Site Selection

Hopefully, you are adopting a standardized real estate process that encompasses a clearly defined all-in-one strategy for site selection, lease negotiation, and legal review. I realize that, as a franchise executive, you may not have the time, resources, or capabilities to put this process in place. This four-part series highlights 11 key points for standardizing your real estate process.

Introduction: A Reality Check for Real Estate Services

If CEOs visited and audited each location in their system, they would discover that there is up to a 30% error factor in visibility, convenience, tenant mix, economics, and lease terms. This is the single largest contributor to a franchisor's annual turnover rate.

Real estate plays a central role in the overall success of a franchise system...

As many of you already know, there are significant changes to lease accounting on the horizon. The impact will be significant to companies' balance sheets and specifically to the franchise community. Companies that have significant operating leases will see the biggest impact, although everyone will feel the effect in some capacity. The proposed standard is tentatively scheduled to be released in 2013 with a possible effective date in 2016. Private companies may see a one- or two-year deferral which is consistent with new standards being issued and greatly influenced by the recently established Private Company Council (PCC). The PCC is a new body that will work with the Financial Accounting Standards Board (FASB) to determine whether and when to modify U...

If you have a telephone at any of your franchise locations, you are most likely being overcharged. If you have trash service at any of your franchise locations, you are probably paying more than you have to. If you pay for worker's compensation at any of your franchise locations, there are almost assuredly errors in the way your coverage was categorized. To put it more simply, if you have walls, doors, workers, and customers, the monthly bills you're getting are probably too high.

Recurring monthly expenses like phone, Internet, trash, and alarm services can be a wasteland of, well, waste...especially for owners of multiple franchise units. Multiple locations spread over even one metropolitan area most likely means separate service bills and contracts for each service at each location...

While franchisors typically supply name brand recognition, a proven business concept, and extensive franchisee training and ongoing support, most will not sufficiently help you with your site selection or commercial lease. Deciphering the lease agreement document (often 50 to 60 pages in length) and negotiating the best deal is often left up to you. And negotiating this against an experienced landlord or the landlord's broker can be a challenge. Knowledgeable real estate agents and brokers are specialized sales people. Their job is to sell franchise tenants on leasing their location at the highest possible rental rate.
Multi-unit franchisees may have a little leasing process experience - yet they have to negotiate against seasoned professionals who negotiate leases every day for a living...

Every commercial landlord wants national franchises and chain stores for tenants. They have name recognition and a proven track record in business. So when it comes to expanding your own operations and negotiating further leases, lead with your strengths. If you are opening a franchise location, you are automatically more desirable to a landlord. If you are opening your third, fifth, or tenth franchise location, you are even more attractive because you are proven successful! Here are three strategies to implement in your lease negotiations.

Multi-unit franchisee owners should be fully aware of the specific considerations relevant to small commercial site development prior to committing to a lease or property purchase. The challenge of fitting many required components onto a small parcel can be daunting, especially when considered in conjunction with evolving local ordinances and state regulations, which are on the rise. The best method of ensuring that the proposed site will work, and do so in the most efficient manner possible, is to apply rigorous due diligence in the development design process.

Parameters for successful development of small sites for development-ready outparcels versus stand-alone or freestanding sites have somewhat different requirements however, they do share a primary development goal...

A great franchise in a poor location will become a poor business. When it comes to site selection, one difference between an independent tenant and a franchisee is that, presumably, the franchisee will be getting real estate help and support from the franchisor. Whichever side of the coin you're on, here are some site selection tips for leasing commercial and retail space:

Potential franchisees should take a lesson from cautious pedestrians who look both ways before crossing the street. Before paying a substantial franchisee fee, you must be aware and understand that the franchisor may not, or simply won't, be able to handle every related detail for you.

Please don't get me wrong! I am a firm supporter of the franchising concept. There are many existing franchises which are very successful as they have a strong product/service as well as the right people in place. I have found, however, that many franchisors can often fall short in the area of real estate help (specifically in regards to site selecting and lease negotiating). Finding the right location is vital to a franchisee's success or failure...

Airport concessions may, at first glance, seem like a risky endeavor. Traffic has been steadily declining for a year - down nearly 12 percent in February 2009 when the FAA released its last traffic statistics - and the barrier to entry remains high.

But consider the upside. The largest U.S airports host an average of 60 million passengers each year. Not one U.S. air carrier offers their coach passengers breakfast, lunch, or dinner service on domestic flights. Locations offering healthy, fresh, portable options are limited, yet travelers often have hours to wait for delayed flights, missed connections, or - in the best case scenario - a shorter than average security wait time.

As multi-unit operators or franchise systems pursue options beyond traditional locations, how can they prepare themselves? Here's what I consider a good "check-in process...

It's hard to ignore the negative press about the economy, and it's almost impossible not to cringe at the mention of credit rates and loans. But (and there's always a but) the glass remains half full--or possibly even overflowing--for those lucky enough to be tenants in today's real estate market.

To gain some perspective on being a tenant in this economy, I interviewed one of the largest landlords in the country; a large Washington, D.C.,-based landlord; and a family that owns a few neighborhood shopping centers. To my surprise, I received a very candid response from each. All three confirmed that this is a terrible time to be a landlord, but a great time to be a tenant--and each told me ways they would be pushing the negotiation envelope in this market if they were tenants...