How do we look for the great sites?

Peter Buckingham | Managing Director | Spectrum Analysis Australia

One of the most critical decisions in franchising you will ever make!

Whether you are a franchisor, or a franchisee, finding a great site is one of the most important decisions you will be making, and sets up the way for a successful journey into the future. Great location and low rents are the dream; however, the reality is you need an excellent site, and not to be paying too much for most franchises to operate successfully

Do not think of the lease fee as a monthly expense, treat it as a long term commitment that if all else fails, the landlord will still be expecting to be paid until the end of your lease. Add that up over five to 10 years, and it will probably be the most significant expenditure you ever make outside your home.

Where do I start to make an informed decision?

The first thing you need to address is, where do you begin to seek the ideal store? You can be reactive – i.e. listening to every real estate agent in the market, telling you he/she has the best opportunity available. Or you can be proactive, undertake preliminary research, and decide upon what makes logical sense where to start looking for the ideal store.

The first thing you must consider is who is the customer and roughly where do they sit in the socio-economic world? Some items may be described as "demographically agnostic", or everyone uses it or buys it, but most franchise systems have a target audience, and your first thoughts should be to match the area to the product you sell. Would you be better selling $50,000 diamond rings in Toorak or Broadmeadows (Vic), Double Bay or St Mary’s (NSW), Cottesloe or Armadale (WA)?

Think of whom the customer is likely to be, and how do we locate our business in a suitable area?

You can use demographics to understand better the areas that interest you. The 2016 Census is still the most current data, and you can look up some information in the ABS website (www.abs.gov.au ), look for quick stats (or just Google quick stats), enter a suburb or postcode, and a large amount of information will appear. Once you click on the people data, you will see the area, the State and Australian figures for that location. You quickly see whether the area is high or low in terms of what you are looking for, and you can use this to assist your decision.

Do NOT become concerned about the size of the population of a single suburb or postcode in the metropolitan areas, as these are irrelevant if you know there is population all around you. A country location (town or city) is different, as that number probably represents the total market available. Suburbs and postcodes are somewhat random in size and can vary from 817 people (in Kooyong) to 50,474 people (in Reservoir), both suburbs in Melbourne.

One point I want to make here is to look at a map, and remember - "fish don't purchase what you are selling – unless it is bait". Areas such as Williamstown (Melbourne), Newport (Sydney) and Cottesloe (Perth) may look good when walking around, but you are in water within one-kilometre in at least two directions! The market is, therefore restricted in how many potential customers are within a three-kilometre radius.

Census data should help you answer the following types of questions:

  • Are the people in the area younger or older than average?
  • Is the area a young family type area? (children’s items)
  • Is the area more of a yuppie/student type area?
  • Is there high ethnicity in the area? If so, who is present? (suitable cafe offers)
  • What is the average household income, and where does that sit Australia wide? (fast food vs casual dining and expensive restaurants).
  • Do people drive cars? (fuel and tyres)
  • Do they rent, are buying their houses, or own them? (mortgages and loans)

Depending on what type of franchise you are joining, this can be very critical.

Most franchisors will do their best to help you, and in some cases may provide what we call a datapak, or could assist you with looking up and understanding the census data. You will have heard those words that you must do your due diligence ringing in your ears. The franchisor or their staff can not/should not/will not commit to you any undertaking regarding sales you can expect. They may be able to show you actual examples of other franchisees' sales in the system and be able to introduce you to or advise what actual levels of sales they are enjoying. It is then your call on what you expect to sell in the future.

If you are looking at going into a shopping centre (mall), I am sure the leasing agent will be providing the best demographic information possible to help sway your decision. My main concern is that they like to show a map and class areas as a primary catchment, secondary catchment and tertiary catchment areas. You need to have some base knowledge of the area as we have found these often to be excessive, or not realistic if another large shopping centre may be only five-kilometres away.

Once you understand the data, you should be able to be proactive and help the franchising manager by saying these are the actual areas you want to find a store in, not just where the local agent says.

What comes after the area analysis?

Once you have an area, you need to match your expectations with what is available and your budget. Depending on what you are selling and whether you are going into a shopping centre or a strip, these are the points to look at:

Shopping centre

  1. Size of the shopping centre and what is the
  2. gross lettable area retail (GLAR), moving annual turnover (MAT) and pedestrian count?
  3. Are the shops being offered the correct size?
  4. Are you in a suitable precinct, matching you with others in the same market?
  5. Who are your near neighbours – do they benefit or hinder your brand
  6. Is the pedestrian traffic strong?
  7. Am I paying the correct rent for what I am selling?

Shopping strip

  1. Where is the busiest sector of the shopping strip?
  2. Am I prepared to pay the rent for this area, or should I look further out from the centre of the strip?
  3. If the store the right size?
  4. Is there reasonable parking nearby?
  5. Is there some visibility for my signage?

Freestanding site (QSR, petrol station etc.)

  1. Where is the traffic strongest (traffic counts)?
  2. Is the site suitable for what we are selling?
  3. Is the access good – preferably from both directions
  4. Visibility (from both directions)
  5. Traffic speed going past – is it reasonable to pull in?

Summary

It is quite easy to talk about the perfect site, but my view is before you even open that discussion, you need to understand the areas under offer and select an area suitable to what you plan to sell, rather than a great site in a mismatched area.

Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, a Geodemographic and statistical consultancy. Peter is the Go-To person as to where to open new stores in Australia. Peter is both a Certified Franchise Executive (CFE) and a Certified Management Consultant (CMC). To contact Peter email peterb@spectrumanalysis.com.au or visit www.spectrumanalysis.com.au