Why Some Franchises FAIL Before They Even Open

Posted by Jim Otto

We have all heard the big movie business men say, "Location! Location! Location!". And it's to their employee who is sent out to scout a new place for this huge business (and it is always around a holiday so they are being forced to get it done before the holiday so they don't have to miss it) who doesn't really want this huge pressure of finding the perfect spot. But really, the big boss man isn't wrong. You need that perfect location WITH that perfect rent price.  


You know, I'm amazed at how many people sign a franchise agreement and then fail to spend the proper amount of time finding a good location with a reasonable lease payment. If you look at the reasons that franchises fail, you'll often see two of the following listed: a bad location, and paying unreasonable (too high) rent. Finding a good location AND one where you are not paying excessive rent can be tricky. Think about it...A+ location landlords know that they can charge A+ rents. They have the high velocity traffic, visibility, and access that the tenant need. You may be able to go to a B+ or even a B space landlord and get a much lower lease payment. However you may not have the traffic that you need for your business to be successful, and as a result you'll need to spend a lot more on marketing in order to tell customers where you are. There are lots of variables when it comes to finding a space and I'll cover more of these later on. But for now, here are two of the easiest ways to avoid getting a bad space: 

Be Patient - Again, I'm always amazed by how many people sign a franchise agreement  - but then are so excited to get started that they sign a lease on a bad space. On the other hand I've seen people look for a space for so long that they weary of the process. And then to top it all off, the franchisor starts putting pressure on them to get open - so they sign a lease with sky high rent, which makes it very difficult to have a profitable location. Before you make either of these mistakes remember this, you assume an obligation to make payments for the LIFE of the lease. 

Have a Lease Attorney Review the Lease - Yes, I used the word lease twice. If your Brother-in-law is an attorney but he doesn't specialize in leases, it's best to just see him at Thanksgiving and not have him review your lease. Landlords will have your head swimming with terms like Severability, Subleasing, Joint and Several Liability, Default and Use of Premises (have I convinced you yet, or do I need to go on!). A good lease attorney can save you thousands of dollars on a five-year lease, and to me that's a good investment. 

Your franchisor should be able to provide you with a Proper Use Statement. In addition most franchisors will give you assistance and help in reviewing your lease. But remember this when it comes to dealing with Landlords and leases, "The devil is in the details", and only an experienced lease attorney can catch all those details.


We Can Help You Find Business SUCCESS!

francomparesmfawardWINNERtransparent-1Shear Madness Franchising franchises our award-winning Shear Madness Haircuts for Kids salons. We have worked with franchise stores in providing franchisee support (in order to encourage continual growth and business success), and have sometimes seen the unexpected happen! When it does, we help by identifying and helping with challenges that might arise for franchisees. Additionally, we work to present options that can help prevent these events as well. As many franchise owners may not have opened a business before, having someone who can advise them is a significant advantage of franchise ownership!

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