Many of you have heard that business is all about location, location, location! Having high levels of walk and drive-by traffic, close proximity to a regional mall or shopping district, and a complimentary mix of tenants in the center are all important factors to look for when leasing space. However, these are the same factors a landlord considers when determining a lease price. The higher the property grades on these criteria, the more it should cost.
Location is extremely important, but is it the most important factor? That depends on the concept’s potential for profitability. Can you find success in a second tier (B grade) location or a standalone building? Is the A+ location necessarily going to lead to A+ performance? Is there a precedence for the concept to succeed in a similar space?
The answers to these questions aren’t always obvious. Compare the different options using a cost structure analysis. Here’s an example comparing three 3,500 square foot locations.
In this comparison, Location A will cost $45,500 a year more in rent than Location C. Based on the profitability of the model you’re considering, determine what sales volume you need in order to realize the same profits in Location A as you would in Location C. Will location B, which meets many of the criteria you’re looking for, generate nearly as many sales as Location A? If so, maybe that’s the best option. Often times a gut feeling, rather than empirical data, is all you have to work from. Don’t be afraid to trust your intuition and rely on the advice of your business advisors and other successful business owners. Top franchisors havereal estate professionals to help you through this process.
At BaseCamp Franchising, our franchise partners receive a comprehensive program including real estate development maps of potential markets and demographic information for each potential site. Armed with this data, and with the help of a local real estate professional, we work to identify the best locations as well as work to negotiate a favorable deal with the landlord. When the time comes, our real estate team reviews the lease; saving our franchise partners thousands of dollars in attorney fees.