How Businesses Decide Exactly Where to Set Up Shop
Feb 5, 2024
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Tom McGee, CEO of the International Council of Shopping Centers, shares insights on the complex factors influencing retail site selection. He discusses how foot traffic and competition shape decisions, along with the importance of demographic research. Chris Hatch, partner at Forza Development, dives into the unique challenges of optimizing drive-thru locations for chains like Starbucks. They explore safety, zoning regulations, and how evolving consumer behavior impacts site choices, revealing the intricate dance behind choosing the perfect business location.
Location visibility, zoning regulations, demographics, proximity to competitors, and traffic patterns are important factors in retail site selection.
Data analysis plays a crucial role in retailers' site selection decisions, including evaluating sales forecasts, traffic data, and drive-through-specific considerations.
Creative thinking, repurposing existing retail spaces, and adapting to changing consumer preferences are key aspects of successful site selection decisions for retailers.
Deep dives
Factors in site selection
When choosing a site for a retail location, several factors come into play. One important factor is the location's visibility and accessibility, such as being situated on a corner with easy ingress and egress. Zoning regulations also play a role, as they determine if a drive-through is allowed and the type of development permitted. Retailers consider demographics to ensure the location aligns with their target customer base. Proximity to competitors is another consideration, with different industries having varying preferences for distance between similar businesses. Traffic patterns are crucial, and retailers analyze peak hours and traffic flow to optimize convenience for customers. Noise control and acoustics may influence site selection as well, with advancements in audio technology improving communication but increasing demand as drive-through traffic grows.
The role of data in site selection
Retailers use data analysis for site selection decisions. They examine sales forecasts based on demographics, trade areas, and existing competition. They evaluate the draw and potential customer base in specific areas, determining the estimated sales volume. Traffic data is assessed to ensure convenient ingress and egress, often prioritizing right turns over left turns for safe and efficient entry. Drive-through-specific considerations include minimizing wait times and ensuring clear audio communication. Utilizing traffic engineers and technology also aids in optimizing site selection for efficient and safe traffic flow.
Repurposing existing retail spaces
Creativity in site selection sometimes involves repurposing existing retail spaces. This approach can be especially useful in highly developed areas with limited available land. Retailers may invest in older, underperforming locations with existing drive-throughs and buildings, seeking to capitalize on lower costs and repurpose the space. However, the process can be intricate, considering development rights, zoning, and expenses related to untying the maintenance costs from anchor tenants or mall owners.
Drive-through considerations and specific cases
Drive-through-specific businesses, such as Dutch Bros and In-N-Out Burger, prioritize factors like corner lot placements and ideal ingress and egress for customer convenience. The distance between similar businesses can vary depending on industry standards, with quick-service restaurants like Jack in the Box typically maintaining a one-to-two-mile spacing, while In-N-Out Burger might have a range of three to six miles between locations. Evolving customer preferences drive the emphasis on minimizing left turns, ensuring minimal wait times, and establishing safe and efficient traffic patterns.
Challenges and opportunities in site selection
Site selection poses challenges and opportunities for retailers. Factors like traffic considerations, zoning restrictions, and understanding customer behaviors require careful evaluation. Ensuring convenient locations, optimizing traffic flow, and adapting to changing consumer preferences are vital. The demand for retail space remains high, with retailers often looking to modernize and repurpose existing retail sites. Creative thinking, data analysis, and collaboration with traffic engineers and city municipalities contribute to successful site selection decisions.
We know that companies think carefully about where they open stores. They might look at things like how many people pass by the location on a day-to-day basis or how easy it is to access the site by car. But what are the lesser known factors that go into deciding where to open a brick-and-mortar store? And how have these considerations changed over time? In this episode, we talk about the art of retail site selection. We speak with Tom McGee, CEO of the International Council of Shopping Centers, which annually hosts one of the biggest deal-making events connecting retailers and commercial real estate owners. Then, we drill down into a specific type of business: drive-thrus for coffee chains and fast food restaurants. We speak with Chris Hatch, partner at Forza Development.
