How To Avoid The Most Common Franchisee Site Selection Mistakes

Where you plant your first location will usually determine the long-term success of your entire business. Your top trade area might not be your first franchise site, but the one you begin with does set the stage for future growth. Working with franchisees in their site selection decisions over the past 20 years has provided me with valuable insights on the most common mistakes businesses are inclined to make when selecting the real estate.

As you evaluate potential properties, avoid these common missteps to make a smarter selection.

1. Not knowing what you can afford: While you may meet the financial requirements of the franchisor to be a franchisee, you need to qualify financially for landlords, too. Even if you meet the financial hurdle, you may be required to provide personal guarantees for the entire term of the lease. Be aware of what you are committing to. My rule of thumb is to keep occupancy cost (total rent, not base rent) around 10% of your revenue.

2. Having insufficient funds for the long term: Launching a site usually costs more and takes a bit more time than expected. Hurdles and costs always come up. Have sufficient capital to get through the first six months so you can make the investments in marketing.

3. Choosing a "budget" location: A wise broker once told me, “There’s a reason everyone's here: No one goes to the bad spots.” That long-vacant location likely has something wrong with it. Set yourself up for success, not failure.

4. Signing a lease that doesn't align with the term of the franchise agreement: If you have a 10-year franchise agreement, do not sign a 7- or 12-year lease. This will put you in a bad position with either the landlord or the franchisor. This is an easy fix upfront, and much more difficult down the road when you don’t have leverage.

5. Being a test case: You are not likely to be the one franchisee who can do it differently and better than everyone else. You bought into a system. Follow it, listen to corporate and utilize provided resources. Look at what makes existing franchisees successful and follow their leads — they're successful for a reason.

How To Avoid The Most Common Franchisee Site Selection Mistakes curated from Forbes - Real Estate

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