CHOOSING A FACILITY FOR YOUR FRANCHISE – Part 2

Part 2: Things to Consider Before Signing the Lease Agreement

Location is a critical decision you will make as you open a franchise. Before you start looking for a location for your franchise, it is important to have a clear vision of your business. For help creating a clear vision for your franchise, please refer to Part 1 of this article, “Part 1: Choosing a Facility for your Franchise.”

With a clear vision of your business needs and wants in mind it should be a little easier to narrow down your search to a few facilities. Once you have narrowed down the search, it is time to get some help as you make your final decision.

Your first resource for support in franchising will almost always be your franchisor. Franchisors can often offer location selection help, training assistance, advertising services, and sometimes even financial assistance for a new facility. In many cases, this support is ongoing. Your franchisor wants your business to succeed because your success puts more money in his/her pocket and makes his business name even stronger. At the same time, if your franchise is not successful, it could have a negative impact on your franchisor’s business. That being said, your franchisor is most likely on your team and will want to play some sort of role in ensuring that your business gets off to a great start. You may even be required to consult with and obtain franchisor’s approval before selecting a location.

As far as location is concerned, many franchise agreements in Arizona limit you to a particular region or territory. Ask your franchisor about potential sites within that region, including roadside shops, strip malls, professional buildings, kiosks, indoor malls and more. Your franchisor may have access to data that indicates hot spots where the business can thrive. For example, your franchisor may know how the lack of a drive-thru or dining space will affect your restaurant business based on past company or franchisee experience. Your franchisor has already experienced the ups and downs of starting the same business that you are starting. His/her insight may guide you past a lot of bumps in the road and help you find the ideal location based on the industry. Some franchisors will even help their franchisees fund the purchase of a facility. Before you sign a lease for your facility, make sure you follow any approval requirements by the franchisor of any location through your franchise agreement.

Once the locations are narrowed down with your vision for the franchise in mind, along with location approval from the franchisor, it is time to focus on the facility itself. Is it possible for you to achieve your business vision with the facility while also making sure the franchisor is satisfied? Generally, franchisees will be expected to develop a facility to meet the site development requirements of the franchisor. Such expectations are required for layout, decorations, furniture, fixtures, arrangement, etc. After approving your site plan, it will usually be your responsibility to build and arrange the location to meet the franchisor’s standards according to local building codes. If it does not look like your vision can be balanced with the franchisor’s requirements at a particular location, then consider looking at other facilities that will.

Even though your franchisor will probably be your best resource during this critical stage, he or she could also make things more difficult for you by having strict developmental requirements and high standards. As a franchisee, it is important to remember that you are using their hard work and business. Support you receive will also depend greatly on your franchise’s industry, the size of the franchisor, your relationship with the franchisor, the financial capabilities of the franchisor, and the culture of the franchise system – among a host of other factors unique to each franchise system.

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If you have a franchisor who has been heavily involved in the important steps above, it is likely that he or she will also want to be involved in the actual lease-signing process with you. However, it is up to you to go over the details of the lease. Commercially written leases are usually written in a way that strongly favors the landlord. Depending on the market, there could be room for negotiation, but you may not realize this without professional help. When signing contracts for your franchise, it is always a good idea to hire an Arizona business lawyer to help you go over the fine details of the agreement in order to avoid overlooking any unforgiving surprises.

Legal fees may in reality comprise only a small percentage of your overall investment in the franchise system, especially if you are planning on opening more than one location. If you are prepared to spend tens of thousands of dollars on a franchise, then it would be wise to commit a relatively small percentage of your funds to obtaining legal advice about your legal rights and obligations as a franchisee.

Location and facility selection may be one of the most important factors to the success of your business. Before you sign a franchise agreement and lease a facility, make sure you have a clear vision for your business, find a location that will fit your vision within the boundaries the franchisor has established, and seek legal help to get the most out of your franchise agreement and lease. Your franchisor wants you to succeed, and so do we. Good Luck!

Approved By:

Brad Denton – Denton Peterson, PC

1930 N Arboleda #200
Mesa, AZ 85213

Office: 480-325-9900
Email: brad@dentonpeterson.com
Website: arizonabusinesslawyeraz.com