IF PICKING THE RIGHT LOCATIONS IS SO SIMPLE, WHY HAVE SO MANY RESTAURANTS FAILED?

Submitted by John C Melaniphy III on Wed, 06/08/2011 - 12:45

During the pandemic, thousands of marginal and successful restaurants closed because of fewer people dining out, the loss of significant luncheon business, other financial problems, lack of anticipated sales, rising gasoline prices vs. dining out expenditures, fewer frequent customers, smaller check averages, and consumers trading down, along with locational factors like poor access, limited parking, and numerous other reasons. This is the food business where every customer is a food critique.

Admittedly, in the last several years even restaurants and quick service food unit in good locations have fallen victim to the pandemic. However, even with economic these problems, picking the right locations given all of the problems can help to keep the grim reaper away. Up until 2009, I thought that the 1974-1975 Recession was the worst I had experienced. This one is at least twice as bad.

In my book, The Restaurant Location Guidebook and in my previous book, Restaurant and Fast Food Site Selection, I address Site Selection and Procedures that will maximize sales and minimize the recession hazard, providing some insulation from the recession blues.

AVOID “CANNIBALIZING” Your Existing Restaurant's Sales

Submitted by John C Melaniphy III on Mon, 11/01/2010 - 10:57

Melaniphy says that infill locations can often cannibalize sales from your existing restaurant(s). Obviously, that is not what you wish to accomplish. This problem can be easily avoided.

Know your existing restaurant’s customer characteristics, trade area, and where the existing restaurant’s most frequent diners reside. Many restaurant chains utilize “customer intercept surveys” to better understand their customers. They plot the customer data so they can visually portray where their customers reside and how often they come to the existing unit(s), (See Chapter 3 in The Restaurant Location Guidebook).

The process of determining sales transfer or cannibalization is simple, but for whatever reason, most food people do not do it. They should! That way you can know what your impact may be and either avoid it or plan for it. Moreover, if you face a franchise situation, you have data and visuals to fight the battle, first with the franchisor, and perhaps, in the courts or in arbitration. The process is as follows:

1. Develop the needed customer data

2. Make it visual – plot the data on a map that clearly shows where you customers are coming from and the likely impact of another unit

3. Estimate the likely impact

10 RULES FOR FOOD COURTS

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 21:06

Over time, I've reviewed and evaluated both good and bad food courts and food operations for the shopping center industry and independent and chain food operators. In addition, I have been an expert advisor and witness in legal actions regarding food courts. Lastly, I have written a book entitled Restaurant and Fast Food Site Selection which includes a chapter on malls and food courts. Here are a few of my current opinions on the subject.

1. Food courts need pedestrian traffic; they often cannot create sufficient action by themselves. Food courts should be placed where people will logically congregate or certainly pass.

2. Food courts are generative, but in an unusual way. They usually generate the majority of their traffic during normal dining periods, when the body's computer signals its time for chow. Thus, food courts should not be looked at as a generator for a wing of a shopping center or mall. While they will generate traffic at their peak periods, they usually will not generate much traffic during their non-peak periods. Remember, a considerable amount of food court sales come from "impulse" decision making.

TO MARKET, TO MARKET

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 20:54

Originally published in Pizza Today, August 1988

Getting necessary marketing information and data entails the the use of four primary elements. The first is knowing what to get, the second knowing where to get it, the third getting it, and the fourth knowing what to do with it once you've got it.

Collecting and evaluating data needs to be done within the context of the previous Site Selection articles found in Pizza Today. These include: Understanding the Importance of Location, Recognizing the Principles of Location Selection, Knowing Your Customer Profile, Understanding Your Trading Area, Recognizing Different Types of Locations, and Understanding the Need for Accurate Demographic Data.

What to Get

Most food operators recognize the factors that affect the sales potential of a location including population, income, employment, competition, accessibility, and other factors. Where to get the information can be perplexing. The Reference Table included presents a list of the items, usually available, that can help in evaluating market opportunities. Often, it is not necessary to obtain and study all of the items listed. Instead, they represent sources for different types of data, which can be helpful in deciding what is beneficial to you in your own situation. Let's look at the key elements.

TYPES OF PIZZA LOCATIONS

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 20:49

In pursuit of the magic site selection formula, one must recognize that there are numerous types of locations. Moreover, each type usually has a different set of trade area characteristics, requiring modification of site selection criteria. This is one of the reason why many computer models don't work, and why many real estate site location people make mistakes. Additionally, today it seems that pizza is being sold or delivered from every fast food operation, store and restaurant. Why are some so much more successful than others? Let's examine the differing types of locations that I have identified over the last three decades.

DOWNTOWNS

In a sense, downtown areas are "where it all started". Downtown was the original market place, the major activity area, the initial concentration of people and the major employment center. Many changes have occurred in downtowns throughout North America; some for the better; but sometimes for the worse. Downtown locations must be approached, evaluated and selected with caution. If done correctly, some big winners can be found.

CAPITALIZING ON YOUR LOCAL MARKET

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 20:46

I just got off the phone with a women's specialty retailer who has a serious problem. Her store is located, not only in the wrong neighborhood, but also in the wrong type of shopping center. Her sales have never reached their expectation, nor will they. Unfortunately, she is probably not going to make it. In her case, the time to address this issue occurred prior to opening the store. For others, the time is now! Most retailers are experiencing the doldrums of the economy, too many retail stores and a value-oriented consumer. "If it ain't on sales, nobody buys it." Perhaps, some of the suggestions in this article can help to better define your market.

A RESTAURANT'S CUSTOMER PROFILE

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 20:43

Originally published in Pizza Today

A customer profile, if properly conducted, is literally a picture of your customers. The more that you know about your customers, the easier it is to pick good locations. Now you may say: "I know my customers, I don't need to do any of this." Well, let's see how much you really know.

How do you develop a customer profile? You interview a representative sample of your customers in your restaurant. Right away you are getting nervous. "Interview my customers! That is a whole lot of mickey mouse". Right? Not really! It can be very simple. First, however, let's look at the important elements and then review what to do.

CUSTOMER PROFILE

What is a customer profile? Here are some items that are often included in a customer profile. They don't all have to be included; however they can be. Won't it be too long? No, not if the right physical situation exists (space at the entrance), and the interviewer knows what she is doing. Notice the SHE; that is because women usually make better interviewers than men. Simply stated, most people find women more acceptable when being interviewed.

-How often do my customers patronize my place?
-When did they make the decision?
-Who made the decision?
-Why do they come to my shop or order my Pizza?
-How many minutes did it take them to get here?

NEW FACILITIES DEVELOPMENT

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 20:29

John C. Melaniphy
published in Area Development

New manufacturing companies with combined office and plant facilities are usually more complex, since they include senior management, middle management, supervisory personnel, skilled and semi-skilled workers, and perhaps some unskilled labor. Important elements in this process are as follows:

OBJECTIVES (might include the following): Select a city where the company can become a "big fish in a small pond."

Increase the quality of labor productivity, stabilize the labor supply, and reduce employee turnover.
Improve transportation options and cost/savings.
Reduce utility costs.
Reduce corporate taxes.
Avoid excessive government regulations.
Reduce health care costs.
Reduce unemployment compensation costs
Move closer to primary markets.
Move closer to raw materials.
Improve quality of life.
Avoid environmental issues.
Improve safety and security.
Substantially reduce real estate taxes.
Others.
MARKET STUDY
The primary factors included in the market study are as follow:

A. Transportation

Distance to primary markets
Highway accessibility
Shipping costs
Timing to markets
Accessibility to major airport(s)
Railroad service
B. Raw Materials
Material availability
Proximity to raw materials
Freight savings
Distance/timing

FOOD COURTS - AVAILABLE TABLES/SEATS CAP SALES; FOOD COURT SEATING: DOES YOUR MALL HAVE ENOUGH?

Submitted by John C Melaniphy III on Sat, 11/21/2009 - 20:25

Many successful shopping center food courts have inadequate seating. While it can be overlooked somewhat in downtown food courts because of strong take-out business, it cannot be ignored in suburban malls. Seating to food courts is like parking to shopping centers. When you don't have it, you lose customers and sales. The total number of seats, however, is not the most important factor. Instead, the number of available tables with seating is the critical element. An occupied table, even if three seats are unoccupied, is not available seating. People prefer to sit alone or with friends and rarely share a table with strangers.

How do you determine your food court's table and seating situation? Follow these steps, designed to identify the needs in your food court, rather than relying on industry averages. Each food court has its own personality and, therefore, it must be addressed individually.

1. Count the number of tables and seats in your food court. Classify them by types of tables (i.e., moveable or fixed "twos", "fours", etc.) This is important because often the seating has changed somewhat since the food court was originally designed. You may find the numbers have changed since the food court was built.

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