Starting a franchise in California can be a turning point in anyone’s business life. California is a great state for any kind of business, including buying a franchise. There are plenty of good reasons to buy a franchise in California.
From a big and diverse market (California is the most populous state in the US with a population of some 40 million) and robust tourism to a perfect atmosphere for running businesses and the pleasant weather throughout much of the year, the Golden State has it all for a franchisee to thrive.
Having said that, opening a franchise in California without giving enough thought to a few things in advance would be a reckless decision.
One of the most important things you should carefully consider before starting your franchise is the location. In this article, we’re going to give you some tips about how to choose the right franchise location in California.
When asking about the best location for your franchise in California, you might either want to know which city to choose in California for your franchise or how to find the right spot to take out a lease on a property for your new business.
We are going to address both of these questions.
What is the best city in California to open a franchise?
Based on the industry of your business and the franchise brand, some cities are more preferable to others.
The first thing you should consider before choosing your franchise location in California is finding how many similar businesses already exist in certain cities.
This should include both the other locations of the same franchise, e.g. the number of Subway locations in a particular city if you’re going to open a Subway store there, as well as your direct competitors, i.e. the number and density of fast-food restaurants in that city.
Of course, you should take into account other factors such as population, demographic characteristics, etc.
Gathering all this data may be a time-consuming process, but it is worth it.
In fact, franchise analytics is crucial in deciding where to establish your business.
The more relevant information you collect about different cities the better decision you can make about which one to choose for your franchise.
That said, some cities in California are more business-friendly in general.
A list of the top cities for small businesses in California has been suggested by Fundera, a marketplace for small business financial solutions.
Fundera gave scores to California cities based on the most recent U.S. Census Bureau data, including the American Community Survey, the Populations Estimates Program, and the Survey of Business Owners.
Given the metrics used for this evaluation, such as population growth, Median Household Income, unemployment rate, average business revenue, number of firms, and owner-occupied housing percentage, this list can also be taken as a list of top cities for franchise-based businesses in California.
So if you’re looking for the best franchise location in California, consider the following cities.
1. Palo Alto
Located in California’s San Francisco Bay Area, Palo Alto is known as the Heart of Silicon Valley and has a reputation for the many major technology companies based in it.
Companies like Tesla, HP, VMWare, Nest, Ideo, Xerox, and Palantir have their headquarters in this city along with 7000 other businesses. Google, Facebook, Pinterest, and PayPal were also once headquartered in Palo Alto and grew a lot here.
With an overall score of 73.41, Palo Alto outperformed any other California city in the Fundera study.
The Median Household Income in Palo Alto was $147,537 in 2019, meaning that half the households have an annual income of more than this amount, which is bigger than that of the U.S. ($63,030).
Higher income means higher purchasing power and more profit for franchisees.
The average business revenue in Palo Alto was also high and the unemployment rate was low (2.6%).
2. Yorba Linda
A city approximately 37 miles southeast of Downtown Los Angeles, Yorba Linda got the second-best Fundera score, 71.17.
The city has also the second-highest Median Household Income in California with $121,102.
The owner-occupied housing percentage of Yorba Linda is also very high (82.61% compared to the national rate of 64.3%), meaning that the majority of residents live in their own homes.
The high percentage of home-ownership means that the residents don’t have to pay exorbitant rents, so they have more money to pay for other things.
Also, people living in their own homes are more likely to pay for certain home services, providing more opportunities for service-oriented franchises.
3. Torrance
With a score of 68.82, this Los Angeles County town is ranks 2nd for the percentage of firms with paid employees (30.85%) and 3rd for average business revenue.
The robust economy of Torrance is largely a result of the major manufacturers based in this town, including Alcoa Fasteners, Robinson Helicopters, Exxon, and Honda.
4. San Francisco
San Francisco is home to many big names like Twitter, Gap, Levi Strauss, Airbnb, Uber, Lyft, Yelp, and Square.
Thanks to the technology boom, the Northern California city has become one of the healthiest business communities in the United States. However, the corporate environment of SF isn’t limited to tech firms.
Entrepreneurs in all industries find San Francisco a great place for growth.
The more than 116,800 firms surveyed by Fundera in SF have a combined sum of $175 billion in sales annually.
San Francisco’s good score of 68.09 was partially boosted by its high population growth (7.32% between 2010 and 2015).
Population growth is an important factor in the future success of your franchise, so make sure to take it into account when choosing your franchise location in California.
5. Thousand Oaks, California
Located approximately 40 miles from Downtown Los Angeles, Thousand Oaks houses headquarters or regional offices of several companies, including Verizon, Volkswagen, General Dynamics, and Amgen, and many more high-tech companies.
For this reason, it is sometimes referred to as “the next Silicon Valley.”
Thousand Oaks is also one of the wealthiest cities in the U.S., being ranked the 13th wealthiest U.S. city by NerdWallet in 2016.
It has the 2nd highest owner-occupied housing percentage (69.8%) and the 3rd highest median household income ($108,322) in California, scoring well in the Fundera study (67.96).
6. Santa Monica
The coastal town of Santa Monica of the Los Angeles Metropolitan Area enjoys a sound economy thanks to the numerous companies located there and its status as a beach resort, which makes it a popular tourist destination.
There are more than 23000 firms in Santa Monica, 22.86% of which have paid employees.
With a score of 67.22, Santa Monica is one of the best cities for small businesses and franchisees.
7. Redwood City
Just halfway between San Francisco and San Jose on the shores of the San Francisco Bay lies Redwood City with a population of 86,000 that saw a 10.73% increase from 2010 to 2015.
It is interesting that more than 10 percent of the population of the city (9000 people) are employed by only two companies, namely Electronic Arts and Oracle.
Redwood City got a score of 66.14 in the Fundera study thanks to its sustainable economic health.
8. San Clemente
A coastal city lying halfway between Los Angeles and San Diego, San Clemente scored 65.91 to gain a position in the list of the best cities in California to open a business in it.
Its low unemployment rate of 4.2% and high median household income and owner-occupancy rate of $100,187 and 66.48% comes from a strong economy.
Tips for choosing the right location for your franchise within a city
Having chosen the city, now it’s time to find the best location within the city to set up your franchise business.
Even if you have selected the right city, you won’t succeed if you choose the wrong location for establishing your business.
So what should you do to pick the best spot for your franchise?
Here is what you need to consider before choosing a location.
1. Understand your business
The first step is to know your business and target market.
What are you offering? Who are your potential customers? Do you need a visible place to be easily spotted by people, or you’re going to grow by word-of-mouth marketing?
Are your target customers well-off people or people of all economic statuses?
These are some of the questions you should ask yourself before deciding on the location of your franchise.
2. Seek help from your franchisor
Every franchisor has its own specific requirements, including those related to the location of the franchisee.
Although the details are usually specified in the franchise agreement, be sure to consult with your franchisor’s professionals about how to choose the right location.
Many of the franchisors have local development experts that are tasked with scouting the best locations for future franchisees.
It is crystal clear that they would be glad to help you as your success is their success.
3. Talk to other franchisees
It is a great idea to seek advice from other franchisees (both of the same or a different brand).
They did what you’re doing now and definitely have some experimental knowledge to share with you.
Ask them if they are happy to have chosen their current location or regret it, and why.
Ask them there if there is anything they wish they knew when choosing their location.
4. Find the premises with the help of a professional
After finding the right spot, you need to find the right premises to lease. In weighing the available options, consider the following:
i. Cost
The cost of the lease is of significant importance when opening a business.
It’s great to have a store in the middle of a bustling street, but the exorbitant rent can ruin your business profitability.
On the other hand, properties that rent for a low price may not attract enough customers to your store.
So it is crucial to find the ideal balance in terms of the cost of the lease.
ii. Accessibility
Depending on the type of business, accessibility can be highly important.
A restaurant that is miles away from the main roads isn’t expected to attract many customers.
The easier it is to get to the place the more customers you will have.
Check if there is enough parking space for your future customers who drive to your store or they would have a nightmare finding a parking place.
iii. Exposure
Accessibility alone isn’t enough. Is your business the only reason people might stop and get out of their cars?
If yes, think twice. You need a lot of foot and vehicular traffic to attract customers.
Areas with crowded malls, entertainment facilities, and tourist attractions are great places to find a spot for your franchise.
Do some research to check the traffic pattern by, for instance, spending a day counting the cars and people who appear in the area in different parts of the day.
5. Similar businesses nearby
Check the similar businesses that currently exist in the area, which are your future competitors. Investigate their competitive advantages and weak points. See how you can compete with them and get your fair share of the market. Read how to find your restaurant’s competitive advantage.
Future plan
Have some foresight when choosing a franchise location. Check if there are plans for projects in the area, that might positively or negatively affect your business in the future.
If, say, a new shopping mall is going to be built nearby, then it could help your business attract more customers, hence investing there becomes more economically viable.
You are now ready to negotiate a lease agreement.
While your franchisor can help you with this, you should also seek assistance from a professional realtor and attorney to finalize the deal because taking up a long-term lease of this nature needs professional expertise.
That was all you need to know about choosing the right franchise location in California. If you need more information, please do not hesitate to contact us.
