News

Want to attract a franchise tenant? Here a three factors to consider

By Greg Bell

The biggest McDonalds in the southern hemisphere is on the market, with a price tag up to $100 million. Located in the pole position of Brisbane's bustling Queen Street Mall, the property is currently under a 10-year lease with McDonalds, with two 10-year options thereafter. 

For many commercial property investors, attracting a high-profile franchise tenant is a portfolio pipe dream. Franchise tenants can boost the marketing profile of your property and help you attract other businesses. Because of this, however, franchises are extremely selective in the spaces they'll occupy. Here are some things to consider if you hope to bring a national chain into your next commercial asset

1. Location

In commercial real estate, buyers must always think about location. That's because all businesses will have different requirements, whether that's pedestrian access, proximity to the motorway or something else. 

With franchises, however, narrowing down the perfect spot is even trickier as brands don't just want 'good' location – they need a location that's suited to their pre-determined business model. Franchise organisations might have strict rules in place around the suburbs they operate in, how much parking they offer, or which businesses they neighbour. 

2. Customer base

Equally important is understanding the customer profile. Every franchise has an ideal consumer, whether that's pre-teen girls or middle-aged tradesmen. If you want to reel in these businesses, you need to learn their target market and buy a property suited to the demographic. 

Sometimes, this means putting yourself in the organisation's shoes and thinking about where their ideal customer lives or spends time. An upmarket yoga apparel store, for example, will do most of its trade with women between the ages of 20 and 50 who have a decent amount of disposable income. Where do you think this kind of retailer will want to set up shop? Next to a Hungry Jacks in the CBD? Or further out in a more luxury, boutique-style area? 

3. Property modifications 

When you partner with a franchise tenant, you should anticipate sizeable building modifications. These kinds of businesses come with strict branding and signage requirements to ensure each fitout matches their national identity. Unlike renting to a smaller business, owner and landlord will be expected to adjust to the 'branding needs' of the tenant – not vice versa.

Similarly, franchise businesses will often use their own lease format, which includes all specials and conditions. Franchise tenancy agreements tend to be very thorough, but it's still a good idea to have your own legal team review the lease before signing on. 

Want to learn more about commercial real estate investing? Check out our full news hub today. 

Up to Date

Latest News