Location Selection Lesson 10

Objectives  List the elements of a good location  Explain the pros and cons of locating near a competitor  Discuss the financial impact of buying, building, or leasing  Calculate rent payments based on different lease terms  Compare locations and choose the best site for a business

Location is Important  It can make a big difference in the success of a store  Target market  Traffic  Convenience

Types of Locations  Shopping Centers:  Group of retail businesses that are located together  Mall:  Advantage: High traffic, climate control  Strip Mall:  Advantage: Located near residential, cost less  Business Districts:  Unenclosed shopping area that has evolved without a lot of planning and that features a variety of stores  Main street downtown

 Freestanding Locations:  A store that is unattached to other stores  Advantage: No direct competition  Home Depot, Target

Elements of a Good Location  Trade Area:  A business’s geographic surroundings, which provide most of the customers  Target market  Competitive Environment:  Describes the proximity of competitive businesses  Nearby competition is often good for a business

 Traffic:  Number of people who go by a store location during a period of time  The more traffic the better  Convenience:  A location that is easy for customers to get in and out of, plenty of parking, visibility  Additional Factors:  Availability of workers, zoning laws, expansion

Competing or Complementing Businesses  Competitive Business:  One that sells the same or comparable merchandise  Complementing Business:  One that sells merchandise that is related to, but not the same as, an area business’s goods  Furniture store and home decorating

Buy, Build, or Lease?  Buying or building requires capital (money) and a good location  Leases:  A contract between a landlord and a tenant for use of a property for a specified amount of time in exchange for a specified amount of rent

Types of Leases  Fixed-Rate Lease:  Charges the tenant a specific amount of rent each month  Rent does not vary  Percentage Lease:  Bases the amount of rent on a percentage of the sales generated in the space  Triple Net (NNN) Lease:  Charges the tenant rent pluse the three operating costs of the rented property.  Insurance, maintenance and utilities, and property taxes

Changing Business Environments  Very important to study the business environment