Restaurant Development & Design

FALL 2014

restaurant development + design is a user-driven resource for restaurant professionals charged with building new locations and remodeling existing units.

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2 2 • R E S T A U R A N T D E V E L O P M E N T + D E S I G N • F A L L 2 0 1 4 Consultant's Take Real Estate Models Help Drive Sales BILL MCCLAVE, MANAGING PARTNER Birchwood Resultants wlmcclave@birchwoodresultants.com A s a company whose sole focus is building mathematical real estate models, we are often asked, "Do real estate models really work?" Or, as one client put it, "I know that half the deals my broker brings me are probably wrong. I just don't know which half!" Our answer to questions on the effectiveness of real estate models is a qualifed yes. Real estate models work if they are built and consistently employed as part of an integrated devel- opment review process. In fact, it is not unusual to see chains accurately screen their brokers' work by consistently employing their models and realize new unit sales increases of 20 percent to 30 percent or more. First Things First: Models Don't Cure Cancer Before proceeding further, it should be noted that real estate models don't cure cancer. And they are absolutely incapable of saving a chain with major brand proposition and/or value issues. Before investing in a real estate model to help expand its system, any restaurant chain needs to ensure that it has frst established a clear market position with food and value that effectively position it as a leader in its segment. Further, the chain needs to have developed a new, forward-looking proto- type that can be adjusted for multiple different development opportunities. With those pieces in place, investment in a real estate model not only makes sense, it can make a big difference in terms of driving sales going forward. What Real Estate Models Do Properly built, real estate models deliver fve key benefts. They: • Identify Brand-Critical Consumer Profles. Up-front consumer research identifes a restaurant brand's critical consumer profle. This profle typically accounts for 20 percent to 30 percent of the U.S. household base while delivering 60 percent to 80 percent of brand customer visits. Secondly, the up-front consumer re- search identifes the required trade- area densities that align with that consumer profle and deliver critical mass densities of the surrounding residential base, daytime employ- ment and the retail base in the trade area. Successful chains focus relentlessly on their brand-critical consumer profle and required trade area densities. • Rank Markets. Armed with up-front consumer research, real estate models then quantitatively rank all 210 U.S. DMAs (designated market areas) for their ft with the identifed consumer and required trade-area densities. Successful chains devel- op their highest potential markets frst; not just the ones franchisees and developers bring to them. • Identify All High-Potential Trade Areas. Real estate models then map leading DMAs to quantitatively identify all high-potential trade areas. These trade areas match the identifed consumer and required trade area densities and can sup- port a new unit at above system- average sales. We typically fnd that more than half the deals brokers

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