchising experience fruitful and successful.
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Disclaimer: Franchise Market Philippines strives to provide relevant and accurate information in all its articles. However, some information in our articles may differ or might be outdated from what you can see or read directly from the establishments' or businesses’ websites. Please get in touch with us directly for any discrepancies.