Avoiding a Franchisee’s Biggest Mistake – Commercial Real Estate

Article by Scott J. Simcik and Albert L. Harlow, Jr.

Securing the best location for your Franchise can be daunting.  It use to be you could just drive around and find a location easily. It use to be the lease rate and terms were what they are. Today, if you do operating like we would in the 2010s, you will do yourself and incredible disservice and it will cost you a lot of unnecessary funds.

Everyone wants that “favorite” location. Yet many Franchisors have little to NO ability to control the standards, because they do not have a quality real estate system that is an accountability-based core process. Typically Franchisors simply unleash new franchisees into their local agency networks with little to no basic instructions on best-practices or franchising norms. They just let them go off and “find it fast and sign”.

While commercial real estate can be a franchise's biggest mistake, it can also be the biggest contribution to its success. Today when working inside the commercial real estate industry, there's technology available like never before. Plus if you have a practiced team on your side, with patience, are process-focus, and can maturely control the emotions of all parties involved, results ultimately providing a much grerater chance of success is assurred.

When we turn over a franchisee to Click IT’s commercials realty masters, they have one basic rule. The goal is to find every possible location and then to narrow the list down to the top 3 locations. Then, ongoingly, they keep this identified top three locations in all their minds, first and foremost, and at all times. This keeps a franchisee engaged without painful symptoms of drift, or panic which can be the root cause of their anxiety during this process of finding their location, when one of the top three doesn't work out or becomes undesireable. They simply need to replace the location with a new top three location.

Chasing one location for 30/60/90 days, securing an average location at higher start-up capital costs, and or losing it, which can cause a damaging level of emotional let-down (starting over), is unfortunately the franchising norm. It's because nobody wants to keep up the “daily accountability” effort that is fundamental. Developing a slow and steady process for finding multiple location as options to keep open at all times gives the franchisee and their realty team the financial leverage needed, so the best choice ultimately is made without any doubts or regretes later.

Franchisees just want a space and brokers want them to have one quickly, regardless of the highest commitment to quality. Why look for leverage when you are certain a Franchisee can simply pay the Landlord for capital improvements and a higher rent? This impatience can cause a Franchisee financial decline after opening!

A Franchisor's values are communicate throughout a Franchisee's onboarding process. Ultimately, it sets the foundation for managing expectations. If Franchisees accept this core value, Franchisee’s will enjoy a much longer term of success, real profits and an annual retention, not to mention establishing a systemwide culture of improvment.

If a Franchisee can answer one question to protect sustainable profit long term, what would it be?

Remember, commercial locations come on and off the market daily and weekly.

Would you rather sign a lease within the next 90 days and spend $100,000 more in start up capital and $1,000 more in monthly rent for the life of the lease, on an average to poor  location?

OR would you rather wait six months, have a perfect, highly visibility location, save a hundred thousand dollars in capital, and have $1,000 less in monthly rent?

Would we each not want this question asked, if we were anxious, emotional and inexperienced first-time Franchisees?

At Click IT, real estate is the first core process we begin because it greatly impacts revenue and profit. We remind our franchisees to remember this as we move through this artuous task that can take much longer than anyone would expect at first, without knowing the process. At the conclusion, when the lease is signed, after working with our team of commercial real estate experts, you will have a complete understanding of your market area, the rates other pay for leasing property, and will have no doubt have negotiated the best deal that could have ever been realized any other way.

Controlling the acceleration and savings of time and financial results is created by a daily commitment to the top three location, leveraging them at all times until a location is secured!

We encourage our team everyday when we start working with a new Franchisee, to always have a genuine top three locations selected and in everyone's mind; so not any one of these locations is too dominant in anyone's thinking. This gives leverage, and helps to keep our Franchisee focused on what's important during our weekly connect calls. It also helps to prevent any potential of scattered thinking, and wasted energy.

In conclusion, the earlier this process of beginning to look for the ideal location in an area is started, the better this journey will be for the franchisee.

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