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Finding and keeping good retail sites

The current fertile economic environment and increased consumer spending patterns has meant buoyant growth for businesses in general. For franchisors and franchisees, this rapid expansion has increased the competition for prime sites from each other and from the longer-established retail concerns.

Even though securing an ideal site for a franchise is a difficult undertaking, often fraught with many legal and financial implications, the experts say that there are ways of finding and keeping good retail sites. This issue was the topic for discussion at a recent networking breakfast hosted by Standard Bank and Franchise Directions. Members of a panel of experts offered franchisors sound advice and business suggestions:

Proactive and structured approach to site selection is important
Site evaluations are expensive but are important. They should be viewed as an upfront investment in the business since site evaluations help manage the risks involved with starting and operating the business. It is one way of securing long-term success.

Tips for selecting good franchise sites:
· Site evaluations become especially necessary where a site is not an obvious choice.
· Franchise owners should invest in the creation of a country development plan that will assist in the identification of prime locations.
· For smaller businesses that cannot afford site evaluations, manual research could be conducted, such as obtaining demographics and psychographics of the potential site.

Managing relationships is key!
The landlord-tenant relationship is adversarial, and possibly will always be. Space allocation is often calculated scientifically, based on statistics, which makes it difficult for franchisors to negotiate for non-standard floor space.

Furthermore, the concept of the private landlord is fast disappearing. Centres are being taken over by large property developers and investors who prefer to opt for low-risk tenants: larger franchise chains and retail concerns are targeted ahead of smaller operators.

Tips for managing important relationships:
· Make an effort to understand what landlords need and want in tenants.
· Maintain relationships with potential landlords, brokers, estate agents and property developers and investors.
· Where the allocation of space is not suited to your business, present your business plan and model and negotiate your needs based on a sound value proposition.

Know your rights and obligations as a tenant
Lease agreements differ from landlord to landlord. All too often, lease agreements are ensconced in safes, with the tenant having very little knowledge of his rights or obligations.
· An offer to lease is binding. Be certain of the site before making any offers.
· · Spend more time looking at the lease. Have a good understanding of what the agreement entitles you to, what constitutes breach of contract and so forth.
· · Do not be afraid to place the same obligations on your landlord as he has on you.
· · Do your ‘homework’ before engaging in discussions with landlord, or signing any agreement.
· · Where necessary, seek legal advise by consulting with professionals like lawyers, accountants and engineers.

Share your experiences and knowledge
Comparing notes with other franchisees/franchisors is one good way of ensuring that the right sites are secured. By sharing your experiences, other franchise operators will be able to build on your learnings and successes.

Frank Orchard, Head of the Specialist Support Unit at Standard Bank, says: “Finding and keeping good sites is just one of the many challenges faced by franchisors. Finding the right franchisee, securing finance and maintaining brand equity and are other issues, to mention just a few. To maintain current growth rates despite these challenges franchisors and franchisees need a strong support structure and experienced business partners.”

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