“We were able to add additional locations into Idaho that we knew should be there, but that we couldn’t validate before. Placer validated it.”

~ Bret Franson, Franchise Consultant & Real Estate Analyst‍

The Challenge

A restaurant concept working to identify the right amount of franchise stores for Boise, ID

Cynthia Lee, CCIM, TACS, GRI of KW Commercial, knows how to advise and work with franchised restaurant and dining chains, both as an operator and as a broker. She, along with Bret Franson, a franchise consultant and real estate analyst who led franchise development for two different franchises over the past 15 years, now work with restaurants that consider expanding their successful restaurant operations through franchising.

Cynthia and Bret recently consulted a successful restaurant concept based in Texas. The chain had 16 successful stores in San Antonio and Austin, Texas, and had set their sights on expanding into Boise, ID, a hot market.

The question was simple: how many stores could Boise handle? The implications were important - too few stores meant room for competition and less franchise fees, while too many stores could lead to cannibalization.

The Solution

Unexpected divergence: population vs. psychographic analysis give different recommended store counts

Bret knew exactly how to find the ideal store count, and their recommended locations. Adept at digging into psychographics and demographics, and various tools to help with this, including Placer, he set to work reviewing the psychographics of the Texas stores to apply it to Boise.

He explained his process this way: “one thing we do is look at market penetration based on how many of their customers across all 16 stores belong to a particular psychographic segment group (or demographic  group, or however they want to look at it), then compare the number coming into their location to how many live in that area and turn that into a guest propensity index. We then compare it to the population we see in Boise.”

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Using that method, Boise suggested an inventory potential (possible store count) of 3 locations.  The problem? By population alone, it would seem that Boise could support 5-6 stores, not the 3 stores suggested in the initial inventory Bret performed.

As someone well versed in the intricacies of using data to model store expansion, Bret knew the limitations of psychographic analysis. “Analyzing psychographics for the 16 stores is one of the pieces of the equation, but it isn’t the only one. Think of it this way: these 16 stores were, in effect, doing business locally in Texas, right? They were in a few Texas cities, but were now looking at a franchise candidate in another state, one whose psychographic segment groups may differ, so it's going to be skewed by some amount because there are certain groups that are in certain states and not in others.”

How could he reconcile the store count he expected (5-6), with what the demographic and psychographic data was initially showing (3)?

Placer’s Site Similarity Report shows locations not considered before

A big fan of their Placer Senior Customer Success Manager, Jess, Cynthia and Bret reached out to see what she could dig up to bring additional insights that could support 6 stores, which experience told them was the right count.

Jess knew exactly what to do, running a custom report called “Site Selection, By Similarity,” which could run the most granular analysis possible, one that would take weeks if done by hand. Instead of analyzing the group of 16 stores overall, as Bret had initially done, the Site Selection, By Similarity report did two key things:

It analyzed the psychographics of each of the top stores individually
It then compared each of those top store’s psychographics to the psychographics of each shopping center in the whole state of Idaho, giving a 0-100 score for overall match.

The sample report, below, assessed 600 different combinations of store locations and possible sites in Idaho, giving a score for each combination.

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The results were clear and encouraging: if one analyzed the match of all stores in aggregate, the similarity scores for all the restaurants against the shoppers of a given shopping center in Idaho would be mid 50’s overall - not exactly a good fit. However, if one looked at each store individually, it became clear that some stores (stores #1 and #3) had poor customer matches to the customers at a given center in Idaho, while other stores (stores #2 and 4) had very strong matches with the psychographics and demographics of the shoppers at each of the shopping centers they were scored against in Idaho, suggesting a very strong potential fit. In other words, the restaurant had a very strong match to existing shoppers in Idaho, but that was only visible if analyzing two of their top performing stores, not all 16 stores in aggregate.

Cynthia and Bret knew what to do with the more granular insights Placer delivered him. Bret explains: “We contacted the president of the restaurant chain and said ‘we’ve got several centers in here that have an 85% similarity to a couple of your top performing stores, are you comfortable if we inventory based on those couple of stores?’ Naturally, he said yes.”

Using the most similar top performing stores to model how many stores to open in Boise resulted in a suggested count of 6 stores instead of 3, confirming what the total population count suggested, and what Bret’s gut had been telling him.

‍The Outcome

SUCCESS: 6 New Locations in Boise & $150k in Increased Franchise Fees

With the larger store count, Cynthia helped the restaurant sign the multi-unit franchise deal for the 6 stores, instead of the 3 counted earlier. The implications for that larger deal were clear:
1. It generated more franchise revenue - $150k extra - which helps the restaurant provide better support for the franchisee, and
2. It will make it more difficult for competition to enter a nascent restaurant category in Boise. Effectively, having 6 stores instead of 3 filled holes in the market that would have been left behind if they only rolled out 3 stores, preserving their first-mover advantage.

As someone who helps with deals like this day in and day out, the benefit Placer brings to someone like Cynthia can’t be overstated: “without placer we wouldn't be able to do what we're doing with the level of insights and granularity that we are now, because it's very hard to get information on the consumer for a restaurant. Placer changes all of that. It’s absolutely incredible what we can do for our customers with it.”

We are thrilled Cynthia and her team found success with the Site Selection by Similarity report, and look forward to working with her and her team on more projects going forward.

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