Franchise Location means the business premises approved by Company for the operation of a Southern Hospitality Restaurant that is a subject of this agreement, and specifically 1433 17th Street, Suite 150, Denver, Colorado 80202 for SH Denver (the "SH Denver Location"), and 7431 Park Meadows Drive, Lone Tree, Colorado, 80124 for SH Lone Tree (the "SH Lone Tree Location ").
Why should you consider a location for your franchise?
If your franchise is located out of sight from key roads and highways, potential customers will walk or drive right by. If this happens, you’ll lose traffic that is essential to running a successful business. 2. Accessibility
What is a franchisee?
The franchisee is the individual who buys into the franchisor’s existing business model and trademark to gain the right to sell the franchisor’s goods or services. Oftentimes, entrepreneurs with little experience tend to enter into a franchise for the following reasons:
How much does it cost to own a franchise?
By definition, franchises have ongoing fees that must be paid to the franchisor in the form of a percentage of sales or revenue. This percentage can range between 4.6% and 12.5%, depending on the industry. There is also the risk of a franchisee being duped by inaccurate information and paying high dollar amounts for no or low franchise value.
Can a franchise owner lease a franchise location from a third party?
If Franchise Owner leases the Franchise Location from a third party, the Company must approve, in writing, the terms and form of Franchise Owner's lease and the lease must not be terminated, renewed or in any way altered or amended by Franchise Owner without the prior written consent of the Company.
How do you choose a franchise location?
The following are five steps that you should take to ensure that you find a good location for your new franchise:Find the Right City. ... Look at the Cost. ... Look for Accessibility. ... Look for Exposure. ... Check Future Plans.
Why is location important for a franchise business?
If you're wondering why franchise site selection is so important, the first answer is visibility. When a location is hard to see or find, it's going to significantly limit how many people come to it. A poor location that's hard to access can even discourage potential customers who were planning to come.
What is an example of a franchise?
Examples of well-known franchise business models include McDonald's (NYSE: MCD), Subway, United Parcel Service (NYSE: UPS), and H&R Block (NYSE: HRB).
What makes a good franchise location?
Look for cities/towns that not only have larger populations but have also experienced steady population growth over the past few years. Steady population growth is often linked to a strong economy, which is what you'll want for your franchise to thrive.
What will you do to make your franchise location more successful than other franchise locations?
Tips for Choosing a Good Franchise LocationThink about the nature of your business. ... Consider locations near businesses which attract the same customer. ... Research local regulations. ... Put yourself in the shoes of the customer.
How does franchise work?
In franchising, a franchise owner partners with a corporate brand to open a business under the brand's umbrella. The franchisee owns and operates that location using the franchisor's brand name, logo, products, services and other assets.
What are the 4 types of franchising?
The four types of franchise business you can invest inJob or operator franchise. These owner operator franchises are usually home based, which keeps overheads down to a minimum. ... Management franchise. ... Retail and fast food franchises. ... Investment franchise.
Is Walmart a franchise?
Unfortunately, you cannot buy a Walmart as of 2022. Walmart is made up of various shareholders which makes Walmart not able to be a franchise. The Walton family still owns over 50% of the company through Walton Enterprises LLC and the Walton Family Holdings Trust.
Why is geography or territory important in franchising?
The Importance of Owning a Good Territory Basically, you want an area that has plenty of room for growth, so you can reach your financial goals. One where the economic conditions are good, along with a large number of consumers who can and will purchase your products or services.
What is the importance of site selection?
Site selection is important because, whether leased or purchased, the success or failure of a restaurant depends on its location. Companies devote significant time and resources to analyzing each prospective site.
Who has the final decision on location selection the franchisor or the franchisee and why?
Your franchisor is going to want you to find the best location possible. After all, their success is tied to your success. Many franchisors provide guidance to their franchisees in regards to location selection and lease negotiations.
What are the advantages of site selection?
Facility improvements increase the value of the business's property rather than the landlord's property. Increased net worth through appreciation of both the business and the facility (including land and buildings) No forfeiture of asset at the end of term.
What happens if your franchise is located in a place that's difficult to access?
If the site of your franchise is located is in a place that’s difficult to access, you’re making it hard for customers to do business with you.
What happens if a franchise is located out of sight?
If your franchise is located out of sight from key roads and highways, potential customers will walk or drive right by. If this happens, you'll lose traffic that is essential to running a successful business.
Why do franchises fail?
However, another equally important factor is choosing the right location. In fact, some studies have shown poor location is cited as one of the leading reasons why franchisees fail.
Where should a daycare be located?
A franchise that relies heavily on impulse purchases, for instance, should be located in an area that’s visible from as many places as possible, especially major roads. On the other hand, a daycare should strike a balance between visibility and neighborhood safety.
Is a business friendly municipality good?
Be sure to do a lot of research on any local licensing requirements and other regulations. Business-friendly municipalities are usually good for your business!
What Is a Franchise?
A franchise is a type of license that grants a franchisee access to a franchisor's proprietary business knowledge, processes, and trademarks , thus allowing the franchisee to sell a product or service under the franchisor's business name . In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual licensing fees .
What is franchise contract?
Franchise Basics and Regulations. Franchise contracts are complex and vary for each franchisor. Typically, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must purchase the controlled rights, or trademark, from the franchisor in the form of an upfront fee.
What Are the Risks of Franchises?
Disadvantages include heavy start-up costs as well as ongoing royalty costs. By definition, franchises have ongoing fees that must be paid to the franchisor in the form of a percentage of sales or revenue. This percentage can range between 4.6% and 12.5%, depending on the industry.
How Does the Franchisor Make Money?
Typically, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must purchase the controlled rights , or trademark , from the franchisor in the form of an upfront fee. Second, the franchisor often receives payment for providing training, equipment, or business advisory services. Finally , the franchisor receives ongoing royalties or a percentage of the operation's sales.
What does a franchisor receive?
Finally, the franchisor receives ongoing royalties or a percentage of the operation's sales. A franchise contract is temporary, akin to a lease or rental of a business.
How long does a franchise contract last?
It does not signify business ownership by the franchisee. Depending on the contract, franchise agreements typically last between five and 30 years, with serious penalties if a franchisee violates or prematurely terminates the contract.
When a business wants to increase its market share or geographical reach at a low cost, it may franchise its product?
When a business wants to increase its market share or geographical reach at a low cost, it may franchise its product and brand name. A franchise is a joint venture between franchisor and franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark .
What is franchising in business?
A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. Technically, the contract binding the two ...
What does a franchisee receive from a franchisor?
The franchisee generally receives site selection and development support, operating manuals, training, brand standards, quality control, a marketing strategy and business advisory support from the franchisor. While less identified with franchising, traditional or product distribution franchising is larger in total sales than business format ...
Why is it important to select a franchisor that routinely and effectively enforces system standards?
This is important to you as enforcement of brand standards by the franchisor is meant to protect franchisees from the possible bad acts of other franchisees that share the brand with them. Since customers see franchise systems as a branded chain of operations, great products and services delivered by one franchisee benefits the entire system. The opposite is also true.
What does a franchisor do?
The franchisor provides the franchisee with franchising leadership and support, and exercises some controls to ensure the franchisee’s adherence to brand guidelines. In exchange, the franchisee usually pays the franchisor a one-time initial fee (the franchise fee) and a continuing fee (known as a royalty) for the use of ...
What is franchising relationship?
Franchising Is About Relationships. Many people, when they think of franchising, focus first on the law. While the law is certainly important, it is not the central thing to understand about franchising. At its core, franchising is about the franchisor’s brand value, how the franchisor supports its franchisees, ...
What is business format franchise?
In a business format franchise, the franchisor provides to the franchisee not just its trade name, products and services, but an entire system for operating the business.
Why are franchisors important?
Great franchisors provide systems, tools and support so that their franchisees have the ability to live up to the system’s brand standards and ensure customer satisfaction. And, franchisors and all of the other franchisees expect that you will independently manage the day-to-day operation of your businesses so that you will enhance the reputation of the company in your market area.
What do I need to consider?
There is a host of factors to consider when selecting a franchise location. These include:
Will my franchisor help me choose a site?
Most franchisors offer support in site selection, but this help usually won’t occur until you’ve made a firm commitment to opening a franchise unit.
Does my lender get a say?
If you’re using bank financing to cover any portion of your startup costs, you should share your proposed location with your lending officer before making an offer. This is especially important if you plan to use their funds to buy land, acquire a building, or make renovations.
Who else should I talk to before making a selection?
Numerous other people can offer valuable insight as you search for a franchise location. These include:
Your real estate agent
Your real estate agent may know about properties soon to hit the market, and they may help you make sense of the turnover that’s taken place at any site you consider. Further, they can advise you on how to position an offer in light of local economic conditions.
Local real estate developers
Local real estate developers can be an invaluable source of information. Major developers in your area will know of commercial developments in the works that may fit your criteria, and they’ll be able to tell you about the availability they have in their existing developments.
Local zoning and planning boards
Your city’s zoning and planning boards may be able to help in two ways. First, they can share information on the sites of future and existing developments in your territory, which may include sites that haven’t been on your radar.
Factors that Affect the Viability of a Franchise Location
Demographics, population, and access to the surrounding areas are just some of the factors that figure into the selection of a franchise location. Rent and property taxes are other factors that play into the decision.
Understand Your Franchise Concept
Before deciding on your franchise location it’s helpful to fully understand the concept of your particular franchise. It’s crucial to profile your target customers, starting with where they live and work and their consumer spending habits.
How to Evaluate Franchise Territory Location?
Under your franchise agreement, the level of protection that you may or may not be given varies from one franchisor to another, and most of the time, it depends on the market and business model.
What is franchisee opportunity?
The franchisee has the opportunity to develop the brand in an exclusive territory and set it up for success in that region . There are also exclusive territories for your franchise system that protect your brand in each region.
How Is The Size Of A Franchisee Territory Determined?
Keep in mind that these customers may be defined simply by total population, the population of a certain age group, number of owner-occupied homes of a certain kind, total number of small businesses, number of a certain form of business, or even number of households with gardens, young children or pets.
Why should you take territories and exclusivity seriously when establishing a franchise?
After all, territories help determine the potential to earn, because they contain the desired customers of a franchisee. However, as franchising has become so competitive, with similar franchises attracting the same consumers, franchisees do not have to compete with other franchise owners within their own brand.
Why do franchisees have exclusive territories?
In case two or more of the same brand outlets are in the same territory, franchisees have the opportunity to start competing for the same customer base , depending on the market model. Providing separate and exclusive territories protects their consumer base and the annuity revenue stream they generate from attracting loyal customers and holding them.
How do franchisors determine territories?
Typically, franchisors determine territories that are based on zip codes, geographic size, population size, natural boundaries, or other criteria.
Why is exclusivity important for franchises?
That’s because having a protected, generous, and clearly defined territory will ensure you don’t have to compete for customers with fellow franchisors; your staff will remain loyal; you are going to control your brand’s reputation and perception in your area; you are going to have an easier time getting franchise funding. In this article, we will focus on franchise territory location and how to choose the perfect franchise location.
What is a franchisee?
Summary. A franchisee is a small business that operates under the trademark of a parent company, also known as the franchisor. Throughout inception, the franchisee receives guidance, consultation, and support from the franchisor regarding internal operations, such as hiring, marketing, corporate strategy, and more.
What is the relationship between a franchisee and a franchisor?
The Relationship Between a Franchisee and Franchisor. Similar to a consultant and its clients, a franchisee and franchisor have a mentor-like relationship. The franchisor provides guidance and support throughout the operations of the franchisee’s business, including staffing, set-up, marketing.
Why do entrepreneurs enter into franchises?
Oftentimes, entrepreneurs with little experience tend to enter into a franchise for the following reasons: The cost of opening a franchise is lower than initiating a new start-up; thus, there is less initial outlay that must be put upfront.
Why do people start franchises?
Oftentimes, entrepreneurs with little experience tend to enter into a franchise for the following reasons: 1 The cost of opening a franchise is lower than initiating a new start-up; thus, there is less initial outlay that must be put upfront. 2 Franchisees receive the appropriate support and guidance from the franchisor to succeed.
Who is the main operator of a franchise?
The franchisor, who is the main operator of the business, can sell the right to other potential business owners to use its name and idea to operate their own business. The franchisee is the individual who buys into the franchisor ’s existing business model and trademark to gain the right to sell the franchisor ’s goods or services.
Who was the first franchisee of KFC?
His first franchisee was Peter Harman, who owned a hamburger shop in Salt Lake City, Utah. Over the years, Sanders persuaded many other restaurant owners to add KFC to their menus.
What Is A Franchise?
Understanding Franchises
- When a business wants to increase its market share or geographical reach at a low cost, it may franchise its product and brand name. A franchise is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business m…
Franchise Basics and Regulations
- Franchise contracts are complex and vary for each franchisor. Typically, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must purchase the controlled rights, or trademark, from the franchisor in the form of an upfront fee. Second, the franchisor often receives payment for providing training, equipment, or business advisory servic…
Pros and Cons of Franchises
- There are many advantages to investing in a franchise, and also drawbacks. Widely recognized benefits include a ready-made business formula to follow. A franchise comes with market-tested products and services, and in many cases established brand recognition. If you're a McDonald's franchisee, decisions about what products to sell, how to layout your store, or even how to desig…
Franchise vs. Startup
- If you don't want to run a business based on someone else's idea, you can start your own. But starting your own company is risky, though it offers rewards both monetary and personal. When you start your own business, you're on your own. Much is unknown. "Will my product sell?", "Will customers like what I have to offer?", "Will I make enough money to survive?" The failure rate for …