Do Your Homework Before You Put On Your Apron !!!
Factors to Consider When Choosing a Franchise
5] Location Considerations
It has been said numerous times before by other business experts. Location matters !
a) Qualitative and cultural factors – When considering whether to take a local franchise to a foreign location or to bring an overseas franchise to your home country, careful consideration and research must be conducted to ascertain whether that franchise will fit in with the cultural norms and customs of that particular country. The entrepreneur should research if the product or service will be received warmly by the people of the foreign country or whether it will meet with a lot of opposition. A franchise outlet that disrespects a country’s people will not generate a profit – full stop. Aiming to take an American franchise such as Hooters and Twin Peaks or a South African franchise like Teazers strip clubs to a conservative country or location will probably have a higher risk of financial failure versus if these businesses were opened in a more relaxed location like Las Vegas or Los Angeles.
b) Labour laws and workforce - The labour laws of that country or alternative location must be factored in. Research needs to be conducted into whether there are enough willing people to work in that particular type of field that your franchise is involved in. Consideration must be given to what constitutes overtime hours and what are your payroll filing responsibilities as an employer in the new location.
c) Territory restrictions – In choosing where to base the location of the new business, an assessment of the potential foot traffic needs to be made especially if you intend to have a brick-and-mortar type of franchise business like a fast-food outlet. Consider the population density of the potential site. Pay attention to the demographic information such as age group, professional status etc. Choose a location that shows promise of good long-term growth for your outlet. Consulting with a local commercial real estate agent and marketing expert may provide useful insight into helping you make the right decision.
d) Competition – When it comes to competition among the existing franchise holders or brand, usually the franchisor will ask the other franchisees if there are any objections to having a newcomer open another outlet near them. In some way, you could say that competition is partially protected within the same brand. If the brands are completely separate, you need to pay attention to the proximity of your external competitor. There is no 100% correct solution to navigating this scenario. Competition can potentially lead to more business for your franchise or it could kill your business completely. On the other hand, if you can strike a good collaborative relationship with your competitor, you can foster a situation where you can both refer customers to each other if your capacities are full. That way, both brands end up winning.
e) Property related costs – During the search for commercial locations, determine the costs of purchasing property. Compare it to the costs of renting. Factor in other details such as building modification costs, availability of equipment or whether this has to be shipped in from abroad. Find out how much property taxes, water, electricity and other infrastructure costs will be. Find out if interruptions in water or electricity supply happen frequently. Not only will this affect productivity, you might have to consider purchasing a generator to keep the refrigerator running in order to protect your food ingredients if you are a fast-food franchise. That is just one practical example.
f) Political climate – A location that is prone to frequent political unrest, mass riots, destruction and vandalism of commercial property is never a good choice. You will always have to spend extra money on the repairs and the insurance premiums. There is also the added emotional stress on top of the monetary burdens to cope with. Avoid locations where there is risk of property being expropriated for no reason. Assess the strength and competency of the police and justice system within your potential location. Avoid places where you have to bribe your way to survive.
g) Geographic climate – Having a fast-food franchise near a beach location sounds good on paper, but it is never fun having to deal with a hurricane or intense tsunami that wrecks the living daylights out of your business which took years of effort to build. Factor in the frequency of natural disasters, the costs of a disaster recovery plan and the cost of insurance.
