Using Data and Analytics for Better Site Selection

As a franchisor of brick-and-mortar locations, I know the old adage of "location, location, location" has never been more important. Competition for A sites is fierce and occupancy costs are rising, making the need to avoid mistakes that much more critical to the long-term success of a franchisor. While the need to identify the right markets and locations has always been important, the process of identifying those markets has evolved with the increasing availability of data and analytics. Analytics (the "science" of real estate) coupled with in-the-field market tours and site visits (the "art" of real estate) is now the new normal in making better real estate decisions to create sustainable franchise growth.

In the "old days," say 5 to 10 years ago, it was common to rely on simple demographics to decide what markets to expand in, using metrics like overall population, household income and household size, within a one- to five-mile ring of a site or market. The general philosophy was, the higher the population with the right demographics, the better.

Now, with the advent of analytical tools and services, we can dive more deeply into the data and analyze psychographic metrics to determine who our core customers are, where they live, and how many of them we need within a certain drive-time distance of a potential site. A "core" customer" is not just any person living within a certain distance of your business, but an individual with a higher propensity to use your product or service with some level of frequency. Added to that is how far that person is willing to drive to get to your business -- in minutes, not miles.

We can also use analytics to understand the variables that have high positive or negative correlations to a location's potential. These variables could include the number and type of competitors in the area; other retail or demand generators; the number of seats in a restaurant; drive-thru or pick-up window capabilities; or type of real estate (free-standing, endcap, or inline). All of these variables can have an impact on your business and should be understood when possible.

So, with all of these tools and resources now at our disposal, how do we go about making better real estate decisions? Here are some tips and places to start:

• Understand who your true customers are -- your core customers.
• Understand what variables matter most in a trade area.
• Understand what site characteristics are most important to the success of your concept and don't waver from them.
• Always drive the market and visit the site. Nothing will ever replace seeing a market or site firsthand.
• Think about the long-term success of your franchisee.

Choosing good locations has always been a challenge and will continue to be in the future. Making use of the data available today is now a critical component of building a successful and sustainable franchise system. Combine that with experienced market knowledge, a core development philosophy, and the discipline to say no when the site or market doesn't seem right, and you will have a winning formula for future growth.

Jeff Sturgis is Vice President of Franchise Development for Focus Brands, which uses Buxton as an analytical tool to identify real estate for market growth. He also is chair of the 2017 Franchise Leadership & Development Conference, Oct. 11-13, 2017.