How to Find a Good Location for My Franchise
You generally have between 90 and 180 days after signing the franchise agreement to find a location, and sign a lease, (or the franchisor can terminate and keep ALL your franchise fees paid). You generally must open the Store with 12 months from signing the Franchise Agreement (or again the franchisor can terminate). …… this may be insufficient if the location needs substantial work before it is even in a “Vanilla Shell” condition-or if there are just no available sites in your area. With franchise concepts that require a brick and mortar facility-it will be critical to understand the current available locations in your area BEFORE you sign a franchise agreement. Please do not sign without doing this due diligence as you will be risking your initial franchise fee, and you will get no refund if you cannot find a site (to your reasonable satisfaction). So do your driving around BEFORE you sign a franchise agreement.
And use a realtor-they get paid from the Landlord. I would first yourself look at EVERY available commercial space in your area that is approximately the size range and general desired visibility. There frankly may only be a couple or none. You them start a long arduous path of lease negotiation everything from price, tenant improvements contribution, options to extend term, and general condition of everything–these are usually the main business points a local realtor will help with; but you have to be vigilant in your pricing requirements for your particular area and franchise concept.
You don’t necessarily want to have to take a perceived great location with bad lease terms or a not so great location with good lease terms. You should get what should be close to ideal for you to have the best success. And remember even if you find “the perfect” location, things may become too burdensome to accept the bad lease terms and you have to disengage emotionally ad be able to walk away-that is always the toughest. Regarding lease negotiation, while a realtor, and the Franchisor can assist in the business points, remember whose interests they are really protecting…not yours.
Please do have a business attorney on your side in the lease negotiating. I have negotiated and reviewed many leases for prospective franchisees, and for non-franchisees. There are many legal points the realtor and Franchisor don’t know or care about, that an attorney will assist you with. All leases are negotiable, even the so-called forms. Landlords expect this, so don’t skip over this very important step.
I tell all my clients although this is a time of excitement for new adventure, you must to prepare for, or at least have an (internal) “exit plan” understood from the outset-what if things don’t work out after XX years-how long can you afford to lose money or how long can you afford to earn only XXX per month/year, etc….Just remember the best advice for going into any business, is a good way to get out. While the franchisor would just say to put up for sale if you get into financial or other trouble, we both know a failing business is not easy to sell and certainly not at anything near what you will have put into it-my best advise on an exist plan is the lease term-5 years, with 5 year options, rather that an initial term of 10 years. That way, you know your outside liability going into your 5th year you can be in a position to make informed decisions. Most Franchisors will not go after you if you simply close down for financial reasons, but a Landlord will. Limiting your personal guarantee with both the franchisor and the Landlord is crucial, especially if you have significant other personal assets, but is extremely difficult.
Just keep asking and pushing.
