San Diego Business Lawyer Blog
The decision whether to purchase a franchise requires thoughtful consideration of numerous factors. It is common for prospective purchasers to be blinded by the success of the franchise’s national reputation. A national reputation with hundreds of profitable locations, however, does not guarantee that every potential location will be profitable. Before making the decision to buy a franchise, prospective franchisees should carefully examine the demographics of the proposed location.
Take for example, a successful franchised sandwich shop located in Chula Vista‘s Terra Nova Plaza at the intersection of East H Street and the 805 freeway. This is a high traffic location that some commercial tenants have classified as an “A” center. While this is a hypothetical example, there can be little doubt that a national franchised sandwich shop in this mall will be profitable, perhaps extremely profitable. Put that same franchise in one of Chula Vista’s Eastlake or Otay Ranch shopping areas and you will almost certainly show a different result. While these communities are rich, diverse and beautiful, they have suffered greatly from the current struggling real estate market. This writer is convinced that Eastlake and Otay Ranch will recover and thrive, but for now business owners in the area have accepted their reality. This is not to say that the national franchised sandwich shop cannot be successful there. It merely is to suggest that a prospective franchisee would be unwise to move forward without seriously considering this economic reality.
Of course, this example is dependent on recessionary factors. Other demographics may prove important to the sandwich shop’s success. There may be less demand for a sandwich product in minority communities like San Ysidro and more upscale communities like La Jolla. It will also likely be more successful in high traffic business centers such as downtown San Diego. The point is to evaluate the demographics before assuming the franchise will be successful.