Successful Site Selection
During his 21 years researching sites for Smoothie King franchises, Richard Leveille compiled a 4-inch-thick book loaded with details about local markets derived from road maps, telephone directories and good old-fashioned shoe leather.
That book was essential because Smoothie King was and is on the move, radiating from its New Orleans headquarters to more than 600 locations in the United States and Korea. But Leveille, executive vice president of franchise development and real estate, doesn’t need it anymore. Most of that information is now generated by Buxton, a company that provides analysis of 120 million U.S. households and 75,000 customer characteristics on behalf of its retail and restaurant clients.
Smoothie King continues to expand its industry footprint, with new store openings, a 20 percent increase in sales and same-store sales results that position it near the top of the Quick Service Restaurant (QSR) segment. But its products and real estate requirements also make it something of a niche company.
“Our mission is to introduce people to a healthy lifestyle with great-tasting and nutritious smoothies,” Leveille says. “Making money is a secondary reason to be in business.”
Products, markets and customers
Smoothie King has three priorities in site selection: Visibility, convenience and locations where others have succeeded.
“Visibility represents 90 percent of the site’s marketing to potential customers,” Leveille says, because it “gets people to try out products.” And convenience will determine frequency.
“We have a niche product with a loyal customer following that visits us three to five times a week,” he says. “People make decisions based on convenience, not just about price” – a primary reason one-in-four Smoothie King locations has a drive-through. The third criterion plays off the success of other retailers – even its competitors. “We want to be in the same area as the best Starbucks and the best Panera Bread,” Leveille says.
Using the Buxton tool, he says, allows Smoothie King to “look into the hearts and minds of consumers — how do they live their lives, how do they spend their money. Then we do the matching with other successful Smoothie King locations.”
Citing an example of how even basic demographics require careful examination, Leveille recalls an early conversation he had with Buxton. “If you have two men with the same age and income, and they are neighbors and they both went to college and have similar jobs, they look very similar in their demographics. But one of them is married with three children and one of them is single. They buy in completely different ways, and a standard demographic study won’t pick that up. The study becomes a waste of time.”
Smoothie King’s decision to become a Buxton client was a long time in the making.
“We spent three years understanding the analytic modeling in a site-selection capacity and then we decided to move ahead,” Leveille says. “I found Buxton to be the best because they simply had more investment in it. They were a level above the others with their technology and their dedication.
“If I can avoid one or two closed stores a year or avoid creating mediocrity in our system, it’s a good investment,” he says.
Running the numbers
Buxton’s analysis allows clients to understand which locations are home to their most likely customers, as well as the most appropriate strategies in real estate, merchandising and marketing. The company also offers projections about which markets will support the greatest number of locations.
“Few people actually go out and acquire all the syndicated data we have, and you need a lot of data that needs to be constantly refreshed,” says Charles Wetzel, Buxton president and CEO.
The costs for Buxton’s services vary with the size of the customer, its channels, the number of departments to be analyzed and the types of services it wants. Typically, Wetzel says, Buxton’s clients “like to engage us for a multi-year contract, so there are project components and annual components that range from $54,000 to $194,000.” When asked about client retention rates, he offers a ballpark figure of 80 percent or higher, but is unable to recall a company that has left Buxton in the last couple of years.
“To me,” says Wetzel, “it’s not just a cost question, it’s what do you want your core competency to be. Picking locations is important, but there is also understanding who their customers are and choosing the right merchandise. There are, in theory, companies that could do what we do, but [retailers] come to us because we have the tool box. [The clients] have a team of people but they will want an outside opinion.”
The right fit
Leveille has a then-vs.-now recollection of receiving calls about new markets. He would spend hours typing numbers into a spreadsheet with demographics drawn from his big book.
“Today, my answers are much better and my surety of decisions is much better,” he says. “We compare every site we develop to every site we have already opened. I could never do the analysis that Buxton does for me in just two to four minutes.”