Home-based or brick-and-mortar? That’s one of the key questions you have to answer when choosing a franchise. Each option has its pros and cons. If you’re still on the fence, check out my previous blog posts on how to choose the best option for you (I discuss the pros and cons of home-based franchising in this post, and the pros and cons of brick-and-mortar franchising in this one). If you’re leaning toward a brick-and-mortar franchise, however, this post is for you.
I always encourage my clients to ask plenty of questions during the franchise-selection process, and buying a brick-and-mortar franchise is no exception. In particular, I recommend that you ask yourself the following questions before you make a final decision.
Do I want to manage a business and a location?
When you buy a brick-and-mortar franchise, you’re not just signing up to operate a business. You’re also signing up to operate a location. This commitment adds responsibilities to your plate. The level of responsibility may vary, depending on whether you lease or buy the space and how much help your franchisor provides. But, generally, you should expect to be responsible for:
- Outfitting/furnishing the space (whether you oversee the process or do it yourself)
- Taking in, organizing, and properly storing inventory/food ingredients
- Keeping the space clean and in good repair
- Making repairs yourself or managing contractors if anything breaks
- Securing the premises
- Dealing with construction and occupancy permits, location taxes, health and safety inspections, and any other government-imposed requirements or fees
You’ll have to manage all these responsibilities alongside the usual work of running a business: serving customers, marketing your product or service, hiring and managing employees, and managing your financials. If you’re planning to operate your franchise as a side hustle, the extra work of managing a location might make a home-based franchise a better choice.
Does this business fit my location?
You also need to consider whether your planned business is a good fit for your location. Each type of brick-and-mortar franchise requires a certain type of facility and will perform best in certain surroundings. If you want to own a car-repair franchise, for instance, you’ll need a garage-type facility with plenty of parking. A retail store may not require as much space, but you’ll need a location with good foot traffic and parking. If the franchise sells luxury products or services, your building will need to look the part.
To answer the overall question of location fit, you’ll need to answer several more specific questions:
- Does your area have existing facilities of the kind you need, or will you have to build from scratch? If the latter, do you have the time, money, and knowledge for that?
- Do zoning regulations allow this type of business where you want to locate? If not, will it be easy to obtain a variance?
- Are local commercial rents or property prices within your budget?
- Does your area have an ample supply of quality contractors to help build and/or maintain the facility?
If you answer “no” to any of these questions, a brick-and-mortar franchise may not be the best fit for you at this time.
Do I have plenty of financial reserves?
Brick-and-mortar franchise owners have higher fixed costs than home-based franchise owners. And if you have higher fixed costs, that means you need to have bigger financial reserves. Those reserves serve two purposes. First, they exist to sustain your business (and you) through the startup stage, as you work toward profitability. Second, they serve as a cushion in case of emergencies or downturns, such as a natural disaster, pandemic, or recession.
To make sure you have enough reserves, use the Franchise Disclosure Document provided by the franchisor to estimate time to profitability, business income, and business expenses. Compare those numbers to your reserves to see if you have enough to make it to profitability or to cushion your business for an adequate length of time in case of unexpected problems.
What’s my long-term plan?
Due to the additional responsibility and expense associated with a brick-and-mortar franchise, your long-term plan is particularly important. For instance, you need to account for the fact that anything that shuts down your building will also shut down your business. This could be something as small as a plumbing leak or as big as a tornado. A possible long-term plan for dealing with this scenario: set a goal to open more than one location and give yourself a backup.
In addition, life-cyle planning is more complicated when a business has a physical location. Closure, divestment, transfer of ownership–they all require more time, planning, and expense if real estate is part of the picture. For instance, if you want to close the business, you’ll need to time the closure to fit the terms of your lease or the time required to sell the building. Or if you intend to transfer the business to a family member, you’ll have to coordinate with the leaseholder or bank (unless you own your building outright). Either entity may require a buyout, with the new owner qualifying on their own for a new lease or mortgage. You or your family member may need several years to save up the funds required in that kind of situation.
Are you happy with your own answers to these questions? Maybe it’s time to move forward with a search for the perfect brick-and-mortar franchise! Or are you still uncertain what to do? Either way, I can help–and my services are always free. Schedule a call with me to start your franchise journey!
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