Franchises for Landlords
The commercial real estate business is in remarkably interesting times and I have a solution for the challenge of empty retail space.
There are a combination of factors including, but not exclusive to, retail sales moving more and more online, Covid changing work and shopping habits, as well as population bases shifting all over
the US. The end result is that there is some real estate that is very precious, in high demand and very expensive. Often in areas where population has grown and building has not kept up.
There are also areas where you can find empty stores and, as the owner of that real estate, you want to fill it so that the property shows better, but also get revenue from what was empty space.
Normally you would look for someone to rent that space, however long that took. But what if there was a compelling argument for a different approach?
What if the property owner picked the brands and concepts that populated their properties, opened them, then either kept the cash flow or sold the business and captured the new liquidity and then became the landlord for the new owner? There are a lot of ready buyers for a good business, but sometimes filling empty real estate is a long process.
The challenge in the past was finding a business that didn’t require a lot of time for the landlord, something simple, streamlined and with few employees. For reasons that had little to do with landlords filling space, the franchise industry has answered the challenge quite well.
Have a large space to fill, a former grocery store or anchor that you could fill entirely or divide? That could be a perfect fit for a salon suites concept. In this model a large space is subdivided into smaller spaces and rented to beauty service providers like hair stylists. These providers will have spent years building relationships with clients that love them and would follow them anywhere. When they leave the salon they are in, their clients largely migrate and provide them with instant revenue.
Here is the fun part: as the landlord, you set up a business in your empty space to become, well, a landlord. You are renting out your own property for more dollars per square foot than you used to. And, if one of your new tenants leaves, you only have 100-300 sq feet to fill, your overall revenue has not changed much. These are simple businesses and will feel much like what you already do. Beauty service providers love it because they can set up their own operation, avoid the drama of a salon and control their destiny.
One of my past candidates, now a friend, is an executive and operator of a family office that invests in commercial real estate. They have ramped up this concept in multiple properties across two states and continue to grow. While a good business for them, I believe they also have a lot of pride in helping small businesses open in their communities. What about more common smaller spaces, though?
Well in the 2,000 to 5,000 sq foot range we might be looking at semi-absentee fitness, pet supply, doggie daycare, senior care, or similar concepts. And of considerable interest to my real estate contacts right now is a new laundromat concept that offers a range of benefits that landlords love! This is not the old dingy facility with broken machines where customers don’t like to be there.
This reenvisioned laundromat is bright, fun and safe. It offers a lounge, gaming and WIFI. More importantly it is safe and customers flock to it.
There are a number of semi-absentee manager run businesses in this category. Which one is right for you will depend on the demographics in your neighborhood.
Even smaller you say?
1,000 to 2,500 sq feet is a wonderful range for semi-absentee or (one concept I love) totally and completely absentee, in the same way the owners of Ritz Carlton don’t run these hotels.
The restaurant world has a lot of competition in four categories: Burgers, pizza, chicken and subs. So we want to be thoughtful there. The totally absentee concept I mentioned is in an up-and-coming category, but flavors and style we are all familiar with. The service model is much like Chipotle. The big difference from the majority of the franchise industry is that the franchisor will take over after you sign up and handle design, build out, staffing and running the business on a daily basis. You provide the space and funding, they do the rest! You would get regular briefings and mailbox money.
If you own commercial real estate and want to brainstorm alternative approaches to filling it, reach out to me and we can talk through strategies.
George Knauf is a highly sought after, trusted advisor to many of the top franchise ownership groups in the world. With over 25 years of experience in both start-up and mature business franchise operations he is uniquely qualified to advise individuals that have dreamed of Building their own empires. Whether you have an existing portfolio or searching for your first franchise, he can help you to pursue your dreams. Contact Franchising USA Expert, George’s Hotline: 703-424-2980.