TYPES OF PIZZA LOCATIONS
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.
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.
Unfortunately, I had one experience recently where a potential new operator told me that he was opening a new facility which, because of its "great product" and hors d'oeuvres during the "cocktail hour", would keep customers downtown for dinner. Well, to say the least, I didn't agree. He is currently trying to sell the unit. I hope that you are not the prospective buyer.
Downtown locations house many types of operations. Some provide dining and take-out facilities, while others include delivery. Most units in the heart of downtown rely mainly upon the luncheon meal as their mainstay. Large units must have activity at other meals as well, either through a dinner business or a dinner/delivery activity. Most downtown locations serve a very narrow trade area, usually measured in blocks. There are exceptions, where a high volume operation is able to generate business to the downtown area, or sufficient population resources exist in proximity to the downtown area. Another opportunity exists when a university or medical center is adjacent to the downtown area, or a major industrial area with multiple shifts is located in the vicinity.
The best locations in downtown are usually where there is a concentration of activity, or on a street with considerable pedestrian traffic during the luncheon period. Also, they cater to the luncheon crowd with smaller pizzas or pizza by the slice. Good food and fast service are essential. Remember, most downtown employees only have an hour to walk to a pizza facility, eat and return to work. High sales volume units are usually in or near the downtown area, where there is considerable evening activity. These units often have some parking of their own, or utilize some available street parking is available.
The vast majority of pizza facilities in densely populated urban neighborhoods serve relatively small trade areas. In fact, many are store-front type facilities which serve small neighborhoods, while some others are at subway stops or major bus transfer points. Many are located in commercial strips, older business areas and in or near industrial concentrations. A smaller number enjoy a larger attraction, usually because of location, product reputation, unique gourmet appeal, a broad pizza and pasta menu, parking, seating and perhaps, atmosphere. Unusual locations may be found near baseball parks, beaches, convention facilities, public transportation transfer points and other activity generators not found in the typical neighborhood.
The dense-urban type of location is perhaps the most sought after at the present time, particularly with the over-building of pizza facilities in the suburbs. Moreover, the density of population can help protect against competitive impact. Success for moderate sales volume operators can be aided by serving small areas from adequate locations within easy walking or driving distance. Moreover, pick-up or delivery types more easily serve small trade areas. Frequency of purchase is usually high for a local pizza place. High-sales operators are most often located on a major traffic artery; in a strong middle or upper-middle income area with parking and a strong population base, composed of many young persons, especially between the ages of 20 and 35 years. Naturally, the product must be exceptional.
In recent years, small shopping centers have been springing up in dense-urban areas, offering new opportunities to serve large trade areas, particularly if the shopping center contains a major supermarket (40,000 square feet and larger). These types of locations can be exceptional if the unit can be seen by a majority of the shopping center visitors. Supermarkets of this size must generate sales of between $400,000 and $800,000 per week to be successful, depending upon the cost of real estate. Other small shopping centers may contain a convenience food store, a video rental, an ice cream shop, a donut shop, and other facilities that tend to serve a neighborhood. Unfortunately, the existence of such facilities does not insure success. Instead, the market must be there to support a pizza or pasta unit, and certainly the unit will capture more sales if it is in the normal driving or walking patterns of neighborhood residents.
Lastly, in some dense urban areas today, "action areas" have developed, catering to young urban professionals (Yuppies), and married couples with dual incomes and no kids (Dinks). In addition, the areas usually have a fairly large population of divorced individuals which adds to the overall market activity. These areas usually have a number of high-sales pizza units, often with a sports bar orientation. The trade areas of these units may also extend to the suburbs. However, the most frequent visitors are usually from the general area. The larger trade area attraction most often occurs on the weekends. There are many examples, today, of units in these types of areas capturing sales of between $2,000,000 and $5,000,000 annually.
Suburban locations usually are found on major traffic arteries in either strip commercial or shopping centers of all sizes and shapes. Additionally, they may be in office buildings and industrial parks. Lastly, they may also be in suburban downtown areas near train stations or governmental complexes. The most significant difference between dense-urban and suburban locations is the fact that the vast majority of suburban locations have some parking and often better access. Theoretically, the suburban locations should have higher average sales since they can handle more customers more conveniently. In reality, usually there is more competition in the suburban areas also with parking and, as a result, dense-urban locations with parking often capture higher sales than their suburban counterpart. Naturally, there are exceptions.
There are many types of "best locations" in suburbia. However, one of the best is a location that can serve a significant office or industrial concentration, with a young residential population to provide both strong luncheon and dinner sales. The two types of locations that usually draw from the widest areas include locations in proximity to major malls and locations on the major traffic artery. In each example, access to the location, along with parking, is paramount. These types of facilities usually have seating, parking and a full or limited pasta menu. Regardless of the type of operation, most need to be in "action" areas of some type.
UNIVERSITY AND COLLEGE AREAS
University and college areas with a resident student population can represent excellent opportunities. The primary aspect of these types of areas is the age structure of the student population. Moreover, being away at school seems to make most students constantly hungry. Pizza and especially pizza for two, three or four, truly fits the bill. In addition, jogging and athletics are "in" and pasta on many campuses is considered "jock food". The best facilities are usually on or next to the campus, serve beer and wine along with the pizza, and are considered meeting places. Delivery can also be an important adjunct in increasing sales, but it isn't absolutely necessary if a facility is well located.
HOTEL AND RESORT AREAS
Hotels and motel areas, when concentrated, represent a specific type of location. These usually work best if the facility is well promoted and recommended by doormen, bellhops and cab drivers. Moreover, they are especially successful if the hotel and motel facilities cater to the younger business man and woman. Regardless of the extent of the market, these types of units require a back-up residential population to supplement the hotel and motel activity. In recent years, the hotels are getting smarter. For years, hotel management stood by, watching the pizza delivery people move in and out of their lobbies. Today, more and more hotels have either made a deal with a local pizzeria, or are making their own pizzas in order to keep the business "in the house".
The best locations to serve this type of area are ones that are on the major traffic artery; usually enjoy excellent visibility; are near an employment concentration for the luncheon business; and adjacent to the hotel and motel concentration and the resident population for dinner and late evening business. Also, if there are theaters nearby, for the later evening business, add another plus.
Resort areas, with a group of young visitors, also represent good opportunities. Included are areas such as: beach shops, ski areas, amusement parks, marinas, resort shopping areas, historical concentrations, and numerous others. There are many resort areas where visitors are looking for cheaper food than the resorts, hotel, and motel facilities provide, or the visitors simply want a better product. Orlando, Florida, is a good example of a market on the major traffic arteries leading to Disney World. The age structure of the visitors is mostly younger, with a pizza orientation. Also, pizza is often the "compromise" meal which is acceptable to all members of the family. Nonetheless, location is critical. Visibility, promotion and, without question, a very good product are essential for continued success.
MAJOR MALLS OR SHOPPING CENTERS
The greatest generator of activity in most areas is a successful major mall or large shopping center. Since malls and centers attract customers on a highly frequent basis, pizza facilities often attempt to locate on the major traffic artery leading to and from the complex. While the opportunities are usually great, the cost of the land and buildings, along with the significant competition can be a reason to stay away. Nevertheless, sales potential should determine what an operator can afford to pay for land and building. High-sales pizza facilities are often found around mall and shopping complexes.
Inside a mall or shopping complex is a completely different type of location. Inside, the customer is a pedestrian, and the best location is where the greatest number of people either pass or gather. Most often, today, shopping leasing people want to place pizza units in food courts. As an independent, this can be acceptable, if: the mall is capturing sales of over $100,000,000; the food court has at least 500 seats; contains no more than 10 food units in the court, and has no other pizza facilities. A chain operator can usually take a position in a food court near an independent operator because of name recognition and customer acceptance. Unfortunately, the independent usually suffers.
A residential area location is one where the facility is located on a residential street with little or no other commercial facilities nearby. A location of this type must be totally generative, since it gets no help from any other facilities. This is the true test of one's ability to create business. In fact, this type of location is the most prone to fail almost immediately. Very few succeed and such locations should be avoided.
Small towns are different and must be looked at as a separate type of location. Good locations can be found on the major highway through the town; or on the road leading to town from the interstate; or in or near the downtown area. It is important to recognize that many small towns have trade areas of 10 to 15 or more miles. Thus, the population resources are often greater than they appear.
OTHER TYPES AND SPECIAL LOCATIONS
This category includes: delivery only facilities, mobile pizza wagons, pizza operators in seasonal areas, train stations, airports, near baseball parks and stadiums, high-rise buildings, water-oriented locations, and other unusual sites that are limited in number and require a special set of circumstances for success.
For example, the delivery-only units should be in neighborhoods where the age is most conducive to pizza consumption. While such units can be located outside of the area, delivery time becomes a major factor. Also, since most people in the pizza business will be into delivery by the end of 1988, secondary locations will become increasingly more difficult to maintain. The other types are usually unique to a specific environment and are difficult to duplicate with consistent success.
It important to realize that some types of locations can generate millions in sales, while others will not rise above $300,000 annually. By recognizing the location with the greatest potential, one can expand the horizon of opportunity.