franchising aspects Apr, 06 2012

Negotiate well for best location deals

Taking up a location on rent or lease to open a franchise outlet needs a lot of research, hard work and knowledge. Negotiation holds the key for the best location deals. Read on to know more

By Abha Garyali
Sub Editor
Negotiate well for best location deals

To enter the business world by taking the franchise route or as an independent business involves lot of hard work, investment of hard earned money and risk. However, franchising lowers the risk factor to a greater extent as franchisor is always there to hand hold the franchisee. Franchisor’s expertise makes franchisee understand certain critical matters where cost cutting can be done and revenues can be increased.

Searching for an apt location to open a franchise outlet is one such significant step. The franchisor always makes an effort to guide the franchisee in selecting the right location for opening an outlet. He also guides the franchisee in negotiating for rentals and lease agreement.

However, franchisee himself needs to be conscious enough to get the best negotiated deal for his franchise outlet. Through this article an attempt is made to guide the franchisees in negotiating for deals pertaining to locations.

Negotiating the best location deals

Property owners generally hire real estate agents and brokers who are experienced and specialised sales persons to stike the best rental and leasing deal. These agents get some percentage of commission from both the parties for thier services. They usually ask for highest property prices from franchisees. Franchisees should be knowledgeable and conscious enough to negotiate and get the best location at the best price. Here are few steps to be considered while negotiating.

Negotiate aggressively: Franchisees should be well prepared to negotiate. Many times they just negotiate for the sake of it and do not even try hard to bring down the rentals. However the owner or his agents will always negotiate fiercely to win as higher the rentals, more will be his commission. Therefore franchises should also be prepared to negotiate aggressively.

Be informed and do prior research: Before negotiating the deal with the owner or his agent, franchisees need to get information about what other tenants are paying for rent or what incentives they receive. This will make franchisees to get a better deal. After knowing all such details, ask the right questions from the landlord so that he also knows that the franchisee is well informed about rentals in that area

Handle real estate agents smartly: Few franchisees fall in the traps laid by real estate brokers. Keep in mind that estate brokers work for the landlords who are paying them commission and it is not his role to get the franchisee the best deal. Their main aim is to get the landlord the highest rent, the biggest deposit, etc. Higher the rent paid by the franchisee, more is the commission earned by the agent. Therefore it is advisable not to trust the agent totally.

Keep options open: While selecting a suitable franchise location, franchisees come across many sites. They may even find the first offer the most reasonable and best but it is essential not to accept the leasing agent`s first offer. In the real estate industry, it is vital to negotiate with whatever the landlord offers initially.

Negotiate on initial deposits: Franchisees should be aware that large deposits are not required in a real estate lease agreements. Initial deposits demanded by land owners are negotiable as they are always kept higher than the expected amount. The deposits are used by owners to pay their property agents so negotiations are must on this account.

As it is the hard earned money that franchisee is investing in the business, every penny counts and cannot be wasted. Therefore it is pertinant to take franchisors’ expert advice so as to reduce costs in all property matters. Before signing the lease documents, franchisees should get them reviewed by professionals who understand all clauses and their ramifications as well.

Related: Cost Effective Business Proposal

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