What’s the most important factor when building your franchise? There are a lot of different elements that have to be considered, but one factor can make or break you even when everything else seems to be going right –your franchise’s location.
“In order to have a successful unit, you not only need a great product that can compete within the market, and a great franchisee that’s experienced and knowledgeable,” says Mauricio Paschold, Director of International Market Development at Madrid-based sandwich shop franchise 100 Montaditos. “Location is a major factor in our company.”
Indeed, 100 Montaditos has expanded rapidly over the past decade, racking 200 locations throughout Spain and into France and Portugal. Now, having already amassed a strong following at its flagship spot in Miami, the sandwich franchise is attempting to recreate its success and expansion here in the United States.
With so much focus on growth, it’s only natural that Paschold has learned a thing or two along the way about what makes a franchise location worth holding on to. Luckily for us, he had time to sit down and drop some knowledge on the Do’s and Don’ts of Location Scouting for us to learn from.
DO Pay Attention to What’s Around
According to Paschold, there’s no better location for a franchise than on a corner. “Corner locations are a big asset,” he says.“Corner locations can give you presence, brand awareness, and huge traffic for both streets or avenues in terms of visibility – especially when you’re new in the market and bringing in a new concept or proposition.” With visibility from two different avenues, having a corner spot gives you the opportunity to double your potential business. It’s common sense at its most basic.
With that said, there’s a lot more to a good location than just a corner spot. Another major factor is finding an area that complements your franchise. “We were looking for pedestrian traffic and for the brands and shops right next to the property that we took over,” says Paschold of the process that finally led the 100 Montaditos team to the up-and-coming trendy location where their flagship Miami unit now stands. “There’s a great mix of brands with great reputations, and lots of young people that come here just to have a walk. We saw the potential there, and that a lot of investment had been put into this area.”
DON’T Be Afraid to Pay a Little Bit More For the Right Space
Of course, restaurant spaces in prime locations don’t come cheap – but there’s a good reason for that. In those extra dollars spent, you’re paying for increased visibility and extra traffic. All of that means extra dollars back in your pocket in the long run.
“Pricing on properties is directly proportional to traffic patterns and sales volumes,” Paschold points out. “If you’re lost somewhere on a secondary city or street next to low quality brands, you’re not going to have sales there. We’d rather pay three times the regular rent as long as we have high volume, which is the basis of our business.”
DO Understand How You Fit in with the Neighborhood
So you’ve found a wonderful space in a great location – that doesn’t mean it’s necessarily the right place for your brand. Misjudging your franchise’s reputation or draw is a fatal mistake that happens all too often. While popular larger chains have the luxury of attracting crowds nearly anywhere they pop up, less well known names should make it a point to get situated in key high visibility locations to build up a fan base before thinking about moving outward.
This is an issue that Paschold and his company are currently on both sides of. “When we go to Manhattan, we will definitely go to Broadway, Seventh, Park, Lexington – a destination and a great location,” he says, acknowledging that maximum visibility is going to be vital to building the 100 Montaditos brand up from scratch in the United States.
On the brand’s home turf, however, the parameters are significantly different. “In Spain, we’re ahead of that – having 200 units allows you to have secondary markets,” says Paschold. “We already have such a great amount of units that we could go to a place like 42nd or 32nd St. and still draw a lot of people, because there’s big brand awareness.” Knowing what your franchise is capable of right – not later, but right now – can make all the difference of whether your new location sinks or swims.
But whether your brand is up-and-coming or well established, there’s someone else who should be made aware of what you can bring to the table – your potential landlords. After all, just as you should be looking out for neighborhoods that will fit in with your franchise’s aesthetic, the space you’re scouting is probably asking the same questions about you. “It’s essential that you’re not just seeing what’s available, but that you go beyond that,” says Paschold. “Go directly to landlords – explain your concept and how they can benefit from bringing in something fresh with a great reputation. That’s one way you can get a great location. Not only through standard procedure, but by convincing how you can benefit the property, you can get into wonderful spaces.”
DON’T Be Intimidated by your Lease Agreement
When you’ve finally fallen in love with a location for your franchise, don’t let that excitement get the best of you. “There’s a lot of pressure from landlords that have big investments,” explains Paschold.“Huge companies come to a place like Miami and think they’re still working in Manhattan.” Just like a homeowner, you have to be willing to put emotions aside and read the fine print of your lease agreement – or you could end up stuck with terms completely unsuited for your location or expected revenue.
The solution lies in having confidence. “Never get threatened by terms in a lease agreement that could be normal in a big city such as New York or Chicago, but that will not be applicable in your local market,” says Paschold. “Don’t be afraid of saying: ‘this is not what I expect of my lease agreement, and I don’t agree to these terms.’
“Sometimes franchisees get so anxious for their product, they want to open immediately and don’t pay attention to these key factors,” he adds. “There’s no rush. It’s better to spend a little more time – a couple more weeks – than suffer the consequences in the next ten years. Once you sign the lease agreement, there’s nothing you can change. Landlords tend to add a lot of requirements, but there’s always space for negotiations.”
