Franchise Location Building: What to Know

Author: BeTheBoss.ca

Date: DEC 1st, 2016

Topic: Industry Experts


If you're looking at Canadian franchises that require a brick-and-mortar location, there will be some construction involved. This can be a very exciting phase, but you'll need to know what to expect, so keep reading to learn about the building process for your new business.

 

Turnkey buildout 

The turnkey basis is the most common in franchise construction. In this approach, you'll be letting the franchisor carry out all the improvements to your location. The improvements are made on your behalf, and you will pay for all the costs via an upfront deposit and regular payments until the build is complete. 

Naturally, the franchisor is responsible for managing the project and hiring contractors, so there's usually a fee for those services that varies by brand. Once the location is finished, you'll make your final payment to the franchiser and receive the keys. 

This building model is favored by franchisers because it keeps you more focused on other vital issues, such as your training. While it does simplify the building phase, there are things you need to know, such as who will pay for over-budget items or issue and who receives the benefits of any cost savings. Generally, you'll be responsible for overruns, but you'll also receive savings. However, some franchisors do set a fixed price, meaning they'll be on the hook for extra expenses but also reap any savings.

 

Other buildouts

In some other building scenarios, you'll only receive a location layout and design, making you responsible for the general contractor role. You'll need to select the professionals to build the business, but you'll likely need the franchisor's consent for your choices, and your location will still need to meet the brand's specifications and standards. The plans you'll receive with this approach may be very specific to your location or they could be general, requiring adaptation to your particular site. This last scenario is applicable to franchise units located in malls; here you will not only require the franchisor's consent, but also the mall management approval on design and contractor choices.

 

Why do approaches differ?

There are many reasons that franchisors' approaches to building differ. A franchisor who is leasing a location directly and then subletting the location to the franchisee, for example, is likely to want full control over location development, length of lease, indemnification and securities. How extensive the renovations or build needs to be is another factor. If the location is freestanding, more construction and design is necessary, so a franchisor may want more oversight as a result. However, if it's part of a multi-tenant structure, less work is needed, and the franchisor might be willing to give more control to the franchisee. 

Before you sign any franchise agreement, be sure to read all the sections related to location improvement, development and instruction carefully as well as length of agreement and renewal options. You must be ready and willing to take whatever role in the construction the franchisor requires to make the process a smooth success.