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. 

Franchising Fridays – Why Potential Buyers Cannot Call Too Many Existing Franchisees

Delayed Shipments Ruining Sales. Inability to Reach Customers. Can't Take a Vacation. Impossible to Use Software. No Way to Make Money.

These are not the words I want any new business owner to utter, especially one of my clients. And they are why I tell my clients to do their homework before buying a franchise or becoming a licensee or distributor. 

If you're considering becoming new franchisee or opening your own business, that’s great! I’m happy for you.

You’ve probably worked to figure out what type of business fits your personality (hopefully) and experience to help you choose your franchise or has narrowed you down to a few choices to consider.

And through this process, you’ve probably heard most of the good, some of the bad, and likely little of the ugly involved with these franchises. As your lawyer, I can tell you the legal-side details in your franchise disclosure document or franchise agreement.

But how much do you know about the day-to-day operation of your potential franchise or other business?

About the nitty-gritty, pain-in-the-butt details that all business owners deal with, and that in your case will be rigidly controlled by the franchisor. Those that do not make it into writing, how do you learn about those?
Questions like:
-How fast do you usually receive delivery of supplies that you may only buy from the franchisor?
-How do you connect with customers in a social media driven society when your franchisor doesn’t allow you to have your own business Facebook/Twitter page?
-What kind of profits can you actually expect to see for a territory like yours (besides the franchisor’s rosy picture)?
-How do you take a vacation when you cannot close your business for more than 2 days?
-How does the franchisor treat small versus large franchisees in the system?
-How does the franchisor react if your business is struggling?

These questions that can best be answered by calling the other existing franchisees. Use the list provided in the Franchise Disclosure Document to see their names, phone numbers and territories.

Cold-calling business owners you do not know without an introduction might sound awkward to you. And that is understandable. But the existing franchisees expect your call. Call as many as you can! 

The existing franchisees likely made these same calls when they were considering the purchase – and went into the deal better educated than otherwise. Call them, ask the hard (or even strange) questions you have. You cannot call too many. More information allows you to make a better investment decision.

This advice transfers to any business owner considering becoming a distributor or licensee of another business’s  products or services. You may not be entitled to automatically learn as much information about other distributors (names, phone numbers, etc.) as you would for a franchise, but a simple Google search should yield a decent list of other distributors or licensees for you to contact.

When you consider a franchise, distributorship, or licensing agreement - call as many other existing businesses as you can to find out about these details. As I tell my clients, you cannot call too many! 

Posted March 22, 2013, 3:30 pm.