I attended the Restaurant Finance and Development conference in Vegas a week ago and it was interesting to listen to the “hot” concepts talk about the reasons for their success.
“Great food, great service, clean restaurant” is the standard line that you hear from those who are growing units and sales. Who can argue with this recipe for success? Easy to say, hard to execute, and it’s really just a way to respond politely without giving away any trade secrets.
Sounds like the baseball player interviewed after the game: “We were confident that we could do what we had to do. We knew that if we kept our focus we could win the game.” Thanks, dude. I hope the other teams didn’t hear you give away your secret on national TV.
But there was another interesting recurring comment from some of the hot companies: “We don’t discount. We know that coupons are the road to ruin and we’re fortunate that we haven’t had to cheapen our brand through promotional discounts.” Continue reading →
Mistakes are expensive. Everyone wants a model to help them avoid mistakes and repeat successes.
We want a good business model that provides a framework for success. If the business model works and we stick with it, we will make money.
In the chain store business, we want to make good site selection decisions. Avoid bad real estate; pay the right price for good real estate. We want a sales forecasting model that will help us estimate the top line number to plug into our pro forma operating model for a store (which is based on our business model, of course). Continue reading →
In 2002 I was on a panel at the Retail Systems Show in Chicago which was a technology showcase for the retail industry. The panel was focused on analytics and my topic was the use of predictive analytics in real estate planning and site selection. I had already been at the show for a couple of days and after speaking with many CIOs, CTOs, and merchandising executives it became apparent that there was little interaction between the real estate department and the other areas of the business.
I started my presentation by telling the audience that I had come to the conclusion that “everyone outside of the real estate department thinks that stores just magically appear.” Continue reading →
A mathematician is a device for turning coffee into theorems. -Paul Erdos
We have a natural tendency to oversimplify things because it’s easier to make sense of simple things than complex things. The map on the right represents the simplest view of the relationship between a store and its customers. The two-mile radius around the store is a reasonable estimate of the trade area for the store, which means that most of the customers will be inside the circle. If this is true 90% of the time, we don’t care about the details of how customers make their choices. But what if only 70% of the customers actually are in the circle? 60%? 40%? At some point we have to consider a more complex set of factors that determine our true trade area and whether it contains enough potential customers to make a store successful. Continue reading →
One of the hottest topics in business analytics today is “big data,” defined by Wikipedia as “a term applied to data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process the data within a tolerable elapsed time.”
How big is “big data?”
Last year, consumers and businesses around the world are estimated to have stored more than 13 exabytes of information on PCs, laptops and other devices — the equivalent of more than 52,000 times the information housed in the Library of Congress. An exabyte is 1 followed by 18 zeros, or a billion gigabytes. And the amount of data stored in such “technological memories” is growing 25 percent a year, said Martin Hilbert, a researcher at the University of Southern California. These were some of the estimates shared at the The Economist Big Data Conference last June in Santa Clara, CA. (for complete story see http://pittsburghlive.com/x/pittsburghtrib/business/s_745039.html). Continue reading →
I don’t watch many movies, but I just saw “What Women Want” with Mel Gibson and Helen Hunt. It may sound strange, but it made me think of the changes in the chain store real estate business in the last couple of decades and consider the changes that are still ahead.
Twenty years ago, most of the dealmakers in the chain store industry were men. Business was conducted on golf courses, in restaurants and bars, at sporting events, and other venues of the “good ol’ boy network.” Cambridge Dictionaries Online defines a good ol’ boy as “a man from the southern US who enjoys having fun with his friends, and disapproves of ideas or ways of behaving that are different from his own (see also http://en.wikipedia.org/wiki/Good_ol’_boy_network). Continue reading →
Tens of thousands of chain stores and restaurants have closed in the last three years. Few chains are expanding at all and many aren’t done shrinking their fleets (Collective Brands is closing 475 shoe stores as we speak). Maybe the only good news about all this downsizing is that we don’t have to think as much about cannibalization, which is a big part of the problem that got us into this mess.
If the chain store business was simply fighting through another recession and waiting for the economy to turn around, this might be the case. Unfortunately, we are also going through a fundamental change in the way customers shop and dine.
On the shopping front, e-commerce now captures about 6% of all retail sales. But that’s only part of the story. Analysts are now tracking “Web-Influenced” retail sales which account for more than a trillion dollars, or 40% of total retail sales. Both of these numbers are expected to rise in coming years which clearly demonstrates the need for retailers to approach marketing and store planning with an integrated plan that utilizes stores, websites, and social media to create a powerful brand and a rich customer experience.
I have become obsessed with the realization that chain store operators are leaving billions of dollars of sales on the table by failing to properly train and develop their talent in the real estate teams (total sales of US retail establishments is around $4 trillion according to the 2007 Economic Censuspublished in 2009).
Why is this? Laziness? Ignorance? I don’t think so. Some of the most clever AND street-wise people I’ve ever met are senior executives in chain store companies. I think that the training challenge is relatively new and requires adapting to new market conditions. It’s the natural evolution of the chain store business. Sears built an empire with selection (“Sears Has Everything”). Wal-Mart revolutionized retailing with their supply chain management. Apple has seemingly cornered the market on “cool” and “easy.” Here are some of the driving factors that have increased the priority of training from low-moderate to high: Continue reading →
Ray Kroc once said, “If we are going to go anywhere, we’ve got to have talent. And, I’m going to put my money in talent.” McDonald’s Hamburger University graduates about 5,000 people per year.
Benjamin Franklin said, “If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest.”
Training is recognized as essential in many areas of chain store operations. The National Restaurant Association conducted its one millionth training class last month. The NRA has been running its ServSafe Food Safety, ServSafe Alcohol, ProStart curriculum, ManageFirst, and other programs for the last 25 years. (http://www.restaurant.org/pressroom/pressrelease/?ID=2137). Continue reading →