News & Updates

Constructing & Leasing Your Franchised Store

July 27, 2011

Building a franchise system is about more than simply permitting somebody to run a business under your brand.  For newcomers to franchising, a key to your success will depend on your vision, support and leadership as franchisees will look directly to you for guidance in developing their businesses.

A vital consideration will be how to handle construction of the premises.  As a franchisor, you may be failing your franchisees and doing a disservice to your brand if you are not assisting in the approval of a particular location.  The old adage of location, location, location is as applicable to franchising as it is to any other business, industry or venture, and franchisors should be aware of the importance of a good location on franchisees and franchisors alike.  For this reason, a franchisor may elect to go on the head lease of a particular location and then sublease that location to the franchisee, or make it a system-wide policy to always do so.

The benefit of this model is that, if the franchisor has found a location that has worked well for the system or that the franchisor anticipates will succeed, that location will remain with the franchisor if the franchisee ever leaves the system.  When the day comes that a franchisee sells its business, or has its franchise agreement terminated by the franchisor, it will be the franchisor’s option as to whether it will continue to operate the business from that location itself, or whether it will sublease it to another franchisee. 

Franchisors should, at a minimum, be providing advice or resources for setting up a turnkey operation and may build the location themselves or require the franchisee to build, at the franchisee’s own expense, and in compliance with the franchisor’s standards.

Tags: Franchising