When leasing commercial space, many of the same rules apply as they would for any negotiation. Ask for more than what you want. Don’t get emotional. Be ready to walk away. Never accept the first offer. But there are many other factors to consider, for both franchisor and franchisee.
Setting Up Franchisees for Success
Because location is so important (in fact, according to the International Franchise Association it’s the number one reason for failure or poor performance), as a franchisor you’ll want to give your franchisees as much site selection guidance as possible. The details of your involvement can vary and should be carefully thought through and outlined in your Franchise Disclosure Document. Many franchisors maintain total control of site selection by choosing and leasing the site and then subleasing it to the franchisee. This is smart because you’re not relying on a franchisee to make a decision on something so crucial to his or her success – and ultimately your own success as a franchise. Some franchisors help with site selection but leave it up to the franchisee to negotiate the terms of the lease. This may be a gamble because your franchisee could negotiate poorly and end up with the wrong amount of space or an inappropriate term, not to mention possibly missing out on such perks as build-out assistance or allowances. Many franchisors work with a franchise development company, which has experts in the fields of franchise site selection and real estate, to help establish this vital process.
A Few Key Pointers
If you find yourself in the situation of searching for a site on your own, here are some general tips.
- Parking can make or break a business. Make sure there’s enough by visiting the site at different times throughout the day. For example, there could be a popular restaurant nearby that causes a parking shortage during their lunch and dinner rushes.
- The tenants around you can affect your business. Being near businesses that are complimentary to yours can help drive traffic to you. Of course, you also want to stay away from direct competitors.
- Do some sleuthing on what the tenants around you are paying and what kind of incentives they received. This will give you a leg up in the negotiation process.
- Talk to other franchisees to benefit from lessons they’ve already learned about choosing a site.
- If you’re handling the lease on your own, don’t sign anything until you’ve had a professional review the lease documents.
For a decision this important, you’ll want to learn as much as you can, whether you’re offering site selection support as a franchisor or want to be as prepared as possible as a franchisee. Here’s an article from Entrepreneur to get the research ball rolling: “Three Tips for Finding a Franchise Location.”