How Do I Find the Right Real Estate Site for My Franchise
A poor real estate decision in retailing is a major contributor to premature closing. But these so-so locations were chosen for a reason. Here's five of those reasons and how to avoid those missteps.
The Site Selection Process
There is an enormous amount of risk in the site selection process given that developing a new location is typically the largest investment that a franchisee is going to make in their entire business. Although the often stated figure of a 90% failure rate associated with the restaurant industry has been proven to be untrue (studies have determined this rate to be in the range of 25%), it is often a poor real estate decision that leads to a premature closing.
Despite the risk associated with this crucial decision, many operators rely on intuition and “gut” when determining the site of its newest location. While intuition gained from experience is an integral part of the process it is imperative that the operator utilize pertinent data and methodologies in the selection process.
When the operator fully understands its customer profile and quantifies where these customers exists within a market area, the operator can employ a pro-active real estate strategy which will enable him or her to make the best possible prediction for success at a particular location. As we will explain, technology can streamline this burdensome process and reduce risk in the process.
Before we address the site selection process, let’s review the primary reasons why poor locations are chosen and mistakes made, which include:
- Selecting a weak strategic position in a highly competitive market.
- Selecting a site that can easily be out-positioned by a competitor.
- Entering an already over-saturated market.
- Overlooking demographic information that suggests your customer profile is not situated near the location.
- Overlooking key site features such as visibility and accessibility.
In order to avoid these missteps we will discuss how to implement the following site selection process framework over the next months, which features the following criteria:
- Collecting customer profile data.
- Understanding the competition in the marketplace.
- Quantifying market demand for your products.
- Recognizing customer behavior patterns with the market.
- Identifying potential sites and their site characteristics.
- Analyzing and ranking the potential sites per your strategic plan.
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Writer's note:
This column will be written especially for BluMauMau readers and for the benefit of all franchisees, investors, and landlords in the Franchise Industry. It will focus on the issues relating to real estate decisions, including how best to restructure existing leases, when an expansion makes sense and securing optimal locations for new stores.
The columnists have successfully navigated the site selection process for a combined total of over 40 years as both real estate professionals and as operators of franchises. Read this article about Irwin Barkan’s recent litigation with Dunkin Donuts.
We will focus on the use of technology that can mitigate the risk of site selection and enable even the smallest operator to utilize the same tools as the largest chain stores in locating the most profitable sites. While these articles are generally focused on the QSR industry, all operators can utilize these techniques for optimizing the real estate process.
We encourage you to post questions for future columns, or your own personal questions. We will assist the community in dealing with the common real estate issues and to find answers suiting individual needs.
About the authors: Submitted by Peter Nizwantowski, Retail Investment Services LLC and Irwin Barkan, I.J. Barkan, Inc.
Peter Nizwantowski pnizwantowski@retailinvest.com is a real estate consultant specializing in the retail and shopping center industry.
Irwin Barkan ib@ijbcorp.com is an investor and developer who has owned and operated both retail businesses and shopping centers.
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