Should franchisees select real estate prior to deciding what brand they want?

For many franchisees, especially operators who decide to open a business in their local community, there is a specific part of town or property where they envision they will see their restaurant, retail store or office in the upcoming months.

But flexibility is key in the real estate process. There is often more than meets the eye and most franchisors have the capability to access data that can give much more than a “gut feeling” about if a property is ideal for a new location.

“There is no downside to researching real estate before deciding on a franchise,” said American Dairy Queen* VP of Franchise Sales and Development Mike Mettler, “but the franchisee must understand that real estate locations are perishable and should not spend too much time on this until they are further along in the process because those same sites may not still be available.”

Mettler added that the DQ brand uses analytic modeling tools to helps target, identify and review locations and trade areas. They also have a dedicated team of development professionals including architects, construction and development team members that have a detailed knowledge of specific regions and support the development of the new locations.

Due to the tools and staff that franchisors invest in real estate research, a franchisee’s trust in the process is essential to selecting the best property to grow the brand.

For some concepts, this means not only finding a good space for the franchisee to operate the business, but also finding good neighbors.

Penn Station, for example, capitalizes on real estate opportunities that are among the company of other well-known brands to grow its customer base.

“Since we have a fairly flexible model, we’re able to find available real estate that is surrounded by concepts nearby with the same core audience, which allows us to pick up overflow and increase customer count,” said Director of Development and Franchising Greg Goddard. “We also work with our franchisees to understand the value of opening a location where their customer base exists, rather than near their own home.”

Goddard added that recently Penn Station downsized its restaurant square-footage in order to invest in higher-cost properties that will have a stronger return on investment for operators.

It is clear that site selection is critical to the franchising process and that brands that succeed dedicate sufficient resources to it in order to find success in target markets across its system. A lesson for any franchise prospect is to keep an open mind about where you plant your business, because it may not be where you dreamed it would open.

“Most franchise candidates do not move forward with real estate they identify prior to initiating the franchise process because they do not understand the site selection criteria and required attributed of both the site and the surrounding trade area,” said Mettler.