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In pursuit of the perfect premises

Written by Maria Barr on Thursday, 08 December 2016. Posted in Analysis

From transport links to the presence of a Waitrose, the choice of location can make or break a franchise

In pursuit of the perfect premises

The tempting waft of butter and sugary deliciousness usually hits you when you’re most likely to crave a calorie fix – while waiting for a train, shopping for groceries or stopping off at a petrol station during a long drive. This is no accident: food businesses like Dunkin’ Donuts have long recognised the importance of setting up shop in the right spot. “We offer a very flexible approach to securing real estate,” says Jeremy Vitaro, vice president of international development at Dunkin’ Brands. The brand has many fully fledged outlets in places like busy airports and train stations where it knows people are looking for snacks. But on top of that, it also has pop-up sites and kiosks in a number of shopping centres and petrol stations where it can’t commit to a full store.

For most franchises, finding a location with enough footfall is key – especially if the model relies on impulse buying. And one of the indicators that you’ll draw in the crowds is the presence of nearby public transport networks. But not every business can secure prime spots next to train stations. “We try to find a balance,” says Riccardo Scala, founder of Beat Theory Fitness, the personal-training franchise. “We want to be no more than a few streets away from an underground or train station so people can walk to us easily but not so near that it’s unaffordable.”

However, it’s not just a numbers game: a location needs to bring the right sort of people through the door. This means that having a crystal-clear understanding of who you want to target and their lifestyle is vital. At Beat Theory Fitness, Scala knows exactly what segment of the market he needs to court. “The type of client we’re targeting isn’t affluent,” he explains. “It’s the person who cares about their health, has tried and failed to get fit on their own but can’t afford a personal trainer.”

And once you’ve got that figured out, you can choose a location based on indicators such as the type of shops in the surrounding area or the average house prices. “Believe it or not, we look at which supermarkets are in the area,” says Scala. “We figure that the sort of people who go to Waitrose or Marks & Spencer are willing to spend a bit more money on their food. So it’s more likely that they’ll also be willing to invest in their health and fitness.”

But even in areas that are generally very busy and seem to fit your target market, you can get dead zones: areas people just don’t seem to walk past. To minimise the chances of renting a dud location, it can sometimes pay off to leave human judgement aside and turn to technology. There are a lot of very sophisticated tools available that can help aggregate traffic patterns, peak times, demographic and lifestyle data and even carry out competitive analyses. “We use a number of tools, including software, to determine if a location has the right footfall,” says Vitaro.

Even with the latest technology, though, renting a permanent location for years doesn’t make sense for all franchises – especially if demand is seasonal. And that perhaps explains the popularity of pop-ups: an alternative to bricks-and-mortar stores that allow businesses to have a temporary presence to test their concept or get a sense of whether a particular area might be a good fit in the future. The Coffee-Bike franchise has been built with this kind of flexibility in mind. Through a network of franchisees, it sells coffee, tea and hot chocolates from a mobile shop on wheels. And while some franchisees stay in one spot and get to know the regulars, others follow the biggest events to capitalise on the footfall. “Our franchisees appreciate having the flexibility of being able to move where the demand is,” says Berenike Seeberg-Elverfeldt, international franchise manager at Coffee-Bike.

Getting to know your neighbours
Whether a potential location is permanent or temporary, it can pay to scope out the competition. Some franchises prefer to carve out a place for themselves away from the competition so the footfall isn’t diluted. “Competition is a factor, especially in city centres,” notes Seeberg-Elverfeldt. “The UK has a very competitive coffee market so it can take some time to find the right spot.”

That being said, the fact that your competition has chosen an area could suggest they’re onto something. Clustering is a recognised phenomenon whereby similar businesses gather together to enjoy economies of scale – something that can be seen on many high streets where there are clone businesses existing side by side. If you think you have a good chance of winning enough business while being in close proximity to a competitor, it could be a wise strategic move to join them.

For example, as Scala scopes out new franchise locations for Beat Theory Fitness in London, he’s looking for areas that already have a number of fitness brands because the business is designed to act as an add-on to gym memberships. “We don’t shy away from these businesses because we want to be in places that already have a fitness presence,” he says. “We could exist literally next door to a gym.”

A joint effort
One of the barriers holding businesses in the UK back is the cost of premises, especially in cities like London where gentrification is rampant. And it’s not just rentals: there’s also the legal costs, deposits and unexpected remodelling bills, which can derail many a franchise’s momentum when they’re trying to expand. “Affordability is an issue,” says Scala. “Across the UK, price is a major factor.”

Which is why the role of the franchisor in the process is so crucial. “From the legal side, the councils can place a lot of restrictions around street trading permits so we support our franchisees with that,” says Seeberg-Elverfeldt. “We’re also in a better position to use our contacts to work out deals with the big chains or negotiate rents. We often help them with their pitches to retailers because we have the experience.”

That being said, while a franchisor knows the business and market inside out, the franchisee has all the local knowledge. Although choosing a location is often the role for the franchisor, input from the franchisee often makes the choice a lot more successful. “Our franchisees have great ideas, so we always have a joint discussion with them when it comes to securing a location,” concludes Seeberg-Elverfeldt.

About the Author

Maria Barr

Maria Barr

As our web editor, Maria is on the lookout for stories and news about Britain’s most exciting startups and small businesses. Part Singaporean and part Scottish, Maria has a background in content marketing and editing.

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