Although building a business is one of the first options that come to mind when acquiring commercial land, such investment offers other options to obtain returns in less time and without allocating more capital: the rental of land for franchises.
As we mentioned in our article 7 business ideas to earn money when buying land, buying, improving —in the event that it is not urbanized— and renting is a strategy that generates extra income immediately.
Within the commercial sector it is possible to find two business models: the traditional ones and the franchises. Although both require a site to be built, franchises offer a greater chance of obtaining stable returns over a longer period of time.
Why are franchises an excellent business opportunity?
The reason is very simple, on average the life time of a business is 5 years, however, when we talk about franchises – approximately 95% of them – the life span is longer than expected according to the data it shows. the Mexican Franchise Association (AMF).
In addition to the above, according to the Ministry of Economy in Mexico, the chances of starting a profitable business in our country are 95% in the case of franchises, 83% in incubators and only 23% with an independent company.
What enables franchises to be profitable businesses?
- They have proven business models.
- They have recognized brands.
- A reduced learning curves.
- And the advice of experts in the field.
So, what is a franchise? We can define it as a business model for the commercialization of goods and services that involves two parties:
- The franchisor that grants the rights for the use and exploitation of its brand.
- The franchisee who pays an amount to exercise this right for a specific period of time.
However, this payment is not the only requirement that a franchisee must cover, it is also important that it meets the specifications – which we will talk about later – indicated by the brand in terms of the space where the business will be established.
This is one of the main obstacles that franchisees face, since sometimes they do not have a space that meets the characteristics required by the brand, and they must rent commercial land that has the appropriate measures and location, in accordance with the business in question.
This is ideal if you are thinking of acquiring land with the idea of renting it, since there will always be companies interested in leasing it, especially if it is in a good location and the land use permit is for commercial purposes.
Commercial land as a new business opportunity
The commercial land are tracts of land located at strategic points to provide an opportunity for the investor to establish business s, due to the development and urbanization of the area where they are.
In other articles we talk about the benefits of buying land in a commercial area over residential areas, and leasing to companies or franchises is one of them.
In Mexico, investing in these lands is very convenient due to the constant commercial growth that has been registered, especially in areas such as the Mexican southeast that offer a wide potential for the construction of different types of commercial developments.
Depending on their location and characteristics, this type of project is very attractive for franchises and retail companies.
Why? Thanks to the fact that they allow them to continue expanding their brand without making a strong investment, since they prefer to rent several lots instead of investing all the capital in the purchase of just one.
Land rental for franchises: a business with stable returns
Constant business growth opens up an opportunity for those who wish to invest in real estate.
The rental of land for franchises is a business model that has been successful and that guarantees stable returns in the medium and long term.
Although the land or commercial premises have the necessary regulations and characteristics to build any type of business, renting them to franchises is more convenient because their life cycle is longer than that of traditional businesses.
As we mentioned before, 95% of franchises last for 5 years or more, unlike traditional businesses whose life cycle does not exceed 2 years.
When putting this data in a balance, it is more convenient to rent land to franchises than to traditional businesses, because its life cycle will determine the term during which the returns generated by the lease will be enjoyed.
Among the most popular brands and franchises that rent land, and that are in constant growth are:
- Circle K
- 7 Eleven
- Savings Pharmacies
- Super Pharmacy Guadalajara
What do these brands have in common?
- Privileged locations in areas with a high influx of people.
- They are mostly found in corner stores.
- They are in strategic points such as avenues and near schools and hospitals (In the case of pharmacies and convenience stores).
Keeping this in mind when choosing a land will be vital to guarantee your investment and close successful leasing deals.
Similarly, there are companies – such as BMF Inversions – that have business premises plans when you acquire a commercial lot and market studies to guarantee your investment.
How to rent land to franchises?
As it is a common practice within the franchise business model, some brands have experts in the commercial area to review the land offered by investors for rent.
Through their websites, you can find the requirements that your land must meet -in most cases-, as well as send your property information and fill out a contact form so that the commercial department can verify it and notify you if it is possible to close the deal.
Even if you develop a business plan before acquiring the land, you can make sure in advance that it meets the requirements of the franchise you have in mind.
Another option is to advertise the rental of land for franchises through a real estate company, however, you must take into account the payment to be made for the marketing services; which, generally, depends on the term and amount of rent agreed in the contract.
A well-located land will always attract the gaze of companies that rent land and are interested, so you can do without the services of a real estate agency.
Characteristics of the land for franchises
Now, what characteristics should a land have to rent to franchises?
Although each brand has its own requirements, there are a number of key points for investing in commercial land that companies take into account to determine whether or not it is a convenient place to build a business.
1. Commercial land use
In order for a franchise to establish itself on land, it must have the permits that authorize the use of the property for commercial purposes and thus, the brand can proceed smoothly with the construction of the business.
For this there are two options:
- Buy the land already with the use of land defined as commercial and avoid the paperwork.
- Buy the land still in a rustic stage and do the land use change process yourself. Although this is the disadvantage of the time it takes to do it, but for this reason the acquisition cost is lower.
Choosing the best option will depend on your business needs, budget and time to invest in it.
2. Minimum area
When considering the idea of buying land to rent to franchises, one question investors face is not knowing how much land to acquire for that purpose.
Although there is no specific number – as this will depend on the surface of the land – it is recommended to acquire at least two lots considering that the average size of commercial land is between 250 and 300 square meters.
Acquiring two commercial lots will increase the chances of meeting the franchise specifications and leasing the property.
Depending on the type of business, each brand establishes different ranges of surface to build a place that meets the conditions of the franchise, for example:
- Auto parts and accessories stores: land from 1,500 square meters with a minimum front of 35 meters.
- Convenience stores: land with a maximum area of 500 square meters.
- Pharmacies: land between 400 and 600 square meters.
3. Documentation in order
Another aspect that the commercial areas of the franchises verify is the legality of the property.
For this, it is essential to have all the documentation in order that provides legal certainty to the tenant company, such as:
- Private property title: The land must be in the name of the person who is offering it for rent and registered with the Public Property Registry.
- Proofs of no debt: To demonstrate that the land is free of encumbrance, the franchises request proofs of no debt that prove the timely payment of water, electricity and property.
- Plans: Some companies request sketches or plans of the land, which must have the seal of the authority that authorizes urban development projects, as well as the general characteristics of the property such as location, surface and adjoining lots.
4. Location and accessibility
Since the main objectives of a franchise are the expansion of a business and the dominance of the market, the location and accessibility are basic aspects to which the tenant companies will pay special attention, to determine if a land offered is suitable for the business. whether or not it is successful.
It is essential that the land is in a busy area, with a high influx of both pedestrians and vehicles and with excellent visibility to guarantee brand exposure.
Likewise, it is important that it be located in an urbanized area, surrounded by avenues that facilitate access to consumers and increase the attraction of customers.
Even some brands are more specific and require that commercial land be on main avenues.
An example of all the above is Parque Bazar, a project that meets the requirements and has the necessary characteristics to develop successful businesses, about which we will talk in more detail.
Parque Bazar: a planned project for commercial expansion
At BMF Inversions we have been able to identify the business opportunity represented by the rental of land for franchises, which is why we developed Parque Bazar.
It is a real estate project of commercial land in Merida and Playa del Carmen that meets the needs established by this business model.
Parque Bazar is a project that, thanks to the previous research we carried out to identify the areas with the greatest growth potential in both cities, has ideal characteristics and conditions for commercial leasing such as:
- Use of commercial land, which allows the construction of businesses without inconveniences.
- Land of 265 square meters (Playa del Carmen) and 300 square meters (Mérida).
- Strategic location surrounded by housing developments.
- Rapidly growing and urbanized area.
- Documents in order that guarantee legal certainty to the investor.
Easy access by main avenue (Parque Bazar Playa del Carmen) and federal highway (Parque Bazar inversions Commercials Oriented).
The characteristics of Parque Bazar broaden the chances of renting land to a franchise, which will allow you to obtain high and stable returns for a period of between 5 and 15 years, depending on the franchise and the conditions established in the lease.
Invest safely with the purchase of commercial land
If you are looking for the best way to diversify your investments, the rental of land for franchises is an excellent business opportunity that does not require an additional investment to the acquisition of the property.
It is safe to invest in land even in times and crisis and especially if you will obtain additional benefits and profits, especially if you acquire lots in cities such as Cancun, Mérida or Playa del Carmen.
Schedule a meeting with one of our specialized advisers to provide you with more information about the commercial lots available and learn about the options you have to take advantage of the commercial growth that is taking place in the southeast.