Frog Blog

Site Selection 2 of 3: Interpreting Demographics

Selecting the location of your concept can be the largest deciding factor between the success and failure of your business. It is for this reason that we have written a series of blogs on site selection that will be released each month in the first quarter of this year. The concepts that will be covered are, respectively, Understanding the Market (Jan.), Interpreting Demographics (Feb.) and Analyzing Upfront Cost Basis (Apr.).

Interpreting Demographics

If you clearly Understand the Market, that is you understand what your concept means to your current and potential customers, then your next step in finding the right location is to analyze the demographic data.

The first step in properly analyzing demographic data is to create a profile that accurately depicts your target market. This profile should not only contain the obvious demo data such as age, sex, income, etc. but it is important to note the intangible attributes of your targets. If you haven’t composed any such data see the “Brand Development” section of our last blog for assistance. If you are still having trouble or are unsure if your data is accurate try interviewing your regulars, they are a wealth of knowledge and are typically happy to answer any questions. We recommend you then go through the qualitative and quantitative data you have collected and create, as accurate as possible, a ranking system of most important to least important attributes; this will keep you focused as you move forward in the process.

The next step is to review your potential location’s demographics. Take the available data on the area and cross-reference it with your ranking system to narrow down your options. We have found it is the natural tendency of an owner to gravitate towards a location that is a clone of the existing location. This might be a mistake. Go back through your research and make sure that you are not overlooking a critical competitive advantage that you were not able to exploit with your existing location. Another grave error we see owners make is that they either overlook or simply lack the insight to see what might happen in the future. Do your research. Does the city plan on road construction in the future? Are they changing a critical ingress/egress? Is the anchor tenant in financial trouble? You will see that these factors can be the difference between success and failure of your concept.

After you are comfortable with the demographics of the location you must then analyze the competition in the area. Is the area saturated with F&Bs? Is there an unbalanced mix of speed vs. sit-down? Do the demographics support that mix? Has there been any turnover in the area and does the loss of such concepts inline with the demographics? These are the obvious questions. We have found that many owners overlook a critical step in this process and that is identifying opportunities that exist through other businesses in the area. Do the retail customers in the area support or oppose your target market? Is there a lunch crowd being overlooked? Go visit your competition and look at their specials. It is possible that they see an opportunity but their concept doesn’t support the demographic. You may be able to capitalize where they are failing.

We find it shocking how often we see owners move into areas with little more than the bare minimum of research to support their decisions. With the amount of capital at stake in such a highly competitive and often saturated marketplace, research and proper analysis of that research will help decrease your risk, increase your brand strength and increase your ability to exploit opportunities.

Stay tuned for the next Frog Blog which will cover how to effectively analyze upfront cost basis.

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