Location of Retail Franchises
In a testament to franchises in our brand-laced United States, take a short drive down a commercial highway in almost any U.S. town and you will see the familiar golden arches, mustached colonels, green mermaids, or a flying buffalo. The success of any retail franchise depends on where it is located. How a new retail franchise becomes located at a particular place is usually dictated by the franchisor, which has conducted market studies of potential sales at various locations. Typically, those studies show the extent of the current market and whether the local population can afford the franchise offerings, especially given the current economic and political focus on inflation and affordability.
Franchisees usually have the opportunity to choose a franchisor-approved location, by starting a new franchise or taking over an existing franchise and its location. A franchise agreement covers everything from the franchise itself, to where it will be located. Interested potential franchisees should seek financial and legal advice to review the franchisor’s financial information relating to any location offered.
There are many other matters relating to just the location of the franchise. Potential franchisees should understand and negotiate limitations to the franchisor’s locating other retail franchises too close, and consider how the franchisor will focus advertising for any selected potential location. Also, franchisees should consider seeking rights of first refusal for any nearby future retail locations offered by the franchisor. Successful franchisees may spread their risk by owning multiple locations where some franchised locations are successful, while others are less successful.
While the franchise agreement is mostly a franchisor-friendly document, all specific terms that a franchisee has negotiated – whether about location or other matters – should be expressly set forth in the franchise agreement. The franchise agreement is typically a lengthy and detailed product of a sophisticated law firm seeking to protect the rights of the franchisor. Having an attorney and financial consultant review the terms for the franchisee is vital to protect their investment and increase the probability of success.
For more information on franchises, please do not hesitate to reach out to me at sjreed@norris-law.com.
About the Author- Biz Law
Steven J. Reed focuses his practice on franchising, business transactions, commercial real estate, and commercial litigation. With extensive experience in New Jersey and New York, he advises businesses at various stages of growth, handles asset and equity sales of businesses, and represents institutions in higher education. His franchise work is domestic and international, and includes representing a real estate broker franchisee in Ireland and a hotel franchise operator in Africa.