Opening a New Franchise Location--Part 2, Real Estate & Site Selection

This is part 2 of a 6-part series on opening a new franchise business. To see part 1, Finance, click here. Future installments will dig into construction, permitting, training, and marketing.

Once you have locked down the financial aspect of opening a franchise, the next step is to consider site selection. Today’s real estate market, both commercial and residential, is dramatically different than it was even 10 years ago.

In 2024, the market for prime sites is highly competitive, and anyone looking for space must find a balance between being patient and being aggressive. To win in this environment, always visit multiple sites in your market, be responsive with landlords and brokers, and be clear and honest about what you will negotiate and what you won’t.

Before starting the site selection process, consider three key things. First are the demographics of your target market. Understanding the local population, its size, age, income level, and consumer preferences is very important to the long-term success of your new franchise.

Second, consider the visibility and accessibility of your potential location. The site’s visibility from the road, foot traffic, and ease of access (such as parking, ingress/egress) are essential for attracting customers.

Third, consider your competition. Jeff Becker, manager of construction and real estate with Penn Station East Coast Subs, advises franchisees, “Analyze the competition in the area and have a plan on how your brand will attract customers. Either too little or too much competition can be a bad thing.”

You should expect some support from the franchisor in your site selection process, but just how much help will vary from brand to brand. “The extent of support can depend on the brand’s size and resources, so it’s essential to clarify what assistance is available to franchisees,” Becker says. Presumably, the franchisor has experience reviewing sites and should be able to offer franchisees, at a bare minimum, a lease analysis checklist to help in your search for a suitable site.

Whether you are a single-unit franchisee developing along with other franchisees in a market or a multi-unit franchisee developing numerous locations or territories yourself, you want to locate a prime spot that aligns with your brand’s image, while also allowing you to build brand awareness. With multiple locations or territories, you might focus on a market saturation strategy as brand awareness grows, ensuring each site complements the others and doesn’t cannibalize the sales of your other locations.

Avoiding common mistakes

It can also be helpful to be aware of these common mistakes:

• Not researching the local market thoroughly. Franchisees must be aware of their local market, from potential zoning changes to demographic shifts. An understanding of the tenant mix of the market in your area is vital.
• Not paying attention to lease terms. Unforeseen expenses can hit hard. You must pay attention to things like rent increases so you can plan ahead more effectively.
• Not working with real estate brokers. Great sites don’t come on the market with “For Lease” signs in the window these days. To help you find the best spaces for your specific brand, it’s important to work with a broker who knows landlords and property managers in your proposed market.
• Not working with attorneys. The lease negotiation process can be challenging. Having experts to assist you can make all the difference in your initial and long-term success.

Today’s real estate market is different thanks to ongoing changes in both technology and consumer preferences and demand. For instance, advanced mapping and analytics tools allow franchisors and brokers easier access to potential sites. Competition for sites has increased. Since 2018, the total number of franchise units grew by more than 13%. Says Becker, “It’s essential that franchisees act quickly and be very responsive to the broker and landlord when they find a suitable site location.”

Ginny Gaylor is an award-winning writer and editor based in Greensboro, North Carolina. She has more than 25 years of experience writing on a variety of topics from home furnishings to health care, hospitality to lifestyle. She can be reached through her website, ginnygaylor.com.