The Whole World’s Watching

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We’ve been hearing about global expansion by  chain store retailers and restaurants for years.  Most people probably think that in many parts of the world this is an “imperialistic” initiative by US and European companies.

My blog statistics indicate that there’s global interest in chain store development from local people.

My blog is hosted by WordPress, who tracks the country of origin for all page views.  The chart below shows the number of page views for the past 2 months by continent with further notes on specific countries.

Maybe I’m less aware of global chain store development trends than most, but I was surprised (happily) to see multiple page views from countries such as Malaysia, Bangladesh, and Botswana.  I did a little more research on google maps and found areas where there is clearly more going on than I expected, such as this map showing seven McDonald’s locations in Kuala Lumpur, Malaysia.

As you might guess, where you find McDonald’s, you also find Wendy’s, KFC, Nike, adidas, Gap, and many other restaurants and retailers.  But they’re not just US/European-based companies.  The Malaysian Retailer Chains Association founded in 1992 has 200 member companies representing over 6,500 stores!  The vast majority are NOT based in the US/Europe.

Anyone who has done international development or is from one of the countries I’m mentioning is probably laughing at me now, and I deserve it!  However, many readers are probably just as surprised as I am!

Many of these page views come from search engines such as google, Bing, and Yahoo.  WordPress tracks the keywords that caused Chain Store Advisors blog to appear in the results.  For example, yesterday nearly 50% of the page views came from India, Australia, and Botswana.  Here are the search terms that led people to this blog:

integrated logistic support hierarchy

system behavior of a chainstore management information

demographics and store sales forecasting

voice of customer

use of analytics in sales force alignment deloitte retail

retail stores looking into market research for 2012

how to approach chain store

There is a great opportunity to share information with our global colleagues in the chain store industry.  The various members of the chain store “food chain” need each other to find and evaluate deals, whether we are operators, brokers, or analysts.

I hope that some of the readers of this blog outside the US will provide comments about how we might begin a dialogue that benefits all.

The Biggest Name You’ve Never Heard Of

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I’ll bet you’ve never heard of Jack Valtrade.

Jack is one of the most successful commercial real estate operators in the eastern US.  He owns 25 shopping centers, a 200 store retail chain, a leasing company, a property management company, and a consulting business.  His net worth is estimated at $500 million, all self-made.

Chain Store Advisors interviewed Jack last month to gain some insights into his success.  “I have an unusual background,” he said.  “My dad is a PhD Economist with the Census Bureau and my mom teaches Geographic Information Systems at Princeton.  My first job was working for a commercial real estate broker when I was 16.  I put myself through M.I.T.  doing feasibility studies for a shopping center owner, and then got my Master’s degree in Statistics with a concentration in Consumer Research.”

Unlike many retail entrepreneurs, Jack is a big believer in extensive market research.  Before he opens a new store or builds a shopping center, he rents an apartment in the market for three months and loads his database with every existing retailer, restaurant, shopping center, and traffic generator in the area.  He then creates a computer model to estimate potential sales and meets with the local brokers, store managers, and property managers to get their views on hot spots, trends, and local culture.

Why haven’t you heard of Jack Valtrade?  Because he doesn’t exist, and he never will.  Given the complexity of the retail marketplace, the only way to be successful is to build a team of experts in the various disciplines of the business.

No one can be a Jack of All Trades.

However, anyone can build a great team, with the right vision, partners, processes, and systems.

Vision

This famous work by M.C. Escher captures the essence of the “top down, bottom up” vision for success in commercial real estate.  The “top down” part, symbolized by the chess board, is the high level strategy including goals, objectives, and the approach to executing game plans.  Success depends on an accurate assessment of the situation, with the details provided by the “bottom up” observation represented by the buildings on the left.  Whether the goal is to lease a shopping center, open a store, or offer the right mix of products to the local trade area, a well-formed vision is the starting point.

Partners

National chain stores are a fact of life.  Companies such as Wal-Mart, CVS, and McDonald’s have a significant competitive advantage from their efficiency in marketing, distribution, and management.  However, they can’t possibly know every detail of every market in the US, let alone the world.  They must rely upon the local market knowledge of brokers whose job it is to know everything that’s going on in their back yard.

On the other hand, the brokers don’t have the “big picture” view of a chain operator, or even a shopping center owner, unless they spend the time to listen and learn.

Good partners have mutual respect for their expertise and believe that they need each other to succeed.

Processes

Because of the complexity of the retail marketplace, a purely “linear” process for executing a game plan rarely works.  The process must be more of a “loop” that includes the following phases:

  1. Research – inventory of the facts necessary for analysis including the type and location of relevant stores, local culture and trends, and the lessons of experience.
  2. Planning – analysis and synthesis of the research to create a “game plan”
  3. Deciding – meeting of the partners to define the actions based on the “game plan” as well as any unplanned opportunities that might arise
  4. Execution – performing the agreed actions while watching for unexpected outcomes, new information, and other situations that might change the validity of the game plan

During the execution phase of the “loop,” the situation may change and require another iteration to determine whether a different set of actions might be more effective.

Systems

Speed and accuracy are critical to successful outcomes when the “loop” is being executed.  If the changes in the market are not factored into the process on a timely basis, the players will be trying to solve last week’s problems in today’s situation.  If the facts aren’t correct, the tradeoffs that are the essence of decision-making and risk management will be distorted and lead to disappointing results.    The partners need to be supported by work flows, analysis and visualization tools, and document management systems that keep the process moving at the speed of the market.

Ever wonder why some companies have fully leased shopping centers or rarely close stores?  You got it:  they have the vision, partners, processes, and systems to support their success.  They adapt as the world changes.  They run circles around their competitors.

You’re not going to find Jack Valtrade; maybe you should take a closer look at your practices and make sure that you’re putting a winning team on the field!

Climbing the Stairway to Wisdom

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There’s a broker who’s sure that all sites turn to gold
And she’s selling the stairway to heaven.
When she gets there she knows, if the sites are all sold
There’s a vacancy coming to save her.
And she’s selling the stairway to heaven. 

- Led Zeppelin (adapted)

One of the popular metaphors for decision-making in the information age is the “Knowledge Hierarchy.”  It is based on the idea that we start with raw data and gradually process it through stages until it becomes wisdom suitable for making good choices.

Some people apply this to professional development over the career of a chain store real estate executive.  When you’re young, you simply see data, but as you get more experience and insight, you are able to use your wisdom to evaluate sites.

 

The fact is, each site must be evaluated through a process that starts with raw data that is enhanced with verification, context, and benchmarks until it is ready for the application of human wisdom. 

The human brain uses pattern recognition and analogies to analyze complex decisions.  This is why “analog stores” are popular in site selection.  If we can find existing stores that are similar to a proposed location, we can adjust the details and apply our knowledge of its sales performance to the new site.

This works great as long as a few important rules are followed:

  1. The data for the proposed site must be accurate.  If we are going to use an estimated trade area, presence of competitors, site characteristics, and other factors in the comparison to existing stores, they must be verified or we will end up using the wrong analogs!
  2. The context must be comparable, not just the raw data.  If there are three competitors within a mile for an urban site, that’s very different than having three competitors within a mile for a rural site.  In addition to urbanicity, other contexts include the level of brand awareness, regional differences, and the format of the real estate (shopping center type and size).
  3. Special insights into the unique qualities of the proposed and analog sites.  No two sites are exactly alike, and no information system can capture every relevant factor.  Has a major employer left town?  Is there a new school under construction across the street?  Has the crime rate been growing or getting better?  Is there a NASCAR track nearby?  Did the landlord just renovate the center?  These insights must be captured in “comment” fields and used in the comparison between the proposed site and analog stores to make sure that the sales number for the existing store is truly an indicator of what to expect from the new site.

Where do predictive models fit into the “Stairway to Wisdom?”  Like people, they rely upon verified data and context to produce knowledge.  Garbage in, garbage out.  Does the model capture all the unique insights about the proposed site and use its calculations as a substitute for human wisdom?

I don’t think so.  There really is NO substitute for the human wisdom that is ultimately used to make the decision.  However, predictive models can transform verified data into knowledge that becomes another valuable input to the final decision process.

The “Stairway to Wisdom” is a good framework for evaluating our decision-making process.  It forces us to ask questions like these:

  • What am I doing to make sure that the data I collect, load, and maintain in my information system is accurate?  Are the business locations (including my stores) in the right places on the maps?  Are all the key competitors plotted correctly and updated as they open and close?
  • What am I using for analog stores?  Do I compare suburban to urban stores and miss the context of the demographic numbers?
  • How am I collecting insights about unique features of both my existing stores and proposed sites?  Is there a “comments” field in the database that tells me about these things?
  • Am I relying too much on the sales forecast that comes out of a predictive model?  Is the “burden of proof” on the model or the dealmakers who are recommending a site?
  • How many people are using their wisdom and experience in the site review process?  Marketing, who will need to drive traffic to the store?  Merchandising and Operations, who will have to stock it and staff it?

And then there’s the relationship to other channels including online sales, which warrants one more spoof on the words of the famous Led Zeppelin tune above:

When she gets there she knows, if the stores are all closed
With an “app” she can get what she came for.
And she’s buying the stairway to heaven.

What Gets Measured Gets Done

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Everyone knows the value proposition for chain store real estate research:

“If you avoid closing one or two stores it pays for itself.”

So why are people so hesitant to invest in analysts, predictive analytics, and information systems to support better real estate planning and site selection?

I’ve been asking this question for nearly 20 years, and I think I’m finally beginning to see the answer.

It’s about measurement.

Here’s how the argument goes:

Summary (simplified):  If we invest in better research, we can use a predictive model to estimate sales performance for proposed sites.  If we know the population and income of the trade area, the distance to our competitors, and the quality of the site, we can use the weighting factors in the model to calculate the sales potential.  We’ve heard that it’s possible to have a model where the estimate will be +/-  20% reliable at least 80% of the time.  In the past we have only been +/- 20% correct 65% of the time.

Therefore, the avoidance of bad stores alone will more than cover the investment in people and tools to build and use the predictive model.

Great!  We now have something that can be measured.  We use the model to predict sales and we only approve deals where the predicted sales deliver an ROI greater than our minimum requirement (“hurdle rate”).  After a year or two we can compare the performance of the stores opened before and after the model was used and see if the results were better.  If they are better, we keep using the model.  If not, we go back to the old way of estimating sales.

Enter the skeptics.

Legitimate questions can be raised that erode our confidence in the value of modeling:

  • How do you define a trade area?
  • What about the fact that competitors all have different effects based on their brand strength, management, and location quality?
  • The quality of the store manager in our units can account for a difference of +/- 20% in sales.  How do we measure that?
  • The economy goes up and down in general and also in specific cities depending on how well the businesses are doing.  Does the predictive sales model take into account these fluctuations?

These are just a few of the many questions that make it hard to trust predictive models.  They all relate to the problem of measurement:  determining the factors that drive sales and consistently quantifying their values.

The skeptic concludes that it’s a waste of time to create and use predictive models because they can’t accurately measure what’s going on in the real world.

The skeptic is throwing the baby out with the bath water.

If the sole objective of predictive modeling is a precise sales forecast, disappointment is certain.  However, we are not trying to win a contest for counting how many jelly beans are in the jar at the county fair.

The objective of research-based real estate planning and site selection is profitable growth.

The value of analytics in other industries has been demonstrated beyond doubt.  The management of investment portfolios, marketing campaigns, and many other complex systems can be greatly enhanced with decision-support systems that guide executives as they invest precious capital.  But the value of analytics is not simply found in the accuracy of specific predictions; it comes from the discipline of “best practices” that include the people, the processes, and the tools that marry “art and science” and adapt to the changing landscape with winning strategies, tactics, and decisions.

Best practices can be described and measured.  It may not always be possible to reduce the measurement to a scientific “cause and effect” relationship, but market leaders have the vision, commitment, and creativity to set high standards for themselves.  In the chain store world, successful companies apply these standards to real estate planning and site selection.  This only makes sense when you consider that real estate is by far the largest asset on the balance sheet of every chain store company (even franchisors have nothing if the franchisees have poor real estate).

Chain store real estate analytics is a topic that needs to move from the real estate department to the Executive Committee.  A good or bad predictive model will never make or break a company if it isn’t used in the context of “best practices” that start with the CEO, the CFO, and the other senior executives whose jobs include hiring, training, organizing, and managing everyone in the real estate decision-making process.

Here We Go Again

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The economy is showing signs of perking up.

Although retail store closings are expected to continue at a strong pace in 2012 (see http://www.forbes.com/sites/erikamorphy/2011/12/31/2012-another-bad-year-for-store-closings/), many retailers and restaurants are staffing up for growth and looking for deals.

Is this the pregame warm-up for the next cycle of boom and bust?  Or maybe, just maybe, there’s a smarter, more disciplined group of decision-makers running the chain store companies today.

As I mentioned in an earlier post, the chain store industry doesn’t have well-defined best practices in real estate planning and site selection.  In order to begin a dialog on this subject I have created a “rubric” that describes various practices at different levels of effectiveness that can be used as a self-assessment tool for people in the chain store industry (click here for the Best Practices Rubric).

There are only nine items on the rubric, so you should be able to complete it in 5-10 minutes unless it causes you to think hard about what you’re doing, which would be a good thing!  Simply circle the description of the practice that best describes your business and when you’re done, add up the points as indicated at the top of each column.

The total points will range from 9 to 36, assuming you complete the rubric.  Based on my experience and exposure to chain store companies over the past 18 years, I would interpret the scores as follows:

0-15 points:  If you are still in business, it’s because you have smart, street-wise people              and probably aren’t doing very many deals each year.

16-20 points:  You are about average for the industry, which is OK if you don’t mind being average.  However, you won’t be able to stay average without improving, given the the struggling economy, growth of “omni-channel retailing” and the new breed of tech-savvy competitors.

21-27 points:  You know that you’re doing a good job because you have made a conscious decision to create good decision-making processes supported by good people and good tools.  You are already thinking about how to stay ahead of the game and work smart, not just hard.

28-36 points:  The business practices of your company are truly “best practices” and you represent the elite of the industry.  You might be reluctant to share what you do because you know that you have a serious competitive advantage.  However, you will probably talk about it anyway because of the positive energy that market leaders generate with employees, investors, customers, and partners.  We thank you for your leadership!

I look forward to your public and private comments on the rubric and the general subject of best practices in real estate planning and site selection.

Confused? Ponder This

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In a recent study by Deloitte, retailers were asked about their expectations for the retail store of the future.  Their response is a good indication of the fact that real estate planning is quickly evolving:

“In fact, three out of five respondents said they have no
idea what the store will look like in five years. Additionally,
nearly one in five believe that 15% of their sales will be
generated from channels that have not even been thought
of yet.”

Source: Deloitte’s Store 3.0TM Survey: The Next Evolution, September 2011

To get the link to download the report visit http://re-lytics.com/2012/01/deloite-study-store-3-0-the-future-of-retail/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Re-lytics+%28Re-Lytics+Updates%29

Chain Store Planning: The Missing Link

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The 4 P’s of Marketing (Product, Price, Promotion, Place) have been around since the 1950’s.  For chain store operators, PLACE is more critical than for other types of businesses.

A better term for PLACE is DISTRIBUTION, but of course it starts with “D,” so it never made it into the 4 P’s.  DISTRIBUTION is a term used to describe what is commonly called “the supply chain” and the facilities involved in distribution are “the supply chain network.”  These facilities include factories, distribution centers, and retail stores.

There has been a great increase in the use of science in Supply Chain Management (SCM) in the last 30 years.  Sophisticated techniques in logistics management have been combined with planning tools that allow the many firms involved in the supply chain to work together based on a set of standard practices (known as CPFR: Collaborative Planning, Forecasting, and Replenishment).

Chain store operators have also been adding science to their real estate planning and site selection practices as far back as the 1950’s.  With the advent of geographic information systems (GIS), fast computers, and geo-referenced electronic data about customers, business locations, and the road network, firms are better equipped to rationalize their site selection decisions.

Somehow it never occurred to the Supply Chain people and the Real Estate people that they should collaborate in their planning processes. 

Supply chain people assume that stores are “just there” with shelves that need to be stocked, burgers that need to be flipped, or oil that needs to be changed.  They stand inside the store looking out through the glass window at the world outside.

Real estate people assume that once a store is opened their job is done and the operations people will make sure that the customers get what they came for, whether they are young, old, rich, poor, visiting at lunch or visiting on the weekends.  They stand outside of the store looking in through the glass window and hope that all is well.

Then came the internet.

The customers still like to window shop at the stores.  But they also like to window shop online.  They also like to wander around in a store while window shopping at a competitor’s store on their smartphones, checking Twitter and Facebook to see what their friends recommend.

 

 

 

The supply chain people keep staring at the rearview mirror of sales patterns and try to forecast demand for estimating replenishment levels.  They tweak their allocations and menus in the name of “localization.”

 

 

The real estate people keep looking into their crystal balls to forecast store sales with trade area demographics, competition, traffic counts, and site quality.  They create customer profiles weighted by distance and project sales by “day part.”

 

The time has come for the supply chain people and the real estate people to BREAK THE GLASS AT THE FRONT DOOR OF THE STORE and start talking to each other!

The supply chain network INCLUDES the bricks and mortar stores.

The online sales activity SHOULD HELP DETERMINE where the stores should be located.

The demographic profile of the trade area should INFORM the assortment planning process.

One thing is certain:  the collaboration of the supply chain people and the real estate people will only happen if it is initiated and led by the senior management of a company, preferably the CEO. 

Thomas Davenport of Babson College released a paper called “Realizing the Potential of Retail Analytics” that clearly makes this point:

“The other key prerequisite is management interest and even passion about analytics. In many cases when interviewing leading companies, we heard comments like the following: “We have a new CEO who is a real data dog,” or, “Our company culture emphasizes fact-based decision-making.” When that management orientation is present, it’s natural to explore and develop more and more analytical processes over time. If it’s not, it may be an uphill battle for lower-level analysts to get the resources and prioritization their work needs, particularly in difficult economic times.”

It will be interesting to see who will lead this charge.  I believe that it will begin in 2012!

Breakthrough in Market Planning

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I attended a franchise trade show recently and visited with a company that was selling multi-unit territories that had been pre-defined based on the expected number of development opportunities and their approximate locations.  The map they had on display looked something like the diagram on the left below, where the green and orange boundaries represent territory boundaries and the black dots are target locations for stores.  The franchise rep said that the target locations had been generated by a sophisticated modeling program and then field-validated by the real estate team.

A more traditional territory plan is shown on the right, where each target store location is a point representing the ideal center of the trade area which is a polygon showing the primary trade area.

I certainly commend this operator for using “best practices” in market planning by laying out their territories in advance and proactively offering them to prospective franchisees. 

What’s interesting about the map one the left is the way that the boundaries are just large enough to surround the points.  This means that a franchisee can select locations up to the edge of the boundary without worrying about encroaching on the stores in the adjacent territory because there is a “buffer” between the stores built into the market plan.  If the buffer is based on the appropriate level of spacing between stores based on the density of the area (e.g. urban, suburban), then it’s a great planning tool.

The problem with the traditional approach shown on the right is that franchisees in adjacent territories might select a location closer to the same edge of the territory and have significantly overlapping trade areas.  One solution to this problem is tocreate a second zone within each trade area that limits the range of choices for a site and creates a buffer similar to the one built into the map on the left.

This is the first time I’ve actually seen a map like the one on the left in a live sales situation and I believe it’s an important step forward in the state-of-the-art in market planning.  It certainly doesn’t eliminate every issue that can arise between franchisees in adjacent territories, but it establishes some clear expectations at the beginning of the process that reduces the chances of conflict at some point in the future.

2012 Predictions for the Chain Store Real Estate Industry

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I guess it’s a good time to do a “2012 Predictions” post.

I’ve been talking to a lot of people about best practices in real estate planning and site selection during the past year.  Many of my observations and insights have appeared in this blog since May 2011.  Looking ahead to the next year, there is evidence that some of the “forward looking” comments from last year will begin to appear in the practices of leading companies in 2012.

Retail store sales during the 2011 holiday season were flat compared to last year (there are so many stats I don’t even want to quote one).  The bigger news was the increase in online sales, and the biggest news of all was the increase in purchases from mobile devices such as smartphones and tablets.  This puts “teeth” in the trend toward “omnichannel retailing” that signals a new paradigm in consumer behavior and requires a new approach to retail real estate planning.

Here are two general predictions about the chain store real estate business for 2012:

#1 Betting on Clicks or Bricks

Given the continuing weakness in the economy, capital investment in store development will be more carefully scrutinized by senior management than ever before.  Given the growing success of the online and mobile channels, there will be more conversations between The CEO, CFO, CMO (Chief Marketing Officer), and CDO (Chief Development Officer or VP Real Estate in most companies).

New questions will be on everyone’s minds and lips.  Instead of “how many stores should we add this year net of closings,” people will be asking “how much can we grow sales without adding stores?”  Another way to ask the same question might be “what’s the ROI on store development compared to promotion and discounting through other channels?”

These questions will lead to some innovative planning and business models that will look very different from the traditional approaches that have not changed much in the past few decades.

#2 Performance Improvement

Investments in technology to improve real estate planning and site selection have grown dramatically in the past five to ten years.  Most of the larger chains and many smaller ones have a Real Estate Research Director or Senior Analyst who is responsible for delivering strategic plans and sales performance estimates to the decision-makers.  They have armed themselves with mapping and demographic programs, databases, and analytical tools based on everything from excel to sophisticated statistical models.  Almost everyone agrees that research can improve performance and that the investment in analysts and their tools is worthwhile.

The question remains:  how much of the potential value from research activities is being realized?  Is there room for improvement?

My prediction for 2012 is that investments in analysts and technology will continue, especially for companies that have been slower to get on the analytics bandwagon.  However, the new focus will be improving the “people” side of research.  This starts with benchmarking business processes against best practices in the industry and extends to consistent training programs to align the deliverables from research with the decision requirements of everyone in the real estate process including senior management, dealmakers in the field, and people in other departments such as marketing and merchandising. 

There’s been a lot of talk about “enterprise GIS” and “localized assortment planning” in the past few years.  The reason this is on my list of predictions is that all of the prerequisites to actually implement such performance improvements are now in place.

a)       The technology is good and has become affordable, especially with “cloud computing” which allows companies to build a platform gradually with variable costs instead of committing to a huge IT infrastructure investment to get started.

b)       The need to integrate real estate planning with other channels at the highest level is crystal clear based on the growth in online and mobile sales and the social media phenomenon

c)        The large capital investment required for bricks and mortar stores has become harder to justify in a weak economy that shows no signs of bouncing back quickly as in past cycles.

By this time next year there will be some great case studies of companies that are actually doing these things and reaping the financial benefits (although it might take another year to quantify this in a convincing manner).

In the interest of accountability, I have marked my calendar to follow up on these predictions one year from now.  I hope I can find some good cases to talk about then or we may not have a very happy new year in 2013 and beyond!

Do We Have Industry Standard Practices in Retail Real Estate?

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Why does any industry have standard practices?  Every business is different, even within an industry, so what’s the point of trying to standardize?

Industry standard practices are a lot like the rules in a game.  They provide a systematic, consistent, and proven framework within which the players develop their strategies and exercise their skills.  Having rules doesn’t make you a winner, but they make it possible to become a winner by promoting the following competitive strengths:

Efficiency

When everyone knows the process, tasks can be completed the same way every time with a minimum of rework, delay, and confusion.

There are five major areas in chain store real estate practices where industry standards can lead to more efficient decisions and better financial performance:

  1. Data management – industry standard practices in market selection, market planning, and site selection involve the acquisition, storage, maintenance, analysis, and reporting of a wide range of data.  Some data are generated internally (customer transactions, store locations and attributes) and others are provided by third parties (demographics, competitors, traffic volumes).  Companies that define and document their data management practices will reduce the time for processing and avoid deadline crunches when decision-makers need answers to get deals done.
  2. Analytics – real estate decisions can be very complex.  Standard practices don’t reduce the complexity, but they can provide a consistent approach to decision-making that allows greater focus on key issues and less time wasted understanding the data that are being presented.
  3. Training – one of the biggest challenges in many chain store real estate organizations is the wide range of management and decision-making styles of team members.  Some prefer to use experience and judgment (art) to assess opportunities, and others feel more comfortable using data and analytics (science).  Training the team on standard practices provides a common ground for different styles to meet and complement one another without creating friction, animosity, and chaos during decision-making.  It also accelerates the learning curve for new employees who can quickly be trained on the company’s processes while learning the nuances through “on the job training.”
  4. Reporting – standard practices include standard ways of reporting.  Interactive maps and reports, standard investment committee packages, and other tools can have formats that become familiar and allows users to condition their brains to a consistent set of metrics over time that lead to faster, better decisions.
  5. Time Management – we have seen that good standard practices generate efficiencies in data management, analytics, training, and reporting.  A major byproduct of these is yet another efficiency:  time management in site selection.  Many companies view each proposed site as a unique opportunity that requires a hand-crafted review.  Companies that have well-established standard practices can see a “dog” site coming from a mile away, barking its head off!  Bad deals get killed more quickly and more time is available for deeper research on the ones that require additional field work or deliberation.

Creativity and Critical Thinking

When the basics are under control and performed in a consistent manner, people have more time to compare alternatives and make better decisions.

Some “free spirits” believe that standard practices suppress creativity and prevent experts from applying their experience and judgment in the real estate planning and site selection process.

Are you one of these people?  Do you know some of these folks in your organization?

Good industry standard practices, by definition, do not stifle creativity or they would not be “good practices!”  In fact, good standard practices enhance creativity and encourage critical thinking in the following ways:

  1. The efficiencies that we just reviewed lead to a consistent framework for the creative contributions of experts in the decision-making process.  One former chain store client of mine provides a good example:The research group had a standardized process for forecasting sales at a proposed site.  The real estate dealmakers claimed that research was killing every deal they submitted and began calling the senior analyst “the angel of death.”  After a number of meetings they adopted a process whereby research made their recommendation first and real estate could accept it or challenge it.  If they challenged, the “burden of proof” was on them to put together a business case that demonstrated the deficiencies in the standard analysis or showed that there were positive factors beyond the scope of the standard analysis that made the deal worth approving.  Mutual respect was regained between research and real estate and they have had solid growth in units and sales ever since.
  2. When there are few or no standard practices in place, a huge amount of energy and effort is required to assemble a basic analysis of markets or proposed sites.  By the time critical issues have been identified, the decision-makers may have run out of time or patience to do their best work as critical or creative thinkers.

There is no question in my mind that the most successful chain store operators, regardless of size, will be those who adopt an appropriate level of industry standard practices as a foundation for real estate planning and site selection.