All Businesses Deserve a Great Site - The Value of Site Analysis

By Guest Author Joe Langran, MBA, and Associate Broker with Antonoff & Co. in Denver, Colorado.

A McDonald's V.P once said that choosing the right site is one of the most critical decisions the company makes. That is why McDonald's created their own volume estimating model tied to a process known as Site Location Analysis.

A fact-based site decision is critical to the success of any business, yet, it amazes me how many retailers pick their own site without it. 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 or under-qualified commercial real estate broker.

For the most part, commercial real estate brokers barely skim the surface when it comes to site analysis. Sometimes a broker's motivation is to simply fill a vacancy in one of his or her listed shopping centers.

Commercial brokers, by and large, have varying degrees of expertise necessary to help a business owner analyze a trade area. The broker may supply the client with a set of demographics, usually for a one, two, or three mile radius, and possibly a map showing the locations of existing shopping centers and the client's primary competitors. This is NOT site analysis.

The supporting data does very little to help the small business owner assess the strengths and weaknesses of a particular site. Therefore, business owners often make a critical site decision with incomplete data and then they wonder why their business is under performing or failing!

How to Reduce the Site Risk: 

• Identify the Customer and how far they are willing to drive to come to your business.
• Define the Trade Area through "Gap Analysis" - Most professional site locators, especially those in convenience driven businesses, define their trade area in drive times, not radii, and place the business with competitive positioning in mind. 
• Analyze the Key Components that Drive Sales and how each component affects the business. The three key components are demographic, physical, and economics. And each of these can also be further broken down into 30 or more subcomponents. 
• Zoning - Understand how or if local zoning ordinances can adversely affect your business. 

Opening a new business an emotional decision, but finding the best location for that business should be a fact and logic-based decision. Don't let poor site selection ruin your dream of a successful business. Use a broker who offers Site Location Analysis and reduce site choice risk. 

For the last 30 years, Joe Langran has used site location analysis to help the franchisees of successful chains like Arby's and McDonald's find the best possible locations. Joe now offers his national "big boy" site selection experience to businesses across the country in his role as a commercial real estate broker based in Colorado and through Three Peaks Analytics (www.threepeaksanalytics.com), an out source real estate department for early stage franchisors. He can be reached at jlangran@antonoff.com or (303) 589-4839. 

Real Estate Leases Part I: The Hunt

Whether you love real estate or not, the hunt to find the “right” space is critical.  

While most have heard the “Location, Location, Location” refrain, the hunt itself obviously depends on many other factors than mere location.

One of the biggest controlling factors is what the lease itself says.

Commercial leases can range from one page, a likely inadequate document, to over 250 pages, which is usually excessive.  Remember that no outside or spoken deals matter to a court or arbitrator resolving a dispute years later. Get everything in writing.

Until you hear the results of your lease review, a task that usually takes 3-5 hours for a lawyer to complete depending on the length, plus another hour or so to discuss it with a client, you won’t know what potentially disadvantageous terms exist in the lease that would make you not want to sign it. And believe me, there will always be “bad” terms.

Therefore, it is recommended that while a lawyer reviews the lease for your “dream space,” you should keep hunting for another space.

Two Key Reasons to Keep Hunting:

(1)  You have not let a week or more go by without seeing more properties if the landlord refuses to negotiate any changes (or the changes you really want).

(2) Leverage. To be in the best bargaining position, you have “play hard to get.” If the landlord perceives that you are too interested or too desperate, the landlord will not negotiate as much and you will lose out. Continuing to visit other properties increases your leverage by making you able to walk away.

Consider Using a Quality Commercial Broker.

Working with a commercial broker to manage your hunt, is also recommended. Many potential tenants I meet do not realize that the landlord will pay your commercial broker’s fees, making this a free service for you as a business owner. I or any other experienced lawyer can easily connect you to a quality broker whom we know will serve your interests.

A commercial broker also makes it easier to keep looking after you have one lease in for review and of course helps find properties that suit your needs likely better than you could on your own.

While insisting to tour other properties increases the broker’s workload, it will lead to you and your business finding the best property for you and any experienced broker will understand this.

Take Away Points:  Have a lawyer experienced with commercial leases review your potential lease. Frequently, landlords will negotiate many provisions, but in case yours won’t, remember to keep hunting for another space that will suit your needs. If you are unfamiliar with commercial real estate, enlist a commercial real estate broker to represent you – they are free to tenants. But know that a broker cannot legally rewrite your lease –only a lawyer can.

Laura Liss represents general business and franchise clients alike in business, employment, and real estate transactions at her own firm, the Law Office of Laura Liss, P.C. (www.lauraliss.com). When out of the office, she enjoys networking, Mexican food, and hiking in the foothills. She can be reached at laura@lauraliss.com, on Twitter @LauraLissLaw, or on Facebook at facebook.com/attorney-laura-liss.

Real Estate Leases: Can’t Live With (or Without) Them

Over the coming weeks, this blog will explore different parts of standard commercial real estate leases in a series of posts.

We will discuss what many of those clauses drenched in “legalese” really mean, and why as a business owner, you should care.

But for now we ask you: What have your commercial real estate experiences been like? What do you know now that you wish you knew then?

We look forward to hearing your stories and sharing with you over the coming weeks!