Franchisors in the Philippines usually do not provide locations and prospective Franchisees have to find them by themselves. However, Franchisors will know where a franchised business shall be located within a certain area and will inspect the site prior to the start of construction or operation, if the location is suitable for the franchised business.
Franchisors will require Franchisee to conduct preliminary research on potential sites. In most cases, property owners, real estate brokers or shopping mall managers provide the demographics and other commercial information pertaining to a potential site. Franchisee or his employees might have to spend some time at a location to do traffic or pedestrian count and to study flow of people and traffic.
Franchisors should approve only suitable locations, those locations that they would approve also for Company owned outlets. Plenty of Franchisors approve also not suited locations just for the sake of getting the Franchise Fee from Franchise applicants.
Good Franchisors turn down up to 90% of location applications to make sure the location is profitable for Franchisee.
How to evaluate a location:
- Accessibility and traffic patterns: Is it easy to exit and enter into traffic? Are there difficult intersections, major road construction or other impediments? What time of the day is traffic heavy? Where is the traffic going? Are people shopping or merely commuting to neighborhoods where they can purchase your product or service from a more convenient store?
- Zoning: does your municipality or City allow that kind of business at a certain location?
- Visibility: Is visibility important to the success of your business? If your product is an impulse item or geared towards mass markets, then you need to be where customers can see your business.
- Hours of operation: Do the hour of operation match the needs of your customer?
- Parking layout: Determine how much parking you need and select a location that offers it.
- Public transportation: Extremely important if it is a product for the “masses” that your outlet is in front of public transportation. Also, if you have a lot of employee in the Franchised business who have to commute to work.
- Neighborhood development: Is the neighborhood stable or declining? What kind of subdivisions or living conditions are in the neighborhood of the outlet?
- Competing outlets: Are competing businesses located in the immediate vicinity? If so, the good news is that your location is attractive; the bad news is that you’ll have competition.
- Size: Do you require space for selling, storage, production, or maintenance of equipment? The larger the space the higher the rent, electricity and maintenance. The Franchisor shall recommend or require certain square meters as minimum space. Don’t rent more than you need.
- Lease term: Look for a lease whose term matches your franchise contract but can be renewed.
- Utilities: Water supply, electricity, sewage, telephone lines play an essential role in determining the suitability of a location.
Franchisors will provide lay out assistance and supervise the construction of a new franchised store. Interiors, color schemes and other identifiable marks of the Franchisor have to be followed in putting up the business. The same goes with indoor and outdoor signage, lightning and decoration. The entire construction cost is at the expense of the Franchisee, and has to be paid as due to either the Contractor or Franchisor, depending on the arrangement.