The 4 Elements of Site Selection

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By Tiffany Toliver, P.E.

These four elements of site selection are pretty general; they will work for almost any franchised concept. And If you apply this structured way of analyzing real estate to your specific use, whether that be restaurant, retail outlet, entertainment venue, whatever, you’ll be able to compare sites apples to apples. This will help you make an informed decision rooted in data.

This method of analyzing real estate was passed down to me from my tenure at a very large restaurant conglomerate. It isn’t anything I came up with myself, it’s actually a method that I was taught by one of the best. And I can say from experience that it works.

So let’s jump right into the four elements of analyzing real estate for site selection. Now envision a table with four legs, each of those legs represents one of the four elements of site selection. So the first leg represents physical site characteristics, the second leg, demographics, the third leg trade area, and the fourth leg competition.

We’ll go in-depth into each of these elements in just a moment. But first, try to imagine the table if I removed one of the four legs. The table would fall over. If I shortened one of the legs, the table would become unstable. The concept here is that you need to have all four elements, or table legs present for a site to be as successful as possible.

75% of the time with franchisees, I encounter a table with one or more missing legs. They’ll ask me what I think of a site, I’ll ask a series of questions based on the table legs, and it comes to light that they’re missing one of those core elements. The pursuit of a site with missing elements can waste your time and cost you money.

So with that, let’s go through each of the legs of the table in detail.

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The first leg – physical site characteristics also known as site quality. So here I look at things like parking, foot traffic, vehicular traffic, access points, visibility from the main roads, signage, and branding opportunities. I can’t tell you how many sites fail from weak site characteristics. Think about it if you can’t find a parking spot, or you have to do a U-turn to get into the site, you as a customer are less likely to frequent that business. If I can’t see your spot from the road, or if there is no signage, I may forget that your business is even there.

The second leg is demographics. This one is a little trickier because it is the definition of your customer base, but the good news is, your Franchisor should be able to tell you the concepts ‘model demographic’ and just how far the demographic reach is for the concept. For this video, I’m going to assume the standard 1, 3, and 5-mile radii. General categories for demos are total population, median age, persons per household, household incomes, and total number of households. These are important parameters that compare your target customer to who lives, or works, in the immediate area. I look at each of these categories for the 1,3 and 5-mile radii.

The third leg is Trade Area. A trade area is a geographic area in which 75% or more of the community does its business.  One of the core indicators of how your business will do in the trade area is to look at co-tenancy. Let’s say you’re considering a site in a shopping center; you’re Cotenancy are all the other businesses in that shopping center. What customer does those other businesses serve? Ask yourself if you’ll be sharing that customer base. Other trade area characteristics are what restaurants, movie theater, grocery stores are in the area. Are there hospitals, military bases, universities, hotels, convention space, or offices? Would the people that live around or use those facilities be a match for your business?

The fourth leg is competition. Who are your competitors in the market? What are they doing right, what are they doing wrong? Are they direct competitors, meaning they offer the same services or product you will? Or are they indirect; perhaps they offer your product in addition to other product lines?

As you can see there are a lot of data points here from the number of parking spaces to who is sharing your shopping center to how many competitors are in your market. So what we’ve done at Franchise Frankness, is try to make it easier for you. We’ve detailed out all these characteristics in a free, downloadable pdf called the site selection workbook. You can print these, take them with you on your site tours, and fill them in so that you have a record of what you saw at each site.  The workbook has links to pull some basic demographic data as well. To access that pdf, click here – for those mobile users, I’ll put a link in the description bar.

If you follow this structured way of analyzing real estate, you’ll be far more organized and on your way to making an informed decision in site selection.

Now there is one additional, overarching element to consider, called dayparts. The word daypart comes out of the television and radio industries. In entertainment, dayparting is dividing the day into parts to target a certain audience. Same concept here in site selection. To determine the existing traffic to your site on or around your peak hours of operation, visit the potential site extensively during your due diligence. If you’re opening a coffee shop, visit the potential site in the morning to understand traffic and customer behavior.

Let’s say that you’re opening up a Mexican restaurant with a full bar. Your peak hours are likely going to be happy hour, dinner, and the after dinner crowd.  If the potential site is a ghost town at 8pm, try to understand why. Is there a school or church across the street? Is the demo an early crowd? Are there any other uses in the center that would drive or deter traffic at certain hours of the day? Understanding the dayparts of your business and the dayparts of the prospective site will help you paint a clearer picture.

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