Finding Real Estate: It’s All About Collaboration

When it comes to finding a franchise location, it shouldn’t be solely in the hands of the franchisee. Collaboration is key, and there are often a few key players who need to be involved in the site selection process, franchise experts say.

Gary Occhiogrosso is the founder and managing partner of Franchise Growth Solutions, which provides consulting services to franchisors, entrepreneurs and independent operators.

“Franchisees need to look for locations that fit the ideal customer profile that the franchisor has laid out,” Occhiogrosso said, adding that sometimes franchisees can get hung up on looking at locations that are convenient to where they live or shop rather than keeping the target customer in mind.

He advises franchisees to keep their emotions out of the picture.

“You cannot approach the process with any level of emotion,” Occhiogrosso said. “There is no such thing as ‘I love the location’ unless you love the location because it fits the franchisor’s prescribed user profile and the math works. Then you can fall in love.”

There are typically six major players involved in selecting a franchise location, Occhiogrosso said —  the franchisor, the franchisee, the franchisee’s real estate broker, the landlord’s real estate broker or agent, the landlord’s attorney and the franchisee’s attorney.

“I think you have to be patient,” Franchise Real Estate Vice President Jim Runyon said. “People get into this and they think it’s going to happen overnight and the reality is that real estate deals are taking longer than they’ve ever taken.”

Franchise Real Estate is the preferred vendor for two brands - Anytime Fitness and Waxing the City.

“We represent those franchisees throughout the site selection process,” Runyon said. “We’re out in all of these markets and talking with brokers and looking for sites that meet the criteria.”

Runyon notes that what may work for one location may not necessarily work for another. Factors that need to be taken into consideration include who the anchor tenants and other co-tenants are, the parking situation and the proximity to major freeways. Franchisees also need to work with a design team, the franchisor and the franchisor’s operations team to make sure a site will be approved. Franchisees need to also make sure they do not commit to a location for frivolous reasons.

“When a franchisee and franchisor collaborate on the location, they both need to agree on it and feel they both have a win in the process,” Shery Christopher, managing director of Shery Christopher Consulting, said.

The franchisee, franchisor, franchisee’s real estate agent and the landlord’s real estate agent are the four key people that should work that deal in the beginning prior to attorneys getting involved, Occhiogrosso said.

“All the business terms should be negotiated in the letter of intent,” Occhiogrosso added.

The vast majority of the legwork that goes into finding a location should be completed before attorneys are in the picture. This, Occhiogrosso said, will help the process go more quickly and be less costly. Bringing in an attorney too early in the game before most of the real estate issues are settled can result in attorneys getting involved in non-legal aspects.

“When they start talking about business things, the meter is running and the franchisee is now paying an attorney to create business terms that attorneys typically know very little about,” Occhiogrosso said. “Attorneys are experts at legal terms. Real estate people and the franchisee and the franchisor should be the expert in what they want in the location.”

Franchisors also need to manage the expectations of the franchisee, Occhiogrosso said. He noted that “Even though franchise agreements lay the responsibility of finding a site at the feet of the franchisee, the franchisors typically have the right to approve or disapprove a location and a lease, so it’s collaborative.”