Omar Al-Massalkhi, CEO of Talkin’ Tacos.
An iconic phrase of business wisdom—“location, location, location”—originated in Chicago as early as the 1920s. This advice continues to resonate among a new generation of entrepreneurs in various endeavors, but especially for retail and restaurants.
It stands to reason that most entrepreneurs find their first location in or near the community in which they live. For example, our business started in the Miami community, which we knew well. But as we grew a larger following, we expanded into other areas in and around the city.
When expanding a business geographically, there are two important factors all business owners should consider: knowing where the demand will be and expanding to underserved markets. I’ve found that in order to fully address both demand and the local marketplace, there’s a corollary to “location, location, location,” and that is “research, research, research.” It’s important to know if the area is doing well and will be a good fit for your business. With that in mind, here are six steps to researching your next location.
1. Look inward, grow outward.
Ask yourself, what are the goals of the expansion? Always expand in a way that preserves the foundation of your success and maintains the quality of the product. Also, I recommend growing geographically within your comfort zone—it is simpler to grow outward from your original location. For example, my brand first chose to expand from our original Miami location into other areas of South Florida.
2. Don’t be in a rush.
Try not to be too impressed by your own success and move into new locations too quickly—you can expand fast and just flop. I use the mantra, “Don’t be Quiznos.” This company took over mall locations and drove their own franchisees out of business; they may have made a lot of sales, but they weren’t making any money. At its height, Quiznos had 4,700 locations, but they “were built on a weak foundation of low unit volumes and low profits.”
3. Get to know your customers.
Make sure you’ve been collecting customer data. Most business operators have their own means of collecting data, whether through POS systems, online ordering, loyalty programs and/or apps. This can allow you to take a look at your most loyal customer base and track their visits to see if there is a pattern.
For example, are they coming in for lunch or dinner? That one metric can give you insight to clarify whether you want to find a place in a similar environment—office vs. entertainment. I also recommend researching available public information; there can be a surprising amount of information in your area’s most recent local census, which is typically accessible online. We gathered customer insights from our first location that demonstrated our brand attracts customers who are under 40 years old, so we always begin our search by taking a deep dive into demographics.
Social media sites are also great places to research what customers want. What are customers saying about you online? Read between the lines; for example, posts expressing wishes that you had locations closer to certain places can give you ideas about where you may want to move next.
4. Scout the competition.
If you’re opening a pizzeria, you don’t want to open on a block that sells pizza. Or maybe you do! Once again, social media combined with boots on the ground can tell you a lot about what’s going on in the neighborhood you’re considering. Are people complaining about the existing venue? That’s an opportunity to bring in a superior venture. Are they excited about what is already there? That’s a warning to steer clear.
There is also hard data available online from trade organizations about nearly every type of business, whether they be clothing stores (National Retail Federation) or restaurants (National Restaurant Association). Trade organizations have already done the hard work of determining consumer preferences, and this data can help you determine if you can compete with similar venues or should find an underserved location.
5. To build or not to build?
Building upon an existing infrastructure can help ensure success, but it can also spell failure. Consider whether the building you’re considering for your new location is in the same line of business, thus potentially having lower conversion costs. Ask where the previous business went; did it fail because of its location or its offerings? If it was a success, where did it move, and is that a better location choice for you, too?
6. Know the nearby business landscape and regulations.
As Sesame Street once asked, “Who are the people in your neighborhood?” Indeed, the people in your new neighborhood will be your new customers. Does your location need lunchtime traffic? If so, look for offices and industrial parks nearby. If you’re a family-oriented brand, check the local government website to see how many schools are in the area and how many students they serve. Do late-night partiers frequent your venue? Look to see if there are movie theaters, concert venues and hopping bars on the block. It may sound silly, but as a business that caters to Millennials, we sometimes scout how many gyms and bars there are in a circumscribed square mile.
Geographical expansion need not stop at state borders or international ones. When expanding your brand beyond your state or country, research is key, and legal advice is essential. For example, in food businesses, regulations for purveying food differ from state to state with regard to cleanliness standards, business licensing legislation and certification requirements. Thinking of going global? Don’t underestimate the cost of an expansion move to another country, and make sure your business plan has a clear conceptual framework. According to one study among CEOs and CFOs, “Nearly 74% of finance executives surveyed agreed that maintaining control of international activities was difficult.”
When it comes to leaving home and growing a business geographically, there are many things to consider. Ultimately, I believe the best advice is simple: Know before you go!
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