THE PRINCIPLES OF PIZZA RESTAURANT LOCATION SELECTION
Over the years of reviewing and selecting restaurant locations, it has became obvious that the industry needed a generalized set of guidelines regarding location selection. Thus, in 1992, my book entitled, Restaurant & Fast Food Site Selection, was published. Furthermore, my latest book entitled,The Restaurant Location Guidebook, published in 2007 amplifies the need for these guidelines. Interestingly, there is a feeling in many parts of the country that dining is a very personal thing, and therefore taste can overcome a secondary location. Perhaps that sometimes occurs, however, in my experience, it is very rare. In fact, the exact opposite is usually true, namely taste cannot overcome a poor location, and thus failure is usually eminent.
The locational principles for pizza units vary somewhat from other types of food operations because there are so many different type of pizza locations. Locations include: dining, pick-up, a combination of dining and pick-up, delivery and a combination of all of the above. Also, there is gourmet, thin crust, thick crust, deep dish, pizza by the slice, pasta dishes, take & bake and numerous others. Nevertheless, in studying them all, I have established some important considerations which an operator who is thinking of expanding needs to think about in selecting possible locations.
1. KNOW YOUR CONCEPT AND OPERATION
As those of you who watch football know, a pass receiver can't run with the ball until he catches the pass. Also, a food operator can't successfully expand unless he or she knows their operation. An yet, although we all know this, people start up or expand without truly knowing their operation. Unfortunatley, it happens all the time. Knowing one’s food service operation means fully understanding food and labor costs, controllable and uncontroable expenses and profitability. If that is not under control and the unit is not profitable, be leary of expansion.
2. KNOW YOUR CUSTOMER
Who is my customer? Do you know? Most think that they do; but really do not. The pizza business has a much easier opportunity to determine what the trading area is and who are the customers, since so many take phone orders for pickup or delivery. Therefore, the operator usually knows where the customer is located and with a little effort can determine how often the customer orders a pizza. It is extremely important to understand, not only who is the customer, but more importantly, WHO IS THE MOST FREQUENT CUSTOMER. I know, for example, that the most frequent customer to most pizza operations is in the 25 to 35 year old age category. For some others that customer is 35 to 45 years of age. A subsequent article will explain and present the customer profile of the frequent pizza consumer.
3. DETERMINE TRADING AREA CHARACTERISTICS
If one understands the differences in types of locations then it is relatively easy to determine the size and shape of a trading area. Trading areas come in all shapes and sizes. They aren't actually round or square nor rectangular. Instead they usually reflect an irregular-shaped pattern, corresponding to the road or street pattern, altered by competition and the demographics of the residents of the area. Many think that a trading area is three miles, since this has been bantered around the food service industry for so long. In some cases a three mile radius makes sense. However, for many in the pizza business, three miles may be to far. For some pizza operators, the trading area can be measured in blocks, while for others the trading area may be five miles or more. It is extremely important to determine what your trading area is by type of location, in order to avoid making mistakes in future location selection.
4. RECOGNIZE STRUCTURE OF THE NEIGHBORHOOD
Every city and the individual neighborhoods have a structure. The structure is determined by physical and psychological barriers, socio-economic characteristics, street and highway patterns, commercial and industrial concentrations, types of employment, income, age, topography and other important factors which influence how growth occurred and change which will occur in the future. By identifying the most important benefits of the structure, a pizza operator can substantially improve the opportunity for success.
5. ANALYZE FACTUAL POPULATION AND INCOME DATA
As Groucho use to say, "name the secret word and collect the prize". Well, the secret work is FACTUAL. When looking at locations, population numbers are usually thrown around by the leasing agent or real estate broker. My friends, that does not make them correct. Sometime you are given a computer-generated fact sheet listing the population, households, age and income within a given area. How accurate is it? Remember, just because is came from a computer doesn't make it right. Did you know that the NUMBER OF PEOPLE IN THE AREA IS NOT REALLY IMPORTANT. How can I say that when everyone knows that the total population is where it is at? Well let me tell you, the most important population element is not how many people reside within the area, but rather WHO ARE THE PEOPLE; WHAT IS THEIR AGE AND INCOME? You don't do business with everyone. Also, who is your most frequent visitor and what is the profile of that person. Your customer profile is the most important demographic characteristic. More later in a subsequent article.
6. ADEQUATE ACCESSIBILITY
Access occurs at three levels. First, one must have access to an area. Next, access to a particular site is essential. Lastly, good access to the unit is a must. Although too often, I see that one of the needed accessibility elements is violated, and a restaurant does not do well. For example, one recent situation involved a restaurnat on a major traffic artery, with a median strip preventing left hand turns. That is usually bad enough. However traffic backed up in front of the location. Not only wasn't there a left hand turn opportunity in to the property, but traffic prevented customers from getting into and out of the site. The sales will never be there no matter how many promotions the operator has. IT'S A POORLY ACCESSIBLE LOCATION!
7. SUFFICIENT NEARBY EMPLOYMENT
Lunch business is usually related to employment in the area. also, to some pizza operators, employment in an area is important for the dinner or late evening business. Thus, it is necessary to recognize the size and nature of the employment in an area. The type of employment, location, time allowed for lunch, existing food facilities in employment concentrations, delivery possibilities and other factors a significant to much of the pizza business. There are simple ways to determine the extent and the nature of employment in an area. Thus, facts can replace supposition. Also, simply because there appears to be ample employment in the area, doesn't mean that they will be customers. There are numerous reasons why they should, and likewise, there may be numerous reasons why they will not.
8. CONSIDER THE IMPORTANCE OF ACTIVITY AREAS
Activity is people and people are potential customers. Why do you suppose that there are so many food operators located on major streets leading to shopping centers or employment concentrations? ACTIVITY!, that is the reason. Identifying activity or generative areas is important to the pizza business especially if food is consumed in the unit. It is also important to the pizza pickup business as well. It may be much less important to the delivery business. Nevertheless, activity areas influence the actions of people and their decision making process with respect to food consumption. Activity generators include: commercial areas, shopping centers, malls, office concentrations, downtowns, industrial areas, airports, hotels/motels, hospitals, recreation complexes, amusement parks, major highway interchanges and others.
9. BE AWARE OF RESIDENTS AND WORKERS HABITS AND PATTERNS
We are all habitual; we follow certain patterns daily. Some patterns are interrupted by traveling, and other are interrupted by unusual circumstances. Nonetheless, if I could study you for several weeks, it would be very easy to predict what you will do. Well, consider the food business and predicting what a large number of people will do. We do it everyday and so do most food operators. They "predict" that a reasonable number of people will want their product. One of the tricks in the food business is to put your units into the patterns of a majority of people in an area. This will allow you to INTERCEPT them without requiring them to change their patterns. People resist change, so capitalize upon it. GET INTO THE PATTERN!
10. THOROUGHLY EVALUATE COMPETITION
Most pizza operators think that they are unique, and some are. However, most are not. Therefore, competition is a significant factor. One must determine it and measure its importance. Unfortunately, most people note the competitions existence and that is about it. You should wonder why customers are going to competitors. Do you expect them to change and come to your pizza place? Why should they? Do you know the sales of your competitors? You should! When looking at a new area have you ever asked yourself, "are there too many pizza places?" Sometimes there are too many and your share of the business will not be enough to be successful. Very few people in the pizza business truly analyze competition. You should know the competitors sales, seating, pricing, menu, services, delivery area, take out vs. eat in, items most often purchased, differences by daypart (lunch, dinner and late evening) and other elements important to individual operators. If you don't know answers to the above, how can you determine your own success?
11. UNDERSTAND THE IMPORTANCE OF VISIBILITY AND EXPOSURE
Visibility is the ability to be seen continuously from one or more directions. Exposure is being seen and recognized over a long period of time. For most pizza operators, visibility is very important; perhaps more important that most realize. Consumers a constantly being bombarded daily by advertising and promotions by numerous media methods to influence their eating out decision making. This reinforcement plays an important role in the decision. When consumers are not reinforced they will often forget a previous experience. Adequate visibility reinforces the consumer, especially if the location is in the pattern used by a majority of the area residents. For delivery oriented pizza operators, visibility may be the Yellow Pages. A strategic position at the beginning of the Pizza Section may be the most important form of visibility. Exposure of a pizza sign or place over time "cements" or reinforces the memory of previous experiences, especially if the facility is in the normal patterns of the area residents. The importance of exposure is very often overlooked.
12. REALISTICALLY ESTIMATE YOUR POTENTIAL SALES
Historically, sales of a prospective unit are estimated on the back of an envelop or on a napkin. Usually it goes something like this: "the rent will be $1,000 a month or $12,000 a year. Well, if rent should not exceed 6% of gross sales then that will require sales of $200,000." That seems like a good number and so it becomes the estimate. Unfortunately, it bears no relation to the market potential. Estimating sales can be a difficult process. Conversely, it can be simplified to provide guideline to maximize opportunity and avoid mistakes. As the Fram Filter man says "you can pay me now, or you can pay me later" A little money and upfront effort, can avoid a major loss of thousands or even hundreds of thousands of dollars.
13. DETERMINE THE LOCATIONAL ECONOMICS
Please notice that this is the last Principle. There is a very specific reason for this. Unless all of the other principles make sense regarding a prospective location, the cost of a locations is not relevant. A good deal on a location can be the best deal on a dog, a real bow-wow! Remember, we most often get only what we pay for. Fudge on the price of a good location and you usually get a bad location. Have you ever tried to nurse a bad location? It is almost impossible! Select good locations and negotiate hard for a fair price. Do not, however, agree on a secondary location because you are unique and the masses will storm over obstacles to eat your pizza. It may be a lonesome life. Each of the above Principles will be featured in subsequent articles in the coming months, detailing the elements of each and how to apply them. Hang tough, the answers are coming!