Published in Inside Franchise Business, August 2019
Kiosks have been the retail buzz word of the last 20 years. What now?
Shopping centres used to be spacious areas for making your retail purchases,
where architects designed wide “boulevards” you could wander down easily, looking at what was on offer on both sides.
This spaciousness was deemed no longer necessary by the “powers to be” who own the shopping centres, and the kiosk was introduced, firstly as a temporary lease (often before Christmas or similar sales times), which then morphed into a typical 25 square metre permanent retail shop in the middle of the aisles.
Certain clients like Boost Juice, Wendy’s and Donut King found them perfect as a way to be inserted right in the middle of the high traffic flow, and argue for a low rent due to the smaller size than the conventional stores.
Kiosks became a great way for landlords to add new tenants at the expense of the spaciousness of the centre – but the rentals were good. Now we have a situation with kiosk space demanding very high rents, and being inserted in any large spaces, and especially in high traffic flows.
BEST FOOT TRAFFIC AREA
There are two words you are looking for in a kiosk: foot traffic. If you are going to be squeezed into 25 square metres, with all the inconvenience of remote storage spaces and other issues, you must be in the best foot traffic area. It is no good being on a mediocre branch of a shop- ping centre when you can see (and count) the foot traffic moving along a more major traffic lane.
Most kiosks are supplying impulse items, and it is also about thinking of how the product you sell can be quickly dispatched. There is one group of kiosks that seem to not look so hard for the top impulse areas, and that is the likes of Mister Minit (keys, locks and tags) and possibly some mobile phone operators, who may see themselves as more of a destination.
Most kiosks are food related and are in competition with other food operators. If they are in this space, often there are good locations they can secure on the entrance/ exit to food courts. One of the most successful in this area is Muffin Break.
Another question you must ask yourself is: do the demographics of the area suit what you are trying to sell? If you are selling a lower cost impulse item, then you probably have a general market. Ask yourself if your product is limited, and if so, how the people of the area match with what you want to sell. For example, if you’re selling Asian teas (such as Chatime or similar), you probably need a higher than average Asian population.
Can you afford the kiosk you are considering? Most lessors now see these as high income earners, and you have to think of the ratio of rent to sales. Your franchisor should have some idea of what they expect to be the maximum percentage of sales their brand can comfortably pay as rent, and you need to think in terms of what you expect to sell – sales prediction, and what the rent will be. If this is too high, expect a disaster.
The other part of the economics is, what are the rental escalation clauses? Most shopping centres want to lease the space to you for five years and expect a rent increase every year, irrespective of the sales. Common requests from shopping centres are annual rental increases of around CPI + 2.5 per cent, so after five years you are probably paying CPI plus 13 per cent from where you started. Do you expect sales to support this?
• Kiosks can generate good sales and they can be expensive in terms of rent.
• Make sure the economics add up.
• Is the shopping centre suitable for the products you are trying to sell – demographics?
• Is it in the highest traffic flow if you are selling an impulse product?
• What are the rental escalation clauses and can you afford them?
Overall, kiosks can be great, but they have issues on size, storage and the rental expectations of the lessors.
ABOUT THE AUTHOR
Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, a Melbourne-based Geodemographic and statistical consultancy. Spectrum specializes in assisting clients with decisions relating to store and site location, strategic network planning and territory planning using various scientific and statistical techniques across Australia and New Zealand. To contact Peter email firstname.lastname@example.org or call on 61 398300077.
Click on the link to the following article 2019.08._the_kiosk_craze_p104-7__inside_franchise_business_aug_oct_2019_.pdf
Peter Buckingham is the Managing Director of Spectrum Analysis Australia. He is a certified Management Consultant, and a Fellow of the FCA and IMC.