How to Choose High-Growth MarketsAuthor: Smoothie King
Smoothie King uses a tried and true strategy for selecting and growing in new markets – follow the demand and make sure resources can support expansion.
John Gordon, Director of Real Estate for Smoothie King, says the brand relies heavily on local intelligence to help determine demand. For example, the company consults with franchisees in surrounding markets who have in-depth cultural and other insight about the region, which may span across state lines.
Smoothie King uses perimeter states within existing markets to look at new growth. For example, now that the brand is starting to saturate Kansas City, it’s developing in Oklahoma City and looking at jumping into Denver.
“We work with franchisees across the country to understand what the hot markets are,” Gordon said. “Then we strategically seed each of the major markets first. We want to develop the stores as quickly as possible to create brand recognition, while we continue to look for new opportunities in surrounding areas within those cities.”
Assessing Brand Demand
In addition to consulting with on-the-ground franchisees familiar with an area, Smoothie King also studies demographics and psychographics of new markets. That tends to be the easier part of strategically growing, thanks to the brand’s longevity. Being around for 44 years increases the chances of older Americans hearing of Smoothie King.
Millennials, the largest generation alive, are currently Smoothie King’s core guests. However, many older guests who have loved Smoothie King’s products for years remain loyal, helping the brand grow through word of mouth.
Qualities of a Prime Site
While product demand, culture, brand recognition and psychographics/demographics are key factors in choosing growth areas, new markets must also have real estate resources that meet Smoothie King’s criteria for franchisee and brand success.
To effectively meet demand, markets should have real estate available in high traffic areas among a quality mix of retail tenants, including big box stores or other places that generate a lot of traffic. High schools, grocery store-anchored shopping centers, and even malls and hospitals create some form of day part traffic.
These areas should likely be high-profile sites, such as drive-thrus, either in an endcap or a freestanding building. Drive-thrus can add 30 percent to sales, and are therefore in high demand.
While retail synergy is important, a strong residential population needs to exist within a short drive time of Smoothie King stores. Locations have to be convenient for moms who want to stop for a snack or meal replacement between driving their children to various activities, or for those who want to grab a smoothie before or after grocery shopping.
“We want a steady morning business with a majority of business coming after 11 a.m.,” Gordon said. “We need strong day parts around lunchtime and 3 p.m., when school lets out. We also want to be viable after 5 p.m. for those either headed to the gym for a pre or post-workout smoothie.”
In the end, he added, “It’s the franchisee’s investment. We want to provide general site selection criteria and guidance for the selection of an acceptable site that hopefully presents growth opportunities for them and for the brand overall.”
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