Today, investors seeking to launch a business sometimes decide to purchase a franchise opportunity instead. Most franchises specialize within specific industries. These enterprises offer proven, established systems for franchisees to follow. Instead of charting completely new territory, a franchisee tailcoats on the success of entrepreneurs who have already pioneered a successful business model in a viable market niche.

Yet anyone contemplating searching for a franchise should carefully investigate the anticipated costs. Franchises today cover a broad spectrum. Some companies offer essentially free business opportunities, but charge a franchise holder a percentage of annual revenues. Other firms request hundreds of thousands of dollars simply for the right to establish a franchise and use the franchisor’s proprietary intellectual property. This brief article considers one potential franchise expense which some novice franchise shoppers overlook: real estate or “build-out” costs.

Franchise Real Estate Requirements

Not every franchise requires franchisees to obtain a business location. In fact, some companies place no restrictions whatsoever upon a franchisee’s commercial venue. Yet others prioritize obtaining suitable premises highly. Some franchises reserve the right to decline to go forward with a franchise agreement if a new franchisee fails to comply with build-out requirements.

For example, some hospitality industry franchises require new franchisees to bring a hotel or motel into compliance with very specific site guidelines. For example, a franchisee may need to add additional guest rooms, expand the size of a swimming pool, and upgrade the lobby. A franchisor may furnish a franchisee with specified deadlines for completing any necessary site modifications.

Other Types of Real Estate Provisions

A number of different types of franchises typically impose build-out requirements. Since many franchises gain fast recognition because customers immediately recognize their distinctive buildings, a franchisor may require franchisees to build, purchase, or rent premises meeting brand specifications. Many fast foot outlets and retail boutiques in the United States use uniform architectural styles wherever they conduct business. Their new franchisees must make arrangements to tailor premises to satisfy corporate design guidelines

Even if a franchisor does not require a completely identical building exterior, the company may establish rules covering minimal square footage, storage, signage, and other issues. Whether you seek to start a cell phone repair franchise or a bakery franchise, it makes sense to pay close attention to any real estate build-out provisions in the franchise agreement! These expenses often contribute to initial franchise costs.