Here’s How Your Location Affects Your Franchising Decision
By: Bill Bradley
Location, location, location. It’s as important in franchising as it is in real estate. The place you choose to open your business will affect your franchise decision every step of the way—the opportunity you invest in, your ownership style, your profit margins and more. Read on to discover the ways your location affects your franchising decision.
Open Markets
Early on in your franchise discovery process, you will talk with your franchise development representative about which markets have availability. Depending on the franchise brand, you won’t necessarily have to live in the market. Ideally you will have enough familiarity with the area that you can make appropriate marketing and hiring decisions, but absentee ownership is possible and gives you the freedom to run your business from anywhere.
Many franchisors, however, are looking for franchisees who can be owner-operators. That means you need to either live in an area that hasn’t already been claimed by another franchisee of the same brand or be willing to make a move. Before you start reaching out to franchisors, be sure to know whether you are looking for an absentee opportunity, owner-operator opportunity or something in-between because this will decide how important your current location is in your franchising decision.
Type of Industry
Certain industries do better in certain locations. You wouldn’t open a surf shop in Colorado or a snow removal business in Florida. While it’s not always so obvious, some products simply have strong regional affiliations that make them more difficult to sell beyond that region—or maybe the franchisor isn’t looking to move into some areas.
All franchisors have a list of locations they are scouting for growth. These areas have a large enough potential customer base to support a franchise location and the factors that have previously contributed to growth for other locations, like a particular climate, the number of families and a presence of complementary businesses. During your early franchise discussions, you should talk to your franchise development representative about whether a particular industry is likely to work in your area.
Operating Costs
The location that you are eyeing as the home of your franchise will undoubtedly have an effect on franchise operating costs that you should consider as you explore new opportunities. Generally speaking, in cities and states with a higher cost of living, the cost of operating a business of any kind is also higher. These increased costs show up in higher real estate and rental prices, licensing costs and in wage requirements. It’s also important to remember that operating costs can fluctuate from year-to-year as your business grows or as legal requirements change.
While these costs do seem to pile up quickly, the areas with higher costs of living are also those with more people (and more potential customers) who are used to paying slightly higher prices than customers in other parts of the country. Depending on the franchise opportunity you choose, suburbs and smaller towns might be a perfect, low-cost location for your business.
