Get Smart about Location Growth

With a country concerned about mortgage woes, foreclosures, and a looming recession, property owners in the hospitality sector, both food service and hotels, are on edge about opening new locations.

So what can be done? Some operators are taking the plunge and purchasing location mapping solutions. These are software systems used to digest thousands of algorithms about customers, demographics, and locality. They then produce detailed location reports with seed opportunities narrowed down to square blocks.

Sure, it sounds like magic, but it isn't. Geographic information systems providers have been installing these types of systems for years, helping hundreds of hospitality operators take the guesswork out of where to safely open a new operation.

Hospitality Tycoon
Sagittarius Brands, owner of Del Taco and Captain D's, invested in a suite of site selection and evaluation software from geoVue that allows the company to run a demographic analysis of trade areas on the fly. It uses the program in conjunction with competitive information and maps of retail concepts both restaurant and non-restaurant. Using all that data, Sagittarius is able to accurately describe what a potential site location is like and compare it to an ideal trade area.

• Help pick higher-value targeted locations within a market
• Can assign a value to a territory based on a preset number of locations that can be built in that area;
• Can identify the exact intersections where the establishment would be most suitable;
• Can narrow down media buys and advertising capabilities in a particular location;

"The idea is that you geographically and spatially map the data and look for patterns," says Andrew Verostek, market planning analyst for Sagittarius Restaurants. "This allows the user to come to conclusions at a more rapid pace than if they were to just open up a map, draw a few circles on it, and pray that they hit the right spot."

But, where does the data come from?

Some companies receive their population trends from PopStats, a service that culls data from different government agencies. However, obtaining geographic and spend trends data is much easier for companies that already gather information about their customers. Marco's Pizza, for example, automatically obtains a wealth of data every time a customer orders a pizza for delivery.

Low-hanging fruit
Marco's hired MapInfo to create a model based on a profile of the company's core customer using demographic and spend trend data directly from its POS system. The company looked at multiple seed points in every area in America and did a demographic analysis of seed points based on a one, two, and three-mile range. Finally, they ranked 300,000 locations from the closest matches to the least likely matches.

"At the end of the day, I had a list of the top ten markets for us to be in, so we could focus our development on those markets," says Jack Butorac, Jr., Marco's president of franchising. "That gave us the demand side of the supply and demand equation."

That data was then compared to a list of 67,000 U.S. pizza competitors, mapped in accordance to their proximity to the seed points found by the software. When they were done, the list of 300,000 was culled down to 3,500 economically viable stores. "We look at those as the highest potential matches in all of the U.S. and created that as our go-forward proposition," says Bryon Stephens, Marco's Pizza vice president of franchising.

Building blocks
GIS systems are a significant capitol investment. Depending on the size and scale of a company and the growth and anticipated expansion, a location-scouting system could require a significant amount of investment in human resources.

If growth is slow and methodical, companies can get by with one in-house person solely dedicated to GIS software management. Experts warn that companies should avoid hiring a part time employee who has multiple duties.

"In the end, the best site selection comes from a balance of the analytical tools and gut instinct from experienced personnel in the field," Verostek says. "You still must touch the dirt, see the trade area, and drive around to see how the data from the computer is actually present in the area."