Shop fit out facts you need to know

By Sarah Stowe | 14 Jun 2017 View comments

Buying a franchise with a shopfront, whether it’s retail or food, means a big investment. Inside Franchise Business: The truth about shop fit outs.

Myles Snow, principal at CRS Property, sheds some light on the costs that come with fit outs, specifically in shopping centre locations.

“Generally referred to as Category 1 costs in the scope of works, they can vary greatly from project to project,” he explains.

He says franchisees have the ability to negotiate fitout incentives for the premises they are considering to occupy.

“We find a number of franchisors will want to undertake that aspect of the negotiation and pass on to their franchisee an agreed percentage of whatever the total contribution might be.

“This, of course, will influence the total cost of the fit out to the franchisee.”

Snow says planning is integral to avoiding delays.

“Proper planning is a fundamental part of scheduling shop design and fitouts,” he says.

“This planning is driven by the franchisor and the landlord agreeing on each party's standard administrative protocols for reaching agreement on critical dates, and scheduling well in advance as to when the fitout period will commence.”

Some key timeframes at this stage:

  • This aspect of the works program should be resolved some five to six months out from the agreed handover date set down in the executed agreement for lease.

  • This extends to setting dates for design approval from the landlord’s architect, which would generally take some six to eight weeks.

Shop fit out as brand DNA

Although franchises share the same brand vision and culture, casual dining concept Zeus Street Greek ensures each franchise has it’s own identity.

“It’s very important that each of our stores has its own design identity, but the bespoke elements of the store identity is carefully balanced against the strong Zeus identity that runs through each of our stores,” says a spokesperson.

“We believe it’s important our stores fit within the environment they operate but it’s equally as important that customers feel as though they’ve walked through into a Zeus store and our brand DNA is evident.”

The approach is undertaken because each of the communities around Zeus locations have their own identities and with that comes a varied sense of community identity.

“Each of the suburbs we operate in are unique, so the store personality needs to reflect this,” continued the spokesperson.

The design process is driven up by Zeus’ design team and partners with input from marketing for branding and store experience. The final store designs are discussed collaboratively with each of franchisee.

But how much influence does a franchisor have over design?

“Landlords are always looking for quality innovative design, and their decision to select one franchisor over another could ultimately come down to the overall design and uniqueness of the fitout and the franchisor’s vision,” says Snow.

“However, there are always tenancy fitout design guidelines established by the landlord and their architect that must be followed. For example, items such as signage, shopfront design, including heights, treatments to bulkheads, and quality lighting.

“In most cases, a good landlords design team will work with the franchisor to encourage that uniqueness of retail presentation to complement their own design objectives.”

Designer price tag?

Snow says custom design can come with some costs and delays if not planned properly.

“For example, in a number of developments, there are no shopfronts, ceilings, or utilities supplied to the premises,” he explains.

“Also, in the case of food franchises, these will require in slab services to their specific layout requirements.”

In these instances, Snow says the franchisor will generally require the franchisee to pay for the changes to their standard layout to facilitate the franchisee’s specific layout.

“These costs can be quite significant and fall outside what the franchisee had originally budgeted for in their original business plan,” he continues.

“The combined sum of costs to undertake shopfronts, ceilings, and partial Category 1 costs will require a significant amount of capital from the franchisee, and should be fully understood from the outset.”

In his experience, most of all the fitouts are designed and fabricated off site, irrespective of whether they are standard or custom designed, and then brought to the premises for installation in the franchisees fit out period which is usually a pre-determined, documented four week period.

It is the franchisee’s responsibility to ensure all trades carrying out their fit out works are correctly registered and comply with the requirements of the builder's contract that will exist with the landlord.

Snow says if this key procedure is not followed, in nearly all cases, it will incur delays which sometimes can turn into weeks.

It is in this critical phase, that the landlord’s appointment of a tenancy fitout coordinator becomes a critical aspect of the actual fitout works. That role should include, amongst other things, ensuring the franchisees trades are properly registered to perform the agreed works on site.

“I have seen many delays caused by inadequate notice to utility organisations, such as power, water, communications and gas,” he adds.

“The delays that can be forthcoming from inadequate planning in this critical aspect of the fitouts can be both costly in respect of penalties from the landlord, along with missing out on the planned opening date.

“Plan your work and work your plan.”