By Lori Karpman
Anyone in the food industry will agree that the three most important elements of success in franchising are location, location, and location. Where one chooses to set up their business has a direct, substantial impact on customer inflow, top-line sales, and bottom-line profits. The restaurant’s setting needs to be able to support the business now and in the future as most franchise agreements have an initial term of 10 years (and often undergo renewals).
Before choosing a location, it is important to have an understanding of the consumer and their eating habits, as well as many other aspects of business operations. Franchisees must consider the following questions:
- Who is the ideal/target customer? Where do they live, what are their ages, and eating habits?
- How long are people willing to travel to get to the restaurant? Do they walk, drive, or take public transit? In the case of the latter, easy access to local transportation is vital
- What is the ‘customer traffic’ in the area? This refers to the number of consumers visiting the location, vehicles passing by the area, and the number of pedestrians who can walk to the place.
Note: The best way to assess customer traffic is to visit the area several times a day, including weekends.
- What does the franchise sell—is it a product or service?
- What size location is required? Does the site require additional storage space and, if so, does it have to be on-site, or can it be a remote location?
- What are the demographics of the area? Do they constitute the business’s target market?
Note: It is important to gather additional information about the people who live in the area, such as their age, income, family size, number of cars each person owns, etc.
- Does the franchise demand a parking area or a terrace? Are there any other space requirements?
Note: It is a good idea for franchises to have around five to eight parking spaces per 93 m2 (1000 sf) of retail area.
- Does the store need special ventilation or a certain amount of frontage
- Does the business involve both online and in-store sales and, if so, will extra inventory be required—as this will call for additional dedicated space.
- Does the business cater to only certain times of the day? For instance, is it a breakfast-only place that closes at 3 p.m., or do the customers come at all times of the day?
- Who is going to go on the head lease? Is it the franchisee or the franchisor? If it is the latter, they will sublet the space to the franchisee.
- What side of the road should the franchise be on—access or egress?
Note: Franchisees should make sure their restaurant is on the ‘right side of the street.’ For example, a breakfast place should ideally be on the side of the street people take in the morning to get to work. If it is a diner, it should be on the evening traffic side of the street. While it sounds silly, truth is customers do not like to cross medians or droves of oncoming traffic.
- How much can one spend on total occupancy cost, including the rent and any common area expenses, or are there other financial tenant obligations
- Is there anything unique about the franchise’s concept that requires special accommodations?
- Will the restaurant require distinct lighting, fixtures, or other hardware installations?
- Are there restrooms for staff and customers? Does one need an accessible washroom?
- Is there adequate fire and police protection for the area?
- Is there a sanitation service available? Are there any recycling measures in place?
- Are there any laws restricting sales to certain days or hours?
- Are there any laws or restrictions on the sale of the franchise’s product or service?
- Does one plan to work in the restaurant? How far is the place from where one lives?
Note: Commuting can take up a lot of time, and travelling may not be feasible.
Addressing the above concerns is essential in selecting the right location for the business. One must remember the selection of space is a long-term commitment and requires a high capital investment.
Certain types of products dictate the choice of location. For a convenience purchase, such as takeout food, easy access to let the customers in and out is important, as is parking; however, if it is a full-service specialty restaurant, people are willing to drive a little longer. Parking remains important no matter what kind of service the restaurant provides.
Before one signs any lease, it must be reviewed by an attorney and approved by the franchisor. There are often sets of rules and procedures related to franchise locations (e.g. non-competition clause). Franchisees may also want to contact the local city hall and/or zoning commission to make sure the franchisor’s signage package is acceptable, or if it is under any restrictions. For instance, in the case of the latter, there may be limits on the size and/or imagery one can use to advertise their business. It would also be nice to know what, if any, construction projects are planned for the area as this may affect the customer’s ability to reach the store, or it can signal higher sales volumes in future years if there is a highway or new residential area on the horizon.
When choosing a city or province to locate the food franchise, one must research the area thoroughly before making a final decision. This includes reading local papers, speaking to other small businesses in the area, and obtaining area demographics from the local library, Chamber of Commerce, or the Census Bureau. Specialty research firms that cater to retailers also provide demographic information. Any of these sources should be able to provide details about the area’s population, income brackets, and median age. Once franchisees are able to figure out who their target customers are, they must work toward finding a location closer to where the consumers live, work, and shop.