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How to Select Real Estate

A study by Ernst & Young published in Chain Store Age Magazine highlighted common practices in assessing retail markets and site selection.[2] A major theme was that retailers should change their emphasis from the quantity of stores they open to the quality of stores they open. Although several factors are considered, the top three criteria for selecting a trade area are projected sales potential, population, and geographic location, according to the survey. In terms of site selection, 71 percent of respondents use statistical models to develop sales forecasts for sites, and the vast majority has minimum criteria for usable square feet, demographics, and traffic levels. Yet, more than 30 percent do not have minimum standards for income levels or competitive indexes. The strides in new location selection technology help the franchisor develop models designed to rank markets, rank locations within markets, and predict sales plus or minus 10 percent, 90 percent of the time.

The real estate process is essentially comprised of three steps: selecting the site profile based on primary target audience demographics, finding the trade area that best matches this profile, and then assessing the attractiveness of both the trade area and the actual site. We consider each of these aspects in turn as well as how much weight to assign to each.


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