Site selection for restaurants is a delicate balance of art and science. Twenty-plus years ago, when I started my career as director of construction for one of the country’s largest restaurant franchisees, site selection primarily fell into the “art” category — we had a few basic criteria such as traffic counts, ABC classifications and general community demographics, but after that we relied on our instincts and experience. Today science has taken over, as smart brands increasingly rely on the incredible troves of data points — both big and small — that now exist on market conditions, customer preferences, demographics, even where a potential customer was five minutes before they arrived in the drive-thru.
The risk of “paralysis from analysis” is real, however, as our team looked to expand our South Florida-based Pollo Tropical brand into Texas, we identified target markets based on several factors: consumer acceptance studies of the brand offering, supply chain efficiency, operational span and the number of stores needed for media efficiency.
We focused our efforts on three designated market areas: Dallas-Fort Worth, San Antonio and Houston. Because Pollo Tropical has little brand recognition in Texas, we set media efficiency as our top priority. Together with operations and marketing, the development team identified the number of units that would lead us to media efficiency, taking into account the estimated unit volumes per store, marketing accrual rate and cost of media in the DMA. Our first Texas location opened in March 2014. To date, we have 18 locations open in Texas. And with stores under construction and future deals in the pipeline, we are well on our way toward the media efficiency targets for each DMA.
Additionally, we are in the process of hiring a real estate analytics firm that will provide additional guidance and knowledge as we select future markets for expansion. The new partnership will allow us to run market optimization studies on any DMA and further identify specific trade areas where we know our customers live, work and shop.
A simple tool in our customer’s hand — the cellphone — fuels the analytics. According to Charles Wetzel, former chief executive at customer analytics firm Buxton, 80% of all data has some geographical component. Most of us (also 80%) keep the geo-location turned on when using our cell phone, which allows customer data firms to pinpoint where the customer was five minutes before he or she landed in our drive-thru, where they went five minutes after they picked up their dinner and where they might be tomorrow morning.
We can then take this internal view of our customers and model it against the overall marketplace to find the sites with the most potential for success. The incredible opportunity lies in both the breadth and depth of the GIS data. Not only will the data deliver countless sites for review, it can narrow these sites down to hyper local areas with the most opportunity.
The data narrows our “pins on the map” from large trade areas to neighborhoods — even street corners — that contain the customers most receptive to our concept.
Of course, after the sites are selected the more low-tech issues remain. Zoning is still an issue. A site may be perfectly matched demographically and psychographically, but the management firm may have architectural controls that can’t be overcome. Build-out costs may still be prohibitive. Leases will still need to be negotiated.
In other words, real estate selection is still the balance of art and science. Yet in all my years of placing pins on maps, today’s data offers a new confidence to the overall craft — building on our instincts and delivering a greater opportunity for success.
John Todd is the Chief Development Officer for Addison, Texas-based Fiesta Restaurant Group Inc. (FRGI), parent company of Pollo Tropical and Taco Cabana.
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