Technology Takes The Gut-Fell Out of Site Selection

Monday, 02 March 2009 18:59

CHAIN LEADER

Technology Takes the Gut-Feel out of Site Selection

Real-estate software can help take some of the guesswork out of finding locations for both franchised and company restaurants, but it's not perfect

January 13, 2009

By Lisa Bertagnoli

It's what every chain restaurant executive wants: a magic tool that can spot A-plus locations and ring a warning bell when a site is a dud.

Such technology exists and can help take some of the guesswork out of finding locations for both franchised and company stores. But it's not perfect: It doesn't replace site visits, and it doesn't boast 100 percent accuracy.

"Accuracy is always an issue," says Paul Sill, founder of a Chicago-based firm that supplies retailers and restaurateurs with site-selection models. "At the end of the day, what anyone's model does for you is steer you in the right direction and give you the greatest possibility of making the right decision."

The Right Direction

Salsarita's Fresh Cantina Inc., the Charlotte, N.C.-based chain of fast-casual Mexican restaurants, chose Sill's company precisely for that reason. The firm will map out the entire country for Salsarita's, which plans to open 25 new locations in 2009.

The model "will give us a roadmap to get to sites quicker," says Vas Lahanas, vice president of business development for the 80-unit chain.

The technological approach replaces a "hub and spoke" system of site selection, Lahanas adds. "Information came to us via a network of brokers, and we'd do conventional tours," he says.

Sill's company crunched data supplied by Salsarita's--consumer behavior such as how far a person will travel to visit the concept, attitudes toward the concept, plus ideal site-specific factors such as visibility, egress and ingress, and parking--and compiled it into a site-selection model.

The model is loaded onto a Web application, accessible by executives, field managers and others involved in the site-selection process. Real-estate brokers can load a potential site into the model for evaluation. Sites with possibilities are routed to Lahanas or the appropriate field manager.

Inappropriate sites are automatically rejected into a virtual recycling bin. That feature "will save us time entertaining sites that make no sense for us," Lahanas says.

Early Confidence

Salsarita's hired the firm last fall, so it's too early to tell whether the site-selection system will work, Lahanas says. However, early indicators have inspired confidence. The company produced an "existing unit scorecard assessment" for Salsarita's, to indicate which stores were underperforming or performing on target. "They probably hit 75 percent," Lahanas says. Sill claims that the technology is 80 percent to 90 percent accurate.

The site-selection model has also confirmed what Salsarita's has suspected: that it does well in areas where customers have some college education, in "green" markets (as opposed to urban locations), and where daytime traffic is heavy.

"When it's put together, the model paints a really clear picture," Lahanas says. Still, he calls the system "complementary" to site visits. "It will never replace actually touching the site."

The Price Is Right

Marco's, a Toledo-based chain of 170 pizza restaurants, uses another site-selection tool, from a Troy, N.Y.-based company, to scout locations. But the tool, which is provided as a software package, has other uses as well.

One is pricing area-development agreements. "On a macro level, the [technology] allowed us to figure the precise number of sites we can build in a territory," says Bryon Stephens, vice president of new business development for Marco's Franchising LLC. Since agreements are priced on the number of stores, the technology has enabled Marco's to charge a fair price for territories.

It has also allowed the chain to make media buying decisions in a market. For instance, Marco's knows it has enough stores in the Nashville market to justify a television buy, and that it cannot build enough stores in the New York market to afford a television buy there.

The technology, which uses demographic and site-specific information to devise a site model, has also helped Marco's narrow its selection process. One example: The chain previously focused on demographics within a three-mile radius of the store, until the model showed that 70 percent of business comes from the first one-mile radius ring.

Now, if that first mile is purely commercial, Marco's will reconsider a site. "It changed our thought process," says Jack Butorac, Marco's president.

Overall, the technology "really identifies areas we should be targeting, vs. gut feel," Butorac says. "It's helped narrow the whole exercise significantly."

MORE: Johnny's Lunch, a quick-service hot-dog chain based in Toledo, Ohio, hired a site-selection technology firm who helped customize an expansion model.