Why location is crucial for a franchise

To assist with working out what sort of premises and location you are likely to require, start by asking yourself several questions: How do my clients find me? How does my business best generate leads or new clients? Do my clients need to or choose to visit my premises?

Following are points that require serious consideration. Some will be more important to certain types of businesses than others:

Foot traffic

Retail businesses heavily rely on foot traffic. For example, you will often see franchised coffee shops positioned in front of bus stops, in shopping centres or out the front of office towers so they are easily accessible by patrons.

Shopping centres are ideal for some businesses, however, it's the position within the shopping centre that will make or break your business. Take a Boost Juice site, for example – passing foot traffic is critical to the success of their business. You won't find many people going into a shopping centre, specifically to buy a $5 smoothie. However, if you’re walking by, you will stop to grab one. If your business doesn't rely on or need passing trade, save the dollars on the higher rent and invest them into marketing.

Choose your neighbours wisely

Your surrounding tenants can have an effect on your business so it's important to know who your neighbours are. Whilst you may welcome competition, if your business is similar to another then you will be competing for the same dollar. For example, you see this happen with video stores, camera shops and mobile phone retailers. Eventually, one will close down as most try to compete on price, instead of service and offering additional benefits to customers. Sooner or later, the margins become just too skinny to continue.

Due diligence

During the due diligence phase, ensure you ask surrounding businesses how they are trading – especially in shopping centres. Ask them how long their leases are, and if they will be renewing. Is the landlord proactive and easy to get along with? If you're looking to sign a five-year lease, what are the future plans on the surrounding area?

Rent and lease

All shopping centres, especially the major ones, have what's called ‘dead spots’ or, to be politically correct, ‘limited passing traffic’. If you're not next to or near an anchor tenant – for example, Kmart, Myer, Coles, Woolworths – you're likely to struggle a bit. If you're going to commit to a shopping centre lease, you need to ensure you don't end up in a dead spot. You may need to invest several days counting people in different locations around the centre. Remember – don't believe the centre manager’s figures. Do your own independent research, if you want to be sure.

Main road positions

You will pay a premium for such locations – even more if you're able to erect large signage.

Retail businesses such as fast food, service stations, car yards and tyre shops put a lot of thought into site selection. There are many selection processes you can go through, such as counting the cars that drive by each day. If you know your numbers, you can work out how big to build the store by the likely passing trade and local population, which can provide a business turnover guide. Some franchisors will even charge more for the franchise rights, based on the market demographics for certain locations.

Parking

If they need to, make sure people can access you. If you are on a main road position that doesn't allow for parking close by and the nearest cross street is half a mile up the road, then you are going to miss out on business because of this. I advised on the relocation of a business, less than 500 metres from the present location and, in the short period following the move, it has almost doubled its turnover.

Gut feel also plays a part in the decision. However, if you approach it scientifically, you’re less likely to make a poor decision. The only time I let emotion into the equation is if I find suitable multiple sites.

Most importantly, ensure you obtain professional advice on site selection and lease negotiation.

After all, you’re investing tens of thousands of dollars in fit out and set up, so it’s worth getting it right. Once you have selected your site, the next step is the negotiation process to purchase or lease, which is another process in itself.

Read about buying a franchise and running a franchise.

The Franchise Council of Australia is a not for profit membership organisation that is the peak body representing the franchising sector in Australia.