CHAPTER 10:

SITE
SELECTION

1
 Chapter Objectives
To thoroughly examine the types of
locations available to a retailer: isolated
stores, unplanned business districts, and
planned shopping centers
To note the decisions necessary in
choosing a general retail location
To describe the concept of one-hundred
percent location

2013 Pearson Education Publishing as Prentice Hall 8-2

 Chapter Objectives (cont.)
To discuss several criteria for evaluating
general retail locations and the specific
sites within them
To contrast alternative terms of occupancy

2013 Pearson Education Publishing as Prentice Hall 8-3

 Overview
Step 1: Investigate alternative trading
areas (Chapter 9)
Step 2: Determine what type of location is
desirable
Step 3: Select the general location
Step 4: Evaluate alternative specific store
sites

Chapter 10 discusses steps 2-4.

2013 Pearson Education Publishing as Prentice Hall 8-4

 Three Types of Locations

Planned
Isolated
Shopping
Store
Center

Unplanned
Business
District

2013 Pearson Education Publishing as Prentice Hall 8-5

 Isolated Stores
Advantages Disadvantages
No direct competition Difficulty attracting
Low rental costs customers
Flexibility Travel distance
Good for convenience Lack of cumulative attraction
stores for customers
High visibility High advertising expenses
Adaptable facilities No cost sharing for
Easy parking promotions
Excellent for store that Possibly restrictive zoning
generates own traffic laws

2013 Pearson Education Publishing as Prentice Hall 8-6

 Examples of Isolated Stores

Large-store formats
Wal-Mart
Costco
Convenience stores
7-Eleven
2013 Pearson Education Publishing as Prentice Hall 8-7
 Figure 10-1: Site Selection and Starbucks

2013 Pearson Education Publishing as Prentice Hall 8-8

 Unplanned Business Districts

Central Business Secondary

District Business
District

Neighborhood
Business String
District

2013 Pearson Education Publishing as Prentice Hall 8-9

 Figure 10-2: Times Square

2013 Pearson Education Publishing as Prentice Hall 8-10

 Figure 10-3: Unplanned Business
Districts and Isolated Locations

2013 Pearson Education Publishing as Prentice Hall 8-11

 Planned Shopping Centers
Advantages Disadvantages
Well-rounded assortments
Limited flexibility
Strong suburban Higher rent

population Restricted product offerings in

One-stop, family shoppinglease
Competition
Cost sharing of
Requirements for association
promotions
memberships
Transportation access
Domination by anchor stores
Pedestrian traffic Impact of store closings on
affinities

2013 Pearson Education Publishing as Prentice Hall 8-12

Figure 10-4: Macys and Shopping Centers

2013 Pearson Education Publishing as Prentice Hall 8-13

 Table 10-1a: Characteristics of Centers

2013 Pearson Education Publishing as Prentice Hall 8-14

 Table 10-1b: Characteristics of Centers

2013 Pearson Education Publishing as Prentice Hall 8-15

 Table 10-1c: Characteristics of Centers

2013 Pearson Education Publishing as Prentice Hall 8-16

 Figure 10-5: Galerya Afina

2013 Pearson Education Publishing as Prentice Hall 8-17

 Location and Site Evaluation

The
One-Hundred
optimum site
Percent
for a
Location
particular store

2013 Pearson Education Publishing as Prentice Hall 8-18

Figure 10-7: Location/Site Evaluation Checklist

2013 Pearson Education Publishing as Prentice Hall 8-19

 Pedestrian Traffic
The most crucial measures of a location/sites value
are the number and type of people passing by.
Proper pedestrian traffic count should include:
age and gender (exclude very young children)

count by time of day (may vary significantly)

pedestrian interviews (what percent are actively

shopping)
spot analysis of shopping trips (verify stores visited)

2013 Pearson Education Publishing as Prentice Hall 8-20

 Vehicular Traffic
Important for
convenience stores
outlets in regional shopping centers
car washes, fast food franchises, donut shops
suburban areas with limited pedestrian traffic
non-destination stores

2013 Pearson Education Publishing as Prentice Hall 8-21

 Necessary Adjustments to Vehicular
Traffic Counts
Need to ascertain differences in traffic flow by
time of day and day of week (Dunkin Donuts
prime times are 7AM to 9:30 AM, Monday-
Fridays)
Omit or discount traffic that requires a U turn to
enter retail establishment
Omit or discount traffic going over 30 miles per
hour
Omit or discount cars with out-of-state plates

2013 Pearson Education Publishing as Prentice Hall 8-22

 Parking Considerations
Number and quality of spots
Distance of spots from stores
Parking slot security at early morning and late
evening hours
Availability of employee parking
Price to charge customers for parking

2013 Pearson Education Publishing as Prentice Hall 8-23

 How Many Parking Spaces?
Shopping centers = 4-5 spaces per
1000 square feet of gross floor space
Supermarkets = 10-15 spaces per
1000 square feet of gross floor space
Furniture stores = 3-4 spaces per
1000 square feet of gross floor space

2013 Pearson Education Publishing as Prentice Hall 8-24

 Figure 10-8 Pedestrian Traffic

2013 Pearson Education Publishing as Prentice Hall 8-25

Figure 10-9: Corner Influence and Hersheys

2013 Pearson Education Publishing as Prentice Hall 8-26

 Pros and Cons of Ownership
Versus Leasing
PROS:
Freedom over concern with lease
renewal or tough lease renewal
negotiations with property owner
Ability to write off depreciation (a non-
cash expense)
Possible capital appreciation from
increased value of real estate
Control over property maintenance

2013 Pearson Education Publishing as Prentice Hall 8-27

 Pros and Cons of Ownership
Versus Leasing
CONS:
Difficulty in securing locations in neighborhood,
community and regional shopping centers
Assets tied up in real estate could be used for
retail expansion, inventory, store renovation
Real estate activity can divert attention away
from retail activities
Difficulty in renting adjacent space or current
space (if location is no longer desirable)

2013 Pearson Education Publishing as Prentice Hall 8-28

 Terms of Occupancy Considerations
Ownership versus leasing
Type of lease
Operations and maintenance costs
Taxes
Zoning restrictions
Voluntary regulations

2013 Pearson Education Publishing as Prentice Hall 8-29

 Types of Leases

Straight

Maintenance-
Percentage Increase
Recoupment

Graduated Net

2013 Pearson Education Publishing as Prentice Hall 8-30

 Examples of Lease Types
Straight $10,000 per month, 5 year term
Graduated- $10,000 per month for years 1-5; then
$12,000 per month for years 6-10.
Maintenance increaseRetailer tenant responsible
for one-half increase in property taxes and insurance
based on a base year of current lease
Percentage- Retailer tenant pays $10,000 per month
plus 5 percent of sales. (Chain tenants, long leases)
Net lease- Retailer tenant pays all expenses with
respect to property upkeep except mortgage and
structural repairs

2013 Pearson Education Publishing as Prentice Hall 8-31

 Other Types of Lease Arrangements
Five year lease with option to renew --at either set
rental or rental determined by real estate appraisers
Lease with option to buyoften X months rent can be
applied to purchase price
Sale-leaseback-- Retailer sells property to investor and
then leases it back
Good guy clause-- Provides that the property owner will
not enforce the personal guaranty for retail tenant as long
as the tenant has vacated the premises and has paid all
rent up to the date of termination. Property owner gets
location back quickly without legal costs, retailers gets off
the hook for lease balance.

2013 Pearson Education Publishing as Prentice Hall 8-32

 All rights reserved. No part of this
publication may be reproduced, stored
in a retrieval system, or transmitted, in
any form or by any means, electronic,
mechanical, photocopying, recording, or
otherwise, without the prior written
permission of the publisher. Printed in
the United States of America.

10-33