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Why You Should Discuss Location Requirements Before Buying a Franchise

 

Something new and exciting is coming to Fishers, Indiana!  Last week, it was announced that IKEA will be opening a location in the Indianapolis suburb.  The announcement was met with both excitement for the job creation and expected stimulation to the local economy, as well as, concern for the expected increased traffic in an area that is already notoriously congested.  In making the announcement, the public affairs manager for IKEA, Joseph Roth, told reporters that IKEA usually looks for 25 to 35 acres of land that has good visibility to a major interstate and is the reason why the Fishers location was chosen.

Similar to IKEA, many franchisors have requirements for site selection such as requiring a certain population density, minimum square footage, and proximity to other commercial businesses to ensure consumer traffic.  More than likely, the specific site requirements are based on the franchisor’s experience on what has proven to be a successful model in the past and the franchisor may be actively involved in assisting you with site selection, as well as, requiring pre-approval of the proposed location.  However, it is no guarantee of success for your individual franchise location.

Any requirements regarding site selection can be found in Item 11 of the Franchise Disclosure Document.  It is important to review what the requirements are in order to determine whether or not it will be feasible to find a suitable location within the geographic area you are hoping to operate in before investing in the franchise.  This may become even more relevant if the Franchise Agreement provides that you only have a certain amount of time to find a suitable site for the franchise, and if you do not, it may be grounds for termination of the Agreement by the franchisor.  If your Franchise Agreement is terminated for failure to find a suitable location, it is likely that your initial franchise fee will not be refunded, or only partially so, depending on the terms of the Agreement.  In this way, and for numerous other reasons, location and site selection requirements become extremely important and is a factor to be considered when deciding to purchase a franchise.

Want to learn more about the impact location can have on your franchise? Listen in as Josh discusses the 4 things you must consider when choosing a restaurant location.