The Office: choosing your space wisely

Your franchise company is off and rolling, yet as if helping new franchisees wasn’t taking enough of your time, now you’re hiring support staff and buying new office equipment to make that move from your friend’s donated conference space to something truly professional. The choice can be challenging, said Andrew Horton, vice president of franchisor relations for FranChoice, an Eden Prairie, Minn.-based franchise consultancy. “It takes a lot of thought; it’s not something you rush into,” said Horton. “What potential franchisees want to see is reality. By that I mean, if yours is an emerging brand, they won’t walk in to a guy’s basement and sign a check for $40,000. It’s not professional. But it’s also a big turnoff to see a flashy place that makes them think, ‘So this is where my money goes?’” Capital management: First and foremost, Horton said franchisors need to ask the questions: How much capital do I have, and how much of that can I invest in office space? And if I need to borrow more, how much should I get? Without a realistic idea of how much cash flow a franchisor can devote to office overhead, that person is shopping blindly. Get a handle on what you’ve got, what’s coming in through royalties and fees, what your growth plans are and what your space needs will be for the next few years, he said. “Most small franchisors, A. need the capital they’ve got now to expand the business, so I think buying a site is an expensive proposition you might want to avoid,” Horton said. “And, B. since franchisors in that emerging mode can’t really say where their company is going to be in five to 10 years, I think a lease is a far better choice. If your company never gets any larger and you’ve bought a building, now you have a huge space you’re never going to fill.” Don’t spend cash on flash: “I’ve been a franchisee myself, so I definitely don’t want someone spending more on office space than they are on improving the business I signed on to,” Horton said. “You want something that shows well, but skip the marble countertops and giving everyone on staff a 2,000 square-foot personal office.” Spend only what you need to spend, but enough so that your support staff can do their jobs well in a reasonably comfortable setting. Disgruntled workers can and will influence franchisees negatively. “When a franchisee shows up for discovery day, the reality they want to see is a company that’s able to support his operational needs,” he said. “The place should look clean and organized, running efficiently like a business should.” Think ahead of the growth curve: If your concept has the potential to grow ultra-fast (and it’s wise to confirm with an expert if that’s truly the case), buying too little space could be a problem. Why? Because, Horton said, if you quickly outgrow your space but have nowhere to expand—either within the same building or directly nearby—a move can cost you in multiple ways. Breaking lease can be expensive, and “when employees learn they may have to drive across town to get to the new office, they may quit. Moving to a new town is even riskier. You don’t want to lose your stud director of operators or franchise sales because of something like that.” Location, location, location: The old saying never goes out of style because it applies to so many different contexts. In the case of a franchise, Horton said most solid companies grow concentrically: within a city first and then regionally outward. Ensuring those franchisees can get there easily—and your field support staff can get to them as well—is always a plus. “Try to get a great location that will most benefit your first 10 to 15 franchisees,” he said. “If it’s a major metro area, it’s also great if you have easy access to an airport. If your business grows like you want it to, you’ll need that.” by Steve Coomes