Who Finds and Builds Out the Site for a Franchisee?

When the term “turnkey” is used in franchising there is sometimes a misconception that if someone buys a franchise, they are told, “Okay great! Call me in a few months and I will give you the keys.” Someone might think that all they have to do is pay you a franchise fee and they are given a business that is all ready to go. However in reality that is not how franchising works (unless someone is buying an existing business that you sell as a franchise… see our article on Franchising and Opening Locations Simultaneously). For someone buying a franchise, as a franchisor, you are not responsible for site selection and build out.  Lets dive into this a bit deeper.

So Then What Are My Responsibilities?

The beauty of franchising is that you are using other people’s resources and talents to operate your business in other markets. This is especially true when it’s time to get the business open. Your responsibilities as a franchisor are to layout for the franchisee what costs they can expect to incur when starting their business.

You may ask yourself, “Well then why am I not finding sites and building out their locations for them?” The answer is easy. If by chance you find a site for a franchisee and it turns out to be on the wrong side of the freeway (for example) then do you really want to be blamed for why their business is not successful? Franchisees are looking for your guidance, expertise, knowledge and know-how when selecting sites but ultimately it is their responsibility to find a site and secure a lease for their business.

The build out of a franchisee’s location is also their responsibility; however your job is to provide them with detailed instructions so that they can execute it. This includes what equipment, furnishings, fixtures and signage the franchisee is to purchase and where to purchase such items. Could you sell such items to franchisees? Absolutely (we will save this topic for another time). With your guidance, it is the franchisee’s responsibility to make sure that their business complies with local laws and if necessary to have all architectural drawings prepared that ultimately you approve.

But I Want To Help!

Well you might be saying to yourself, “But I want to help and do the build out for the franchisee.” AND you can! This is why (either at the beginning or in time as your franchise system grows) you can require your franchisees to use preferred vendors or you can choose to create different companies to provide real estate acquisition or build out services to your franchisees. So for example you may decide to create a construction company that is a limited liability company (completely separate from the franchising company) whose main purpose is to provide build out and construction services to your franchisees as an approved vendor. This can get a bit complicated but don’t fret, give us a call it is easy to explain.

Creating different companies is the exception not the norm when first starting to franchise (it is not very common that a new franchise system creates such companies right away). Even if, for example, you created a real estate acquisition company whose purpose is to help franchisees identify sites, in the end it is your franchisee that makes the final decision.

Tell Me More!

If you’re thinking about franchising your business and want to understand how creating other companies can benefit you and if it makes sense to explore this option right away, Contact Us and talk with Dave. He gets charged up just talking about these things and will be thrilled to chat with you. When we build your franchise model we will identify how site selection works, how build out requirements are executed and tons other details that may not have even crossed your mind.