How to select and evaluate a good location

Posted by FGS on Feb 04, 2015

Selecting a good location for your retail franchise will be one of the most important decisions made that will determine the success of the franchise. A good understanding of how large the territory or trade area of the franchise will cover should have been thoroughly investigated before signing a franchise agreement. The franchisor should be able to supply the franchisee with demographics and pertinent information about the trade area. Additional information will be needed before a lease is signed. The following should be considered:

  • Population density. How many total people and/or households are in the proposed location area. Does the area have room for growth? Is the area highly populated with family houses or apartment buildings, and how will that affect the franchise? What are the ages of the population in the area?
  • Income demographics. What are the average household incomes in the area? What is the typical income group the franchisor is targeting for the franchise? Does the neighborhood nearby look as if they would use the type of product and services offered by the franchise.
  • Number of businesses. Will the number of businesses affect the location? Will the type of businesses in the area use the product or service offered by the franchise?
  • Type of site. Do the most successful franchisees in the system locate their franchise in a mall, downtown area, strip mall, stand alone building, industrial centers? The franchisor should be able to give information on theses types of sites.
  • Traffic counts. How many vehicles pass by the location every day? What is the foot traffic that passes by every day? Will people passing by see your business sign? Is the location easily accessible?
  • Traffic generators. If the location is in a strip mall, often the best traffic generator is a grocery store or some other type of anchor store. Sometimes rents are less expensive when the location is across the street from a good traffic generator. Is the location close to a university, hospital or other large traffic generator?
  • Employee access. Are there a sufficient number of potential employees nearby to properly staff the franchise?
  • Zoning. Is the location properly zoned for the franchise operation?
  • Competition. What is the competition like nearby?
  • Appearance. Is the location area clean and orderly? Is the neighborhood nearby clean?

Other considerations to finding a good site:

  • The franchisor should already be good at locating sites. They should be willing to help find the site, give good advice and help negotiate the lease.
  • A good commercial real estate broker is necessary to help understand the market. In many cases their “connections” will allow the franchisees to get better terms on the lease.
  • Using demographic computer programs like will help in analyzing nearby competition and other demographics.
  • Use the franchisor’s expertise as much as possible but when it comes right down to it, they cannot guarantee it. Other than approving the site they will distance themselves from it to avoid liability.

Top 4 demographic criteria available for use in determining top site locations.
1. Age: What is best age group for unit?
2. Number of households
3. 75,000 per income per household
4. Total population (in any given area)

Additional Criteria
1. Competition in area
2. % of population in targeted age group
3. Number of males & females
4. % of population with income over 75K
5. Number of households with income over 75K
6. Average household income
7. Median household income
8. % of population with Bachelor Degree
9. Medium home value
10. % of population white collar workers
11. Population Density
12. Race

Share this article