2009 May: Location, Location, Location

2009 May: Location, Location, LocationThinking of expanding to another location? Now, more than ever, intelligent site selection is essential — who can afford a hit or miss approach in this economy?

Some larger operations, like Marcos Pizza, use site selection software. With 170 locations, this chain, headquartered in Toledo, is poised to open hundreds of additional restaurants. Their software, designed by Pitney Bowes, allows them to quickly determine if their target customers are present and present in enough numbers to translate to good sales potential, says Byron Stephens, vice president of new business development.

Stephens attributes a significant part of their sales growth to this technology, but smaller operators needn’t fear they’re at a disadvantage without this kind of assist. Managed correctly, traditional approaches can bring you a winning location. Let’s take a look at three general categories you need to consider when scouting for a new location; the area surrounding the site, the site and the building.

Although Frank Salese, owner of Junior’s Italian and two other restaurants in Burlington, Vermont, says he “has a nose for opening restaurants,” he nevertheless does the requisite demographic research when he’s checking out an area. He drives through the neighborhoods and visits the local city hall and Chamber of Commerce to determine if there’s any pending construction or projects that could impact the site under consideration. He also looks for a strong, nearby fast food presence.

“They do the traffic research,” he explains. “They put them where the traffic is going to be and I know this will translate into traffic for me.” Also see what the business activity/daytime population is, if this is important to your concept, says Dennis Lombardi, executive VP of foodservice strategies at WD Partners, a Columbus, Ohio-headquartered consulting fi rm. “And try to determine how the neighborhood is changing,” says Lombardi. “You want to find out how durable the community is. Is it getting better, worse or staying them same? I’ve heard of people going to local churches and asking how the community is changing.”

This is important, agrees Becky Black, VP of operations for Alhambra-based Shakey’s Pizza. “We’re moving forward with aggressive growth, but most of our existing locations have been in the same trade areas for years,” she says. “When a trade area changes from when we signed the lease, it affects us because then the synergy changes.”

Consequently, says Black, you want to investigate how the area might change over the next 5-to-10 years to see if there is a projected growth decline in your target market. Also consider the area’s lifestyle and whether it works with your concept, says Paul Travis, strategic marketing consultant for OneAccord LLC, a Belleview, Washington-based consulting firm.

“Does the way people live their life in that area fit with your concept?” he says. “Look at the neighborhoods and see the trends. Do you see empty properties? This can either indicate decline or the potential for construction, which can end up choking a location’s revenue.”

Travis suggests looking at the surrounding average income. He typically uses a three-mile radius, but for a downtown location, he’d narrow this to a 10-block radius.

When it comes to the actual site, think like a consumer, Salese advises. Drive around and enter the location from all directions. How accessible is it? How convenient is it to pull into?

Also consider:
? How close it is to your existing location, says Lombardi. Too far away and it might be challenging to operate; too close and you could cannibalize business from your other location.
? Find out the site’s history, says Travis. “If restaurants have failed in that location, you’re going to have a challenge. If there’s a lot of restaurant churn, there has to be a reason for it.”
? Look at the businesses immediate to you, says Salese. Are they compatible with your concept?

As for the building, be mindful of parking rules and regulations, says Salese. Some states base the number of parking spaces on the seating and on the concept. For example, in his downtown pizzeria, parking isn’t an issue, but for his dine-in restaurant it was.

Also, says Lombardi, don’t be suckered in by “false economies.” Although it might seem less expensive to move into an existing restaurant, as opposed to building out a site, you could end up spending more money in the long run.

“Think about the age of the building,” he says. “Buildings don’t last forever. If it is 15-years-old and its lifespan is 20, this is going to cost you money. You also have to consider what it would cost you to bring it into code compliance.”

Another false economy is making a decision based on price. He often sees operators back away from paying for a premium location and opting for a lesser one because of the price — and struggle because of this decision. “You pay for a good site once,” he says. “But you pay for a bad site year after year.” ?

Pamela Mills-Senn is a freelancer specializing in writing on topics of interest to all manner of businesses. She is based in Long Beach, California.