(FS7) Understanding Business Layout and Encroachment

Every franchise has a very specific design. While some may feature slight differences in layout or where something is located, they all more or less have the same look or feel to them to provide the customer with the same experience whether they’re walking into a your business in Wisconsin or New Zealand. When you’re surveying different places for your store, you should have some vision of how the franchise will fit in the layout of the locations you’ve looked at, what will need to be changed, and what can stay the same. You’ll want to make sure that your franchise and its layout actually work with the location for the most part because the more you have to change, the more it will cost. That’s not to say you can’t take something and change it, it all depends on how much money you’re looking to spend—and you may even come across an old store that would fit amazing with your franchise’s vision.

 

What your franchise typically uses in its other chains should be included on your list of must haves for the location when you’re picking. If you need a large back room for cargo or back room for a service that your franchise offers, be on the lookout for a location that works with that layout or would be easy to manipulate. Keep in mind that you won’t only have to meet your franchisor’s expectations for your store, but you’ll have to meet local ordinances as well. If you think that something is going to be costly to change, check with your franchisor before doing anything.

 

Avoiding Encroachment

Encroachment, for those who haven’t heard the term before or unsure, is intrusion onto someone’s territory, property, rights, etc. It’s a term that you should be fully aware and understanding of prior to even signing the franchise agreement.funding for franchise

 

In terms of encroachment by or with your franchisor—say that your franchisor promises you a 1-mile radius in a certain area of the town. You can place anywhere in that area and he will promises not to have any other franchises or company-owned franchises in that area, but most of the time this will not uninvited him from selling through the web in this area. However consider you’ve opened a store on Central and Fourth and you’ve been open for three years now. Then you see down the street, from your front door, another franchise, the same franchise opening up on your street. That would be encroachment by your franchisor. You’ll want to read the terms outlined in your franchise agreement to fully understand what both of your limits are.

 

While we’re discussing encroachment, it’s also important to think about not being the only one of your franchise in the market in that area. If left on your own, you won’t have any allies in the area and will be left vulnerable to competitors to take over the neighborhood or the city. If your franchise is lesser known, it will be important to have allies to make that brand recognition in the city. If your brand is well known, you’ll want allies to help maintain the brand name and business because too many consumers, while good in theory, can cause value and quality of service to diminish.

 

Reading the contract carefully is imperative to understanding what is and isn’t encroachment with your franchisor. Contracts will normally tell you what a franchisor is granting you, but they don’t’ normally tell you what you’re not being given, like exclusivity in the area. Never rely 100% on the franchisor’s or salesperson’s verbal promises or statements to be true. Look for it in writing because more often than not, if what they say isn’t in the contract, then it’s not necessarily true.

 

Read More From Franchise Series 7: