Business premises: how to approve sites for your future franchise

A business that works well at one address will not necessarily achieve the same results elsewhere. Before you start franchising, make site selection a decision backed by evidence, rather than a gamble based on the founder’s experience. In franchising, clear criteria help protect prospective franchisees’ investment and prevent outlets from opening in premises that do not suit the brand’s concept.

1. Translate operational needs into property requirements

Start by identifying which features of your current location genuinely support the operation. A shop may perform well because it is close to offices, offers convenient collection or has a highly visible shopfront. Mistaking these advantages for brand strength can lead to unsuitable premises being approved.

Divide the requirements into three groups:

• Essential: conditions without which the business cannot operate, such as adequate electrical capacity, accessibility, storage space or the ability to install an extraction system.
• Desirable: features that improve performance, such as parking, visibility and proximity to the target audience.
• Deal-breakers: features that make the site unviable, such as restrictions on use, an inability to adapt essential systems or building management rules prohibiting the activity.

Do not automatically copy the floor area of your existing outlet. First, describe what the premises need to accommodate: customer service, circulation, production, stock, toilets and areas for plant and equipment, depending on the activity and applicable requirements.

The result should be a requirements checklist with a rationale for each item. “Needs a good shopfront” is subjective; “the shopfront must allow signage that is visible to people approaching from the main access route” provides a concrete basis for checking suitability, subject to local advertising rules.

2. Assess demand and occupancy costs together

A busy location may offer little value if the people passing through are not your target customers. Visit the site on different days and at different times, taking account of the outlet’s intended opening hours. Record footfall, access, competitors, neighbouring activities and any obstacles to deliveries or order collection.

Use a standard assessment form so that properties can be compared. Include photographs, visit times, information sources and unresolved questions. Distinguish observations from estimates: people walking past do not necessarily represent interested customers.

Next, calculate the full cost of occupying the premises. In addition to rent, consider service charges, taxes payable by the tenant, required insurance, maintenance and any development-specific charges. Also establish the costs of alterations, installations and reinstating the premises at the end of the lease, where required by the contract.

Do not approve a site simply because the rent looks cheap. Premises requiring complex building work may be less suitable than a more expensive property with an appropriate layout and infrastructure. Compare revenue and expenditure scenarios without presenting projections as promises of turnover.

Specify who prepares the assessment and who makes the decision. Even in a small franchise business, a second review helps reduce decisions driven by the rush to open.

3. Check legal feasibility before making commitments

In Brazil, Law No. 13,966/2019 governs business franchising. It requires the franchise disclosure document, known as the Circular de Oferta de Franquia (COF), to state what assistance the franchisor offers in assessing and selecting the site where the franchise will operate, and on what terms. Actual practice must therefore match the support described to the prospective franchisee.

This obligation does not replace local checks. Whether an activity can be carried out at a particular site depends on its address, the characteristics of the premises and the applicable rules. Depending on the circumstances, checks may be needed on land use and zoning, municipal licensing, public health requirements, fire safety, accessibility and permission for building alterations.

Seek support from suitably qualified professionals to assess installations and proposed alterations. Also consult any building or development rules and the relevant property documents. The fact that a business previously operated at the address does not prove that the new operation will be able to trade there under the same conditions.

Avoid advising a prospective franchisee to enter into an unconditional lease before these checks are complete. With legal advice, consider contractual provisions that address outstanding issues, permissions and responsibilities. Commercial approval from the franchisor is not equivalent to a licence from the authorities.

4. Document the approval and its conditions

Create a decision record for each property assessed. It should specify:

• the address and property details;
• requirements met and outstanding issues identified;
• necessary alterations and who is responsible for checking them;
• documents and professional opinions relied upon;
• the outcome: approved, approved subject to conditions or rejected.

Where conditions apply, describe what must be resolved before proceeding. If an inspection reveals significant limitations, reassess the approval and its financial implications.

Make the responsibilities of the franchisor and franchisee clear, without turning approval into a guarantee of success. Retain the records to improve future decisions and identify which site characteristics genuinely support the operation.

Practical application: before offering your first franchise, prepare a property assessment form, a legal checks checklist and a conditional approval template. This ensures that every site goes through the same decision-making process.