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Unintended Franchise Killer – Street and Rail Construction Projects

Imagine you have the perfect location for your franchise near a stadium with lots of pedestrian traffic. You spend $450,000 to get your first franchise built and ready. Opening week was wonderful with sales of $12,000 and subsequents weeks continue on with profits. Then, a major light rail construction project starts out front and blocks your sidewalk. After a few weeks of jack hammers and tarps blocking views, nobody is venturing down your way because they don’t want to deal with the noise and nuisance. The construction project lasts for 8 months.

A similar story has happened in Minneapolis, MN in an area called “Stadium Village” near Target Field. Quiznos couldn’t afford to stay open. Independent fast food places such as Hot Diggity Dog and Leo’s Burritos also shut down with no word whether they will reopen.

This is a really unfortunate and sad situation. These projects are often years in the making so perhaps the franchisee should have anticipated this development. Nevertheless, with strict operating rules in a franchise agreement there is not much the franchisee can do to adjust operations.

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.
3 comments
Rippcord
Rippcord

I''ve read a lot of excellent franchise blog posts and have never seen this point raised before. This is such a great issue for both franchisees and prospective franchisees. For franchisees, it''s a reminder to always be informed on what projects could affect you. Even if you can''t relocate, you can prepare yourself by putting money aside for business disruptions or purchasing business interruption insurance. For prospects, awareness of major development could save you some serious headaches. Such a great post, thanks!

thepegleg
thepegleg

*Bad due diligence on the side of the franchisees - plain and simple.  They should have known the construction was coming, as projects like this take years of pre-planning.

Ryan Knoll
Ryan Knoll

I agree that this the businesses could have seen the rail construction coming, but they probably didn't know the true extent of the road blockages. When you fall in love with a location it is easy to diminish the impact of future negative events.