Franchise Real Estate in 2024: 3 Challenges and 3 Opportunities

“Local knowledge matters,” says Dan O’Connell, Vice President of Site Development East Coast for Premier Retail Support. At least it does when it comes to opening a successful franchise location in 2024. With 30 years in commercial real estate leasing, O’Connell says it all breaks down into understanding demographics, site selection, leasing variables, and construction variables. Easier said than done.

Here are his top three challenges and top three opportunities in the retail real estate arena for the coming year and his best advice for dealing with them.

Top 2024 real estate challenges

1) Bad news first: Finding an ideal location this year could be difficult. With prime locations limited, the challenge is to not settle for a Class B location when what you need is a Class A site to achieve your goals. Patience is required to find a space that aligns with a brand’s critical factors: proper square footage, demographics matching the target customer base, visibility to the primary traffic corridor, accessibility, parking, and economic feasibility, among others. To ensure affordability (and profitability), O’Connell recommends using a tenant rent formula based on your specific use. “Remember the importance of the six variables in real estate, he says, “location, location, location.”

2) The second area likely to prove challenging this year is lease negotiations. Settling for lease terms that fall below the local or industry norm poses a risk, and O’Connell advises potential franchisees to be well-informed about industry norms and local market conditions. For example, “Negotiations should include options that align with industry standards, such as two 5-year options for a 10-year lease term,” he says. “If a potential landlord doesn’t agree to standard option structures, consider exploring other centers that do.”

3) You must do your market research and make sure you are fully prepared before settling on a location. Relying solely on brokers or franchisors for market information can be risky. Lack of awareness regarding anchor tenants’ potential departure, or of significant future municipal projects may affect a franchisee’s success. O’Connell urges franchises to take the initiative and educate themselves on leasing activity in their target market. He concludes, “Stay informed about potential challenges or opportunities that may have an impact on the chosen location.”

Top 2024 real estate opportunities

Now that you know your challenges, what are the upsides to launching a retail franchise location in 2024?

1) First, there are more options available today than ever before. Sites such as the Franchise Opportunities Guide from Franchise Update Media can be helpful in winnowing down your choice of brand by industry, investment level, location, and more. Today’s diversity of franchise brands means a franchise exists to appeal to just about anyone, no matter their interests, background, or expertise. That’s why it’s essential to explore a variety of franchises and industries before deciding on one that aligns with your skill set, goals, and time frame. “A broad search may reveal hidden gems and unique opportunities,” says O’Connell.

2) One of the many attractions of franchising today is the ability to match your skill set with an industry that aligns with your passion. This is an ideal scenario because it can lead to a more fulfilling and successful business venture. “Consider Harvey Mackay’s advice to find something you love to do,” O’Connell says. “Building a successful business is challenging, but aligning your passion with your venture can make the journey more rewarding.”

3) Finally, O’Connell sees an enormous opportunity in Reid Hoffman’s idea of acting on ideas. Building a successful business requires planning and executing the plan to test its viability. He advises entrepreneurs to embrace the scuba diving concept of “Plan your dive, then dive your plan.” Proactively take steps to implement your business plan, continually adapting and refining strategies based on real-world experiences.

Make your move

The success of franchise locations in 2024 hinges on overcoming challenges related to location selection, lease negotiations, and market awareness. But beyond these, many opportunities exist for the savvy entrepreneur. By exploring the many diverse franchise options available and aligning your skill set, goals, and passion within an industry and with a brand, you can build a successful business and achieve your business dreams.