How to Target Your Trade Area

My last article ("Site Selection Basics") focused on the importance of distinguishing between your trade area (geography, demographics, mixed uses) and site attributes (such as type of shopping center, access, parking and co-tenancy).

How do you develop your customer profile so that you locate your business in a trade area with a significant number of your customers? 

If you're buying a franchise, you'll be given the customer profile so that you can target the right trade area as well as the most desirable site characteristics for that type of franchise.

There are franchises that focus on attracting customers during particular day parts. For example, fast-casual restaurants that cater to customers in early morning and during lunch will recommend locating in trade areas with a nice mix of residential and employment centers. 

They will recommend picking sites that are perceived as convenient by the target customer, such as being within a short distance (due to time constraints such as a limited lunch hour), good access and sufficient parking.

Some uses are "mass market" businesses. By definition, a mass market business is one where the majority of people in the trade area are potential customers, such as fast food establishments or florists.

And while some demographic segments might provide more customers than others, these businesses depend on being in areas with a lot of activity to bring customers to their door. Here the trade area demographics might be less important than the quality and number of competitors and the particular site location characteristics.

A franchisor will (or should) provide you with both a customer/demographic profile as well as recommended trade areas, types of shopping centers that are better for the franchise, recommended site characteristics and space requirements (size, dimensions of the space, required utilities, etc). 

 If you're buying into a franchise that has other national competitors (and most do), go online and research what the competition is recommending with regard to trade area and site requirements. It's often listed under "real estate" or "submit a site" sections on their website. 

Compare it to what you're being told by your franchisor and ask questions if the requirements differ. A franchisor should be able to explain differences, and this will be a good double check on the quality of the franchise concept.

Franchisors will often have a few franchisees (likely the most successful and happy franchisees in the system) that they refer to prospective franchisees as examples of the business operation, location and potential. 

It's good to spend time looking at a few of the higher volume locations for a variety of reasons:

(1) Talking to an experienced franchisee who's willing to discuss the pros and cons of their business is always worthwhile
(2) It will give you an opportunity to review their trade area and site characteristics so you can see how it conforms (or differs) from the franchisor's recommendations
(3) You can then take what you learned and apply it to your target trade areas.

It's good to visit at least one average store and one poor performing store so you can see what those look like as well. Sometimes you'll notice weak operations (spend some time observing, on different days and at different times), or you might observe problems with the site (such as limited parking) or other issues with their trade areas. This will be time well spent.

If your franchisor doesn't provide trade area, site and space checklists, develop them for yourself using the information from the franchisor as well as other tips you've learned from the competition. 

When looking at different locations, it's easy to get confused so making notes and using a checklist will allow you to keep track of your observations so you can review them later. 

And it goes without saying that reviewing the sites of your potential competitors is critical. Be honest with yourself regarding their strengths and note their weaknesses. This will help you to position you franchise business for success.