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Question: How should I assist my franchisees with the site selection process?
Answer: After the process of selecting the proper franchisee, site selection is the next most important decision you and your franchisee must make! The site selection process requires that you (1) understand your customers; (2) understand your new market; and (3) understand the specific site requirements.
First, in order to select the proper location for the franchised restaurant, you (and your franchisee) must know who your customers are and where they can be found. You must be able to identify the demographics of your customers.
Second, when considering a new market, you should plan your franchise development into sub-markets so that you maximize number of franchised restaurants that can be placed in a new market to maximize brand exposure in this new market, yet at the same time, provide each franchisee territory with sufficient protection so that your franchisees do not encroach on one another.
Third, after you have determined how many units can be supported in a new market and a franchisee has determined which sub-market the franchisee wants to develop, you will next need to train your franchisees about the specific site selection criteria. For example, what is your site selection criteria related to the site’s proximity to retail, schools, certain number of rooftops? What are the required demographic characteristics? What are the space and real estate size requirements? What are the requirements for parking, ingress, egress and site visibility? And, is the space affordable?
Finally, from the franchisor’s perspective, you will want to make sure that you have control over the real estate in some way, in case you want to take over the operation of the restaurant in the event that your franchisee turns out to be a bad operator, but the site is a good location. There are several strategies to protect the franchisor with the location, such as the franchisor leasing or purchasing the real estate and leasing or sub-leasing it back to the franchisee, or a franchisor option to accept assignment of the lease upon the occurrence of certain events, such as a default under the lease.
In short, site selection is critical to the success of the franchisee and the franchise system.
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