How do large multi-nationals decide where they spend their money on new sites? Whether they are in the oil industry, the QSR’s or any other very large chain of retail stores, I hope there is some logic in their site selection process.

Variability of information
 
The starting point for the decision of where to invest in retail should be available data. In an ideal situation, this would be a Census of population and housing, with data down to small areas such as every 100 households, traffic counts on the main roads, some form of pedestrian counts, business and employment information and probabaly the attractiveness of the surrounding / adjoining areas (often called the Generator score).

When you are about to buy a franchise you must look at the competition both from others companies, and from the franchise brand, and ask what is a reasonable distance between stores?
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Competitors are normally not a great problem, and in fact, as in the case of homemaker centres and certain types of shopping centres or shopping strips, neighbouring competition can actually be an advantage.

This is what we call “clustering”. Name a reasonably sized homemaker centre/precinct, and count the bed stores, furniture outlets and electrical retailers. Experience has shown that these retail outlets actually work best together, as the combined drawing power of the homemaker centre far outweighs the advantage of being out on their own.

If you are buying a retail franchise you need to understand what makes a great location.

While we can list 10 or 20 drivers  or factors that lead to the success of a retail business, they have different levels of importance depending on what you are selling, and how.

For example if you are selling petrol and convenience goods, your first driver is probably the numbers of cars passing the site. If you are a restaurant owner, and have a drive through as a major part of your business, this still may be your number one driver. If you have a local restaurant – sit down and wine and dine – then the area, demographics, competition and other factors will probably be more important than traffic driving past.

Today I did exactly the same walk and counted 203 retail stores....

Before you sign up to a shopping centre site, there are some points to consider...

I was speaking with a few senior executives of some of our largest coffee and cake franchise chains over the last few weeks, and asked the open question: “How are you finding dealing with the big shopping centres at the moment?”

The common thread is that times are relatively tough, and so franchisors are having more success in negotiating new lease deals with lower rentals than probably ever before. The last thing a shopping centre needs is vacancies, and the queue of “Ma and Pa” individual businesses wanting a site has reduced greatly, so the need to fill the big shopping centres falls back onto the retail chains.

If you want to secure a site, this puts you in a far better position than two years ago. One retail chain told me how they had been prepared to walk away from some locations and actually had done so. Playing bluff with leasing agents really only works when you are prepared to close some stores, and actually do so and walk away.

Whilst the very big centres can handle this, and possibly find new tenants, the medium and smaller centres quickly start to take on a look of despair if there are more than a few vacancies on the floor.

In some states, where the law forces the registration of leases (New South Wales for example), it is possible to find out what the other tenants in the building are paying.

Getting the territory right for service franchises is essential. So where should you go, and how do you know your territory is sufficient to support a business?

If you're investigating whether or not to invest in a business in the growing services sector it is inevitable that you will have questions about franchise territories.

A service franchise can focus on house maintenance, cleaning, ironing, oven cleaning, even providing a care service. Or if you like the outdoors - working in the sun, rain and wind - maybe one of these is for you: pool cleaning, dog walking and washing, building and renovating, antenna installation, roofing, paving, gardening and landscaping.

In today’s market, many franchise systems want to locate outside of the major shopping centres, as they want lower rents, lower rent increases and longer lease terms with options available. In addressing these sites however, you do not have the information being supplied to you such as in a Westfield’s or Centro shopping mall, so you have to base your decision more on your own research.

If we have a site in a shopping strip, it is normally referred to as an inline store. My definition of an inline store is that it is amongst other sites facing on to a road and / or footpath, adjoining the next door neighbour.

Many shopping strips are owned by independent lessors, so there is little or no group information, unless provided by a Chamber of Commerce, or a business group. I would like to pass on my views on how to evaluate inline stores if offered to you.