Can a buyer of a franchise select the business location?

The extent to which a franchisee can select the business location may be linked to the relative negotiating position of the franchisee. The factors determining the negotiating power of a franchisee to select the business location will depend to a degree on the nature of the franchisor’s business concept, its brand strength, the size and maturity of its market, together with practical property issues and the franchisee’s knowledge of the local market.  The examples below illustrate how these factors may determine the extent to which a franchisee can select the business location.  ”¢ The mature franchisor  In this example the franchisor is in a stronger negotiating position because of its brand strength and experience in the franchising marketplace. The franchisee may have no choice in the territory and may even seek to utilise the franchisor’s expertise in selecting suitable premises.  Further, the brand strength and the size of the local market may mean the franchisee has less power to select a larger territory, because if the territory the franchisee proposes is large enough to support more than one franchise, the franchisor may reduce the ambit of the proposed territory so it can offer the remainder of the territory to another franchisee.  ”¢ The immature franchisor The immature franchisor is likely to have little franchising experience, with only a regional brand that has had none or little market exposure. The fact the immature franchisor’s brand is not as strong as the mature franchisor means a franchisee is likely to have better bargaining power to determine its territory.  However, if a franchisee has superior knowledge of the local market as compared with a franchisor, whether mature or immature, it is likely to have more negotiating power and a greater chance of selecting both its territory and business location.