Choosing Between Leasing and Buying Space as a Franchisee

Not all franchisees have enough properties in their prime market to find anything more permanent than a lease. If a specific location is a major component for your success, your chances of finding a retail space available for purchasing are likely to drop. However, you must still consider all of the challenges of owning your own property before making a major investment if something becomes available.

Commercial Lease

It is best to go through a complete site selection practice with your franchiser to find all of your options before choosing either the leasing or purchasing route. You may find that the very best choice for your business is an outright buy when you were preparing to sign a lease. Keep your options open throughout the process so you can find something within your price range and matching your franchise's requirements.

You should stay patient and prepared when looking for a sale. Many new business owners assume that their long-term lease with a property management company will eventually turn into a purchase arrangement. However, this is actually quite rare. Industry figures show that about 98% of retail and commercial space available at any time is only available for leasing. Most landlords prefer the steady and regular income of renting rather than the one time payment of a sale.

When you do manage to discover an enticing sales opportunity, consider these important advantages and disadvantages of owning your own buildings.

Pros:

  • Your monthly payments will go towards your complete ownership of the property rather than just covering your time in the space.
  • There's no need to follow the regulations and guidelines of a landlord. You can choose the best time to open your business or decide what color the walls should be painted.
  • The investment you make in the property could be returned threefold or more as the property increases in value. If you decide to sell it in a decade, your improvements will help you make the space attractive to other business owners.

Cons:

  • You will have to abandon any work you have put into your current space if it is not the property that comes up for purchase. This can cause you to lose some of your traffic. Expect to invest quite a sizable sum into new advertising and marketing so your current customers can find your new location.
  • Damage and wear will need repairs from your own employee or contracted repair service. Many landlords handle basic repairs for their tenants, but property owners must serve as their own support team.
  • Many properties that come up for sale need serious work or offer a weaker flow of traffic. You may need to invest quite a lot of work into a purchased property before you can use it.

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