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5 Mistakes Franchisees Make When Looking for Business Real Estate Avoid these common mistakes to ensure your next real-estate decision is the right one.

By Michael Ligon

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

As an owner of a franchise, one of the biggest decisions you have to make is finding the right real estate for your businesses. Successful franchisees are constantly looking for ways to scale and obtain new locations. Everyone has heard the cliché — location, location, location as it pertains to property. It's said that these are the three most important factors when it comes to purchasing real estate. The truth is that the location of your business is just one of the many factors a franchise owner should consider when looking for real estate. That being said, the location of your business is important, so be sure not to overlook these common mistakes franchisees encounter when looking for that perfect piece of real estate.

1. History can repeat itself

The history of a location can be very telling and extremely helpful in choosing real estate. For example, if you are looking for a new location for your pizza shop and you come across a piece of real estate that appears to be a great location for your business, be sure to research the history of what was there before. You may find that even though the area appears to be perfect, there were five other pizza shops in that same location that failed. That information doesn't necessarily mean that yours will fail too, but it definitely warrants a deeper investigation into that location before you make a decision.

Related: Considering franchise ownership? Get started now and take this quiz to find your personalized list of franchises that match your lifestyle, interests and budget.

2. Size matters

Another mistake many franchisees make when looking for real estate is mis-calculating the size of the location they need for their business. Bigger isn't necessarily better. Every penny counts when building a business, so making the right choices when it comes to any acquisition is important. Just because you're getting the deal of a lifetime on a piece of real estate doesn't mean it's the right choice. Sometimes you'll find real estate with a great cost per square footage, so the inclination is to take advantage of the price and go bigger. This can be a great opportunity, or it can be an unnecessary decision. Be sure to do your due diligence and run your numbers on all the properties you encounter. No matter how good the deal may look on paper, if you're purchasing real estate with more square footage than what you actually need, the extra area must convert into profitable space. If not, it's not actually a deal for "your" business.

3. Building versus buying

The larger the business, the more options you have for scaling and expanding your franchise locations. When deciding whether to build a new location or buy an existing structure, it is important to examine your numbers. On the surface, building a new location may seem to be the more expensive route, but that's not always the case. There are many instances where the amount of work needed to convert an existing structure into what you require for your franchise location far exceeds the amount it would cost to simply build it. Some franchises have a very particular blueprint that they must follow; that may limit your real-estate options. Be sure to verify that the cost per square foot of the necessary buildout isn't more than the cost per square footage for full construction. In some areas, these two numbers may be very similar, which actually allows you more flexibility in choosing your real-estate and location options. This can be helpful if you're forced to follow a particular blueprint or real-estate guideline for your franchise.

Related: Here Is How Much it Costs to Build a Restaurant (Infographic)

4. Brand identity is important

You must choose real estate that will allow you to showcase a cohesive and recognizable image. That being said, not all businesses require the same style of branding. For example, if you're a franchisee of a major restaurant chain, then it's imperative that the real estate you choose be recognizable to that established brand. A lot of major franchises will provide franchisees with an outline of building specifications, rules and possibly even approved locations for real estate. But, even smaller franchises should follow these guidelines and ensure that they continue a recognizable vision for their business across all of their locations. This means that even if your particular franchise allows for different styles of real estate, you still need to ensure the locations you choose allow you to use the appropriate signage or color scheme to showcase your brand identity.

5. Marketing matters

Sometimes the real estate you pick is not as important as the marketing you choose. As a franchisee, you may choose the perfect piece of real estate in an awesome area and still have that business location fail. This happens when you place too much focus on the real estate and not enough on the marketing. The real estate you chose is extremely important, but it's complemented by the marketing you do for your business and its locations. No matter what real-estate decision you've made, you need to create a marketing plan for that location. As a real-estate coach, I recommend that as soon as you've made a choice for your franchise location, you immediately begin working on a marketing plan. This way, while you're preparing the new real estate for your business, you're also preparing the area for your arrival and creating exposure for your new franchise location.

Related: 4 Social Media Marketing Trends to Implement in Your 2021 Strategy


There are many factors that go into choosing the perfect piece of real estate for your business and franchise locations. However, as with every business decision, data and information are king. Be sure to have a business plan before you even begin looking for real estate. A good business plan will provide you with the information and possibly even the specifications needed to assist you in choosing the perfect piece of real estate for your franchise location.

Michael Ligon

Author, Entrepreneur, Real Estate Investor, Stock Trader

Michael Ligon is an entrepreneur, real estate investor, stock trader and co-founder of The Ligon Group. He is best described as an inquisitive polymath and has been labeled "The Fixer" for his ability to uncover and resolve issues facing struggling businesses.

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