Choosing the
right site is the most important aspect of opening a retail business, yet very
few small retail business owners have access to the expertise that will help
them properly analyze a site. They entrust the success of their business to
their own instincts or the advice of an unqualified commercial real estate broker.
Commercial
brokers, by and large, have varying degrees of the expertise necessary to help
a business owner analyze a trade area for a retail client. For the most part, commercial real estate brokers barely skim
the surface when it comes to site analysis. Sometimes the broker’s motivation
is to simply fill a vacancy in one of his or her listed shopping centers. The broker
may supply the client with a set of demographics, usually for a one, two or
three mile radius, and possibly with a map showing the locations of existing
shopping centers and the client’s primary competitors. This is NOT site
analysis. This supporting data does very little to help the small business owner
assess the strengths and weaknesses of a particular site. Therefore small business owners are often making a
critical site decision with incomplete data.
I have been conducting real
estate site analysis for national corporations such as McDonald’s, Arby’s, and
Econo Lube N’ Tune, Inc. for the past 30 years. These corporations know that picking the right site is critical to the
success of their business. In fact, McDonald’s Management believes site
selection is the single most expensive decision they make on a regular basis. They
understand a mistake in selecting their site could cost the company millions of
dollars over a twenty year licensing term, and the last thing they want is to
deal with an irate store operator for that period. If McDonald’s does make a
mistake and chooses the wrong site, it has the ability to absorb the loss
because it has many other highly profitable units to offset the poor selection.
However, for the small business owner with only one or two locations, a mistake
could lead to financial ruin. I would
like to help the small business owner reduce the risk of picking a poor
location.
I
have a lot of respect for the small business owner who oftentimes will put his
or her life savings on the line in order to start a business. With my expertise
we will:
- Identify the customer and where will they be coming from.
- Define the trade area and I guarantee you it won’t be the one, two or three mile radius! By and large, the professional site selectors define their trade area in drive times, not radii.
- Analyze the key components that drive sales and what each component could mean to the business. These components are residential population, local employment and the strength of shopping centers within the trade area. For a typical fast food restaurant, these three components, on average, will amount to 80% of their business. The percentages may be different for other retail businesses but together we’ll work to figure that out.
- Evaluate other activity generators that might drive sales such as traffic, schools, parks and recreation, etc.
- Conduct a gap analysis to find the strongest local market for the new business.
Joe Langran, an Antonoff & Co. Brokerage specialist, authored this post. Joe has more than thirty years of experience conducting site analysis for national and global corporations. Antonoff & Co. Brokerage takes pride in the quality of our brokers and in their ability to understand the commercial/retail real estate markets.
