In Blog Post, Interview

Congratulations—you bought a franchise! Now, where are you going to put it?

Depending on the brand, your franchisor may or may not provide you with guidance. Perhaps you purchased the development rights to a territory (again, GREAT), but working that fertile valley into a lucrative suite of locations will hinge on how you decide to situate yourself.

In other words, you either need to become an expert or hire one because Youtube won’t get you through this.

We sat down with David Nicholson of FranSite, a company that specializes in franchise real estate  solutions, to provide a little insight on navigating the “where” of it all.

Franchise Real Estate, Done Right

Tell me about FranSite. 

FranSite was created to ensure that Franchisees in need of brick and mortar real estate will be treated fairly in the marketplace by talented real estate professionals. 

As opposed to Googling a less experienced broker who will put you on the slow path to a mediocre outcome in the commercial real estate space.

Franchise Real Estate Brokers evaluate their options.

How does FranSite differ from other franchise real estate firms?

Most of our competitors try to become “One Stop Shops.” They do real estate and construction and development and sales. It’s very hard to bring any real expertise in real estate if you’re dividing your focus like that.

How does FranSite differ from other franchise real estate firms?

Most of our competitors try to become “One Stop Shops.” They do real estate and construction and development and sales. It’s very hard to bring any real expertise in real estate if you’re dividing your focus like that.

In contrast, we’re positioned on the higher end of the spectrum because we approach this with actual boots on the ground.

I’ve personally been in the retail tenant rep world for over 30 years, and we’ve been in the franchise space for about 10 years. Our  relationships with brokers all across the country are solid because we’ve come up in this business together. That’s a network of over 148 brokers in the US and Canada that are standing by to do the work.

And all we’re doing is real estate.

Measure Twice, Cut Once

Does the Franchisor typically provide guidance in this process?

Emerging brands, or Franchisors under a hundred locations, can’t typically invest in an in-house real estate team to look after the Franchisees. And if they do, the way franchisee real estate expands at random across the country, an in-house person can get spread pretty thin pretty quickly.

Time and again when a company gets up past about 50 units, that person gets really overwhelmed. Within our program we’ve rolled out as many as a hundred locations a year per brand without breaking a sweat, because we’ve got all the people trained and ready to go.

I can say that if you do have an in-house real estate person and you don’t have a team, you don’t have an organization like ours in place.

Does that lack of guidance from the Franchisor impact the consistency of the brick and mortar footprint?

Absolutely. Left on their own, the Franchisee can go off brand with the type of real estate they’re looking at because their chosen broker isn’t trained in their brand standards. The result: the Franchisor doesn’t approve the space, leaving you with an unhappy Franchisee and a delayed opening. 

Not to mention all the wasted time and money. 

The Fine Print

What are some of the typical pain points that your clients encounter?

Typical pain points could be not only the quality or size of the real estate, but also the types of utilities, zoning, or other issues that the brand needs approval for.

What’s the biggest mistake a Franchisee without guidance can make?

It’s devastating if the Franchisee signs a lease where they end up paying rent three or four months before they open. 
We work hard to structure the leases so that the Franchisee has enough time to prepare to open before the rent starts. That’s a market-to-market detail, depending on how the permitting process varies.

Franchise Real Estate, when done right, sets the franchisee up for cleaner opening.

What are some overlooked elements in a lease?

Consider the location’s heating, ventilation, and air conditioning system (HVAC). There’s a big difference between a 20 year old HVAC and a 5 year old HVAC on your rooftop. We ask for representations on equipment like that.

If the deal is sloppily done a thinly-capitalized Franchisee ends up burning through their dear capital on the rent before they even open. Then 6 months later they’ve got a $15K problem on their roof that they have to deal with immediately because it’s their responsibility.

An average broker wouldn’t have that insight?

Not necessarily.  You need franchise real estate market knowledge and leverage to get through that negotiation. We have tremendously experienced people in the court of the Franchisee who have long-term relationships with landlords and brokers.

That allows us to develop arrangements closer to the types of deals that a national or regional tenet would be offered. That’s very different from the type of deal that a first time Franchisee would typically get on their own.

In Franchise Real Estate, Who You Know = What You Know

Why is there such a divide between the deals offered to an Emerging and Established Brands?

A stand-alone deal with a local credit Franchisee is not something a more experienced broker wants to work on. But the experienced brokers that we work with will take the business because collectively they work on a lot of clients with us. As a result, we’re able to leverage that good will to ensure that the Franchisees we send them are treated as priorities.

Do you think brands are giving the right attention to this process?

It’s a mixed collection of efforts. It’s surprising to me how many brands just let it take its own course and hope that everything works out without.

How has the industry changed in the last 10 years and where do you see it going?

In the past decades there have been some real improvements on analytics, mapping, and information about who and where the customers are.

That’s an exciting thing. However, it’s not going to replace what needs to be done on the ground. Analytics will tell you that the locations need to be in a certain part of town, but they won’t get you closer to leasing an actual space.

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