If you travel across America after this latest global recession, you will note that many shopping centers have anchor tenants which are no longer there. This is horrible to see so much square footage lost for the commercial property owners, leasing companies, and property managers, but it is also even worse for the mom and pop franchised outlets also in that center with no anchor tenant.
In essence, the shopping mall has died, and they are left holding the bag perhaps, with seven years left on their 10 year lease. They are obligated to make those lease payments even though the shopping center no longer has any traffic, and therefore, no customers are walking by, looking at their sign, and stopping in to buy something because they recognize the brand name.
At America’s largest indoor shopping malls you will note that there are companies that have gone out of business with “for lease” signs, and therefore, there are spaces between businesses that are still in business. This is especially upsetting for a franchise outlet which is paying “tripled net” and knowing that there are a specific number of tenants who were paying the overall cost to run the shopping center and their share of the cost automatically go up each time another business bolts.
It is often said that there is great synergy in the indoor malls due to the traffic, and the people who come to shop, look, and purchase retail items on their credit card. But when a shopping mall dies so too could your franchised outlet.
Therefore, you have to be very careful when and where you choose to put your location, and understand the reality of the US economy’s business cycles through thick and thin. It is not my intention to scare you, rather to warn you and hope that you will please consider this prior to purchasing a franchise or signing a 10 year lease.