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How Do Restaurant Franchises Pick Locations?

New franchisees are motivated by high-population areas, desired local income figures, open real estate opportunities and low outside competition.

By 1851 Staff1851 Staff Contributions
Updated 10:10AM 11/03/22

When it comes to establishing a restaurant franchise, real estate is a non-negotiable for franchises to establish themselves. Picking a successful location can be the difference between a great franchise and a struggling one, even for sites within the same neighborhood.

This calls for intensive research — and for emerging brands, the research needs to be much more thorough than for existing ones.

Some brands, such as McDonald's, have executed a classic real estate identity. Virtually all McDonald's locations share a similar configuration, and many of them look nearly identical from the outside. It’s clear that the restaurant franchising giant has a system figured out: Picking their locations is a no-brainer, and it requires a freestanding building with drive-thru capabilities.

You won’t often see two distinct franchising units looking entirely different with any brand. This is one such product of a projectable business model and something decided long before a brand takes on franchising.

Real Estate Non-Negotiables

It’s unusual to encounter a lot of new franchises setting up shop in areas with a population decline. With the hope of generating projectable revenue for years to come, virtually all business ventures will target projectable populations with projectable opportunities. 

More specific, however, is the intention to find that increase within a target demographic. A growing population is only as good for business as the people who are interested, and as more brands look to take on more business, it’s important for them to research where their services are most desired.

Matching a Target Audience

Garrett Reed, CEO of Layne’s Chicken Fingers*, said his brand has targeted areas in direct proximity to its target audience income. “We target the upper middle class, right around that $50,000-$60,000 mark for household income,” he said. The brand has already developed itself within this demographic in its home state of Texas and has curated a brand identity around it.

By transferring the same model into new markets, Layne’s Chicken Fingers has been able to identify a new market in Jacksonville, Florida, and an ambitious expansion outside of its Texas roots.

Layne’s Chicken Fingers is a fan favorite in College Station, Texas, the home of Texas A&M University, and the target audience there is similar to what Reed calls “SEC country” in the target market of Jacksonville. It was relatively easy for Reed’s team to see similarities between College Station and Jacksonville, and following a similar process is how many brands have picked new locations.

On a macro scale, this can help a brand introduce itself into entirely new cities. On a micro level, this is where specific real estate developments can be targeted and where concentrations of people within a target market can be identified.

Where Can You Save?

You can’t always cut corners when it comes to real estate placement. You can at least target some cost-saving measures, however – which is exactly what restaurant chain Wings and Rings* has pursued.

The sports bar-style franchise has opted for what they call an “end-cap” franchise model for new locations. This is where Wings and Rings has targeted existing strip centers fit for retail or other customer-based traffic, as well as targeted locations on the ends of those centers.

“You can see an impact of a freestanding location with a very well-imaged end-cap location at a much lower investment – frankly less than half the investment,” said Thomas Flaherty, the brand’s chief development officer. “A freestanding building can be a great investment, [but] it’s also more expensive.”

This has allowed the brand to be more flexible without discounting the key parts of real estate that will lead them to success. Wings and Rings has proven that it can adapt to new opportunities, which is one way a brand can promote itself to become more projectable.

It’s also a way that brands can promote themselves to prospective franchisees when they can pass savings on to those investing.

Picking a new restaurant location is a huge measure for all franchises. It serves as the proverbial tipoff toward a longstanding relationship between franchisee and consumer — and hopefully a winning one from the start.

*This brand is a paid partner of 1851 Franchise. For more information on paid partnerships please click here.