What franchisors need to consider structurally about the site selection strategy.
In today’s difficult market conditions, we are seeing some rather spectacular corporate/ franchising failures. There are always reasons for these failures, however two of the common issues are retail rents (which are rising at exorbitant rates), and that the retailer has selected poor/ average sites in the past.
In many cases the site selection strategy has historically been an experienced, long term employee of the company, who has moved aside and become the property manager.
Unfortunately, while the heart is in the right place, the ability to get away with just experience, or those costly words “because it has always been done that way” may no longer work.
Cutting edge retailers use a variety of tools to assist in site selection, and I personally think it is a two-step process, and the two should be almost independent of one another, as each could be said to be a different skill set – often diametrically opposed:
- The strategic development manager
- The property manager
The strategic development manager role should be all about understanding the demographics and growth of Australia (and often New Zealand). The job is to direct the property manager in which regions to go. They need to have a very good understanding of areas, shopping centres, shopping strips, new developments and growth corridors. They need to understand mapping and demographics.
The property manager may have real estate qualifications, needs great negotiating skills, and is on the ground to speak with leasing agents and owners about what they will provide, fit out and cost. This is the hard school negotiator, and may not be the most proficient on the computer, but understands the language.
Working together you have one thinking Australia wide strategically, and one (or more) on the ground doing the deals.
Strategic development manager responsibilities
- Understanding demographics and being able to talk the language with a mapping company, the ABS and other providers of information.
- Learn about industry specific datasets for your business such as CoreLogic property house pricing, various industry associations, shopping centre Information from the Property Council of Australia and many other relevant datasets.
- Be responsible to management to provide the strategic network plan with sales targets, budgets and foresight for store numbers in the future.
- Be aware of all leases coming up and be involved in the decisions to re lease, seek a new location or walk away.
- Give direction to the property managers on where they are to seek new sites, and why.
- Have an understanding of areas like cannibalisation, to assist in answering franchisee queries.
- Be responsible for any sales prediction tools, including some form of post audit to instil confidence for future investment / site decisions.
- Long term responsibility to improve the network.
The property manager responsibilities
- Make contact with the shopping centres identified for new sites
- Visit them and have a clear understanding of the dynamics and where you should be seeking a store and why.
- Visit and look at identified shopping strips, and make contact individual site owners or appropriate retail leasing agents.
- Understand localised issues such as signage, visibility, pedestrian traffic and proximity to competitors (or friends).
- Negotiate the best rents and other concessions possible.
- Finalise the lease right through to signatures.
- Take all the leasing agents to the pub –a good negotiating skill to have.
- Complete the deals, and move on.
The concept of a divided two-step process is to place some discipline in areas that would have a far reaching corporate responsibility (head office), compared to the person more “in the trenches” sorting out the best deal possible.
Many may say their business is not large enough to support such a division, but my view is there is a completely different set of skills required, from a sharp analytical mind required at a head office level, to a more personable executive with experience in the fine art of negotiation (hard and soft depending on the circumstances), who may have been trained as a real estate agent beforehand.
Good luck on establishing your successful site strategies and my view is that sorting out the HR is probably the first major steps to getting it correct.