THE SCIENCE OF SITE SELECTION
With Covid still creating disruptions in the retail market both short and long term, the landscape has changed remarkably with lessees scrambling to create long term rentals they feel they can work with. This puts great pressure on the shopping centre owners who have invested huge amounts and previously had a seller’s market to operate in. With vacancy rates much higher, the boot is now on the other foot!
Whether you are a Franchisor, or a Franchisee, finding a great site is one of the most important decisions you can make and sets the way for a successful journey into the future.
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 5 to 10 years, and it will probably be the biggest expenditure you ever make outside your personal 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? Consider who the customer is and where they sit in the socio-economic world. Most franchise systems have a target audience and your first thoughts should be to match the area to the product you sell. Think of whom the customer is likely to be and how to locate your business in a suitable area.
You can use demographics to better understand 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 Quickstats (or just Google Quickstats), enter a suburb or postcode and up will come a large amount of information. The find the State and Australian figures for that area. You can 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 judgement.
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 rather 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 1km in at least two directions! The market is therefore restricted in how many potential customers are within a 3km 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 café offers)
- what is the average household income and where does that sit Australia wide? (fast food vs casual dining and expensive restaurants)
- do the 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 researching and understanding census data. You will have heard those words that you must do your own due diligence ringing in your ears. The Franchisor or their staff cannot/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 may be able advise what actual levels of sales they are enjoying. It is then your call on what you expect to sell in the future.
Once you understand the data, you should be proactive by telling the Franchising Manager 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:
- Size of the SC and what is the GLAR, MAT and Pedestrian count
- Are the shops being offered the correct size?
- Are you in a suitable precinct, matching you with others in the same market?
- Who are your near neighbours – do they benefit or hinder your brand
- Is the pedestrian traffic strong?
- Am I paying the correct rent for what I am selling?
- Where is the busiest sector of the shopping strip?
- Am I prepared to pay the rent for this area, or should I look further out from the centre of the strip?
- Is the store the right size?
- Is there reasonable parking nearby?
- Is there some visibility for my signage?
Freestanding site (QSR, petrol station etc)
- Where is the traffic strongest (traffic counts)?
- Is the site suitable for what we are selling?
- Is the access good – preferably from both directions
- Visibility (from both directions)
- Traffic speed going past – is it reasonable to pull in?
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 totally 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 email@example.com