Franchising can be a very successful partnership if it starts with a good development plan and process.
Trade Area Analysis
It is critical to territory development and site selection that all parties have a clear picture of the target customer. That target is not always a narrow one. Most franchised food concepts appeal to most demographic segments and there can be the matter of menu prices and locating the daytime population. We create target points within large geographies and then group these targets into territories. This process then results in a demographic profile for each target which can then be used by the franchisee.
If you are a franchisor that wants to grow, it usually starts with a group of development territories that are sized appropriately. It should be known up front how many units can be placed in an trade area and at what pace. Too often the territories are drawn for the franchisee candidate in order to get them to sign their development agreement. We understand that selling requires some negotiation. The problem usually arises after they committed to five stores and build two in a manner that hurts long term growth. Good planning can prevent years of impact and missed opportunity
With a proper territory and targets, a franchisee candidate should feel rather comfortable that the roadmap to success has been created. We enjoy spending time with the franchise candidates early in the process even well before they sign their agreement. The time it takes to bring a target to a site and then to contract can take many months. Starting early can get the franchisee to focus towards hiring and operations faster.
We have been called by frustrated franchisee’s after signing a development agreement that had too many requirements or they didn’t really have any discernable “home run” trade area in their territory. A lot of this angst can be avoided if we can analyze the territory ahead of time and give you some good reasons to redefine what the franchisor is proposing.
Market Planning and Site Selection
Buying and leasing real estate will often be your most expensive purchase in the franchising process. It can get more expensive if sales are not achieved resulting in a higher percentage occupancy costs. If your first unit is not successful you will more than likely never get to the second one which is a dream killer and very disheartening. It is important to have a plan for what sites are going to be developed first and last. Building the easiest site first may also be the one that doesn’t turn out as much profit. While we can’t guarantee success, we can provide a lot of analysis and experience so that your best opportunities are realized first.
You have one chance to minimize the cost of entry whether it’s a purchase or a lease. In the case of a purchase it is important that you contract to get enough time to get a permit before your earnest money becomes at risk or the contract expires. When leasing it is critical to try to negotiate use exclusives and landlord contributions towards build out. Assuring that the available utilities meet your requirements is also important because it can be very expensive bringing those up to standards.