Site Selection: Choosing the Best Location

How can you talk about site selection without mentioning "location, location, location"? There, we did it. Now, let's dig deeper.

(Note: This is targeted to franchisees who need a retail storefront, office, or other physical location. Franchisees with a home-based or mobile concept can focus on the challenges involved in those franchise models.)

Let's begin with the story of a drive-thru coffee shack near my home. It wasn't a franchise - we're only using it to make a point. Her "territory" was prime: a coffee-loving demographic and plenty of vehicular traffic, with weekday commuters headed to work and weekend shoppers headed to and from the local mall.

The solopreneur did a lot of things right: she chose a busy state highway that fed thousands of vehicles onto the Interstate every morning; painted the shack lovely bright colors; erected a large, visible sign right next to the road; and chose a popular local coffee brand. Getting in and out was easy, too, via a one-way U-shaped driveway.

One problem: she set up on the wrong side of the highway, the one commuters used on their way home. For those heading to work, buying a morning cup of joe meant turning left across oncoming eastbound traffic. Exiting meant making another left, again across the eastbound traffic to rejoin the crowded westbound traffic speeding its way to the Interstate. Talk about a fatal flaw!

Too bad her location resulted in limiting her Monday-to-Friday rush hour customers to people who like a hot cup of java on their way home (not to) work. I'm sure it was a great location in terms of availability, cost, visibility, and more. It just had that one problem.

Long story, but important. Choosing the best site for your franchise can be a make-or-break decision. After all the hard work researching and choosing a franchise and forking over your franchise fee, it'd be an awful shame to blow it with one bad decision.

Of course if you had the guidance and support of your franchisor (who wants you to succeed so they can count the royalties each month) this could never happen, right? Well, mostly never, but franchisors are not omniscient, and plenty of mistakes have been made around site selection.

If you are opening a franchised unit where you live or nearby, your local knowledge, coupled with the franchisor's experience, will minimize the chance of failure and maximize your chance of success. So lesson one: work closely with your franchisor on selecting the best location. They've done this before; you haven't. Also, many franchisors require that you get their approval for a site before opening. Check your franchise agreement and/or FDD.

Second, finding the optimal location is not an emotional, gut-feeling type of decision. "I just know this site will work!" Instead, it must be a disciplined, rational, systematic process. And while site selection is not a "science," it is all about numbers and these days relies increasingly on complex computer modeling tools. Ask your franchisor if they use these tools, and how they can help you.

But don't rely solely on computer models either. Do some basic research. If you think a site is perfect, spend some time there. Sit outside the site you're considering. Check traffic patterns, counting cars and foot traffic by day part - especially for a food concept. Are you expecting to make your money at breakfast, lunch, dinner?

Cost, of course, is a huge part of this decision. Rent and payroll are usually the two largest expenses for a business. And while everyone wants the perfect "A" site, these almost always cost more, unless you get lucky. So ask yourself, What's the trade-off between higher rent and higher traffic? You have to run the numbers. But first you have to know what they are.

Next week: Part 2 will dig deeper still, discussing rent/lease vs. buy/own; negotiating with landlords; working with brokers, agents, and attorneys; researching a neighborhood; and more.

8.3: Financing Options
9.2: Other Factors To Consider

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