Location, Location,
Technology

Choosing the best location for a retail outlet used to be a best-guess kind of game. Now, software has removed some of the guesswork.

Site-selection software has taken off in recent years as increasingly sophisticated and easier-to-use programs give distant planners the power to quickly assemble once-slippery details about almost any potential store location.

New programs give decision makers easy access to such data as average age and income of a neighborhood's inhabitants, local businesses, temperatures and traffic flows -- and they can see it all plotted on a map. Such software has become a useful tool for expanding retailers who need to quickly master the demographic details of competitive terrains in thousands of locations across the country.

"Years ago, guys like myself did this on gut feelings," says John Dawson, chief development officer for Dunkin' Brands, the Canton, Mass., parent of Dunkin' Donuts, Baskin-Robbins and Togo's. "We would have to knock on doors and stand on street corners with hand counters and use our best judgment. The process took a long time, it was very arduous, and we made a lot of mistakes."

Then, in 1998, Dunkin' Brands, a unit of U.K.-based Allied Domecq PLC, started using iSITE from geoVue Inc. At the time, Dunkin' Brands was opening about 300 stores a year. Today, it has more than 12,000 world-wide, and it expects to add about 800 a year for the next several years. "Our goal is to get to over 1,000 per year," Mr. Dawson says. "And we couldn't do it without these tools."

GeoVue, based in Woburn, Mass., and MapInfo Corp. of Troy, N.Y., are site-selection software makers that augment their programs with consulting and other services, like market-research surveys. The most versatile programs can be used anywhere in the U.S., Canada and other major international markets. MapInfo offers products such as Smart Site Solutions and AnySite Analyzer for new concepts and stores looking to expand.

Programs can estimate the total dollars up for grabs in a market by analyzing local age and income data from the U.S. Census Bureau as well as sales data from stores in an area -- numbers that are commonly available through third-party vendors. The programs can also tell the optimal number and locations of stores in a market, and how much in sales a store can expect. Analyses can be run for any U.S. market, and can rank markets in order of viability.

Jim Stone, president of geoVue, says he founded the company in 1993 after working in commercial real estate for more than a decade. He also was inspired by the discovery that the Census Bureau had created a set of digital street maps for all of the U.S. Since then, the software has become far more sophisticated, and clients have gone from saying, " 'Show me my stuff on a map' to 'Can't we use more and more science?' " he says.

Such programs are increasingly in demand as retail becomes more competitive and good locations harder to find. "I think it's very clear what's happening for most major businesses," says Keith Peterson, chief operating officer for Claritas, a San Diego-based software company that produces a program called iMARK. "It's much more competitive to find good real estate," Mr. Peterson says, "and you've got to screen a lot more potential locations before [the clients] allocate their resources. They need tools to help them work faster." Claritas is a unit of Dutch-based publisher VNU NV.

Cone Figurations

MapInfo has been instrumental in recent efforts to revive the fortunes of Carvel Ice Cream, a 71-year-old chain of ice-cream shops mostly in the Northeast. In 2001, Atlanta-based Roark Capital Group bought Carvel with an eye toward expanding and revitalizing the company, which at the time had about 330 stores.

"It was an older chain with a lot of heritage and a cultlike following," says Geoff Hill, senior vice president of sales and development for Focus Brands Inc., the Atlanta-based Roark affiliate that also owns Cinnabon and the international rights to Seattle's Best Coffee. "But you walk in, and the store probably needed a paint job. It wasn't performing well."

Applying fresh paint was easy. But Mr. Hill says his team struggled with the challenge of how to open more Carvel outlets without cannibalizing the sales of existing franchisees -- and how to pull off a large expansion when there wasn't much brand awareness outside the company's traditional Northeast market.

"We struggled for two years without any tools" for figuring out where to put new stores, Mr. Hill says.

Then Carvel hired MapInfo, which ended up providing the ice-cream company with a lot more than just software.

To get MapInfo started, Carvel asked it to focus first on the Northeast. "They started by analyzing a lot of our existing stores and looking at our customer base -- who's coming into the store," Mr. Hill says. This work included a lot of surveys coordinated by MapInfo and conducted by third parties, he adds, creating a demographic profile of what a typically successful neighborhood for a Carvel outlet looked like -- mostly in terms of incomes and ages. Data from these studies were then plugged into MapInfo's software to pinpoint new neighborhoods matching the desired profile, which was further defined as being able to meet at least the minimum acceptable sales for a store.

The program's first run identified 127 good locations in what the company calls the "Carvel Corridor," a swath stretching from Philadelphia to Hartford, Conn.

Next, Mr. Hill sent his employees to the locations being considered, to do the kind of old-school, street-level work that is still best done in person: determining the general attractiveness of the area, for example, and how visible the store would be from the street. "From a strategic standpoint [the software] is our beginning point of everything we do, but it's not something that takes the place of ground real-estate work," Mr. Hill says.

Carvel officials say they're still lining up franchisees for most of those 127 locations. Meanwhile, they're confident that the locations will work, because of a test they threw at the program: Without giving MapInfo any actual historical sales data, Carvel asked the company to evaluate locations where Carvel had recently opened stores that had proved unsuccessful; 92% of the time, MapInfo's program said that the locations would be bad.

The company now has 540 locations open and says it will add 100 this year, many of which are outside the Northeast and were planned before MapInfo was hired. Looking ahead, however, Carvel says that it hopes to have 1,000 locations by 2008 -- and that MapInfo will help select all of its future locations.

Smoothing Relations

Carvel is also using the software to smooth relations with established franchisees near future locations. With MapInfo, the company can show them estimates of how much in sales a new store will bring in and how much of that will come from the franchisee's existing store. Mr. Hill says it's a precondition for opening a new store that it have "no impact" on nearby Carvel stores.

Site-selection software can also help retailers after they've got a store up and running. Lately software providers have been adding database capabilities that allow companies to plug in factors like temperature and customer-buying trends in order to pick the optimal mix of merchandise in a given location -- sunscreen, for example. Claritas profiled about 60,000 consumers to create demand estimates in different locations for types of restaurants and menu items.

Meanwhile, geoVue also is used by Prudential Real Estate Investors, a unit of Newark, N.J.-based Prudential Financial Inc., and by Boston-based AEW Capital Management LLP to make strategic investment decisions for their real-estate portfolios. Two shopping-center real-estate investment trusts, Westfield Corp., a unit of the Australian-based Westfield Group, and New York-based New Plan Excel Realty Trust Inc., use the software to figure out which malls have the right mix of demographics and easy access. GeoVue is also used in office, apartment and industrial site selection.

Cushman & Wakefield Inc., the New York-based commercial real-estate services firm, has its own in-house software to assist in site selections for its clients, especially in locating warehouses, distribution centers and offices. Mike Henderson, the firm's director of location analysis, says he often looks at climate, labor cost and availability, and accessibility to airports and universities. He also takes into account the likelihood of natural disasters, such as hurricanes and earthquakes. "We had to become more technologically advanced because the time frames companies are working with are much shorter now," he says. "Where they once might have said we need to make a decision in years, now it's like six months or two months."

Even the ice-cream business is not without its pressures. But with site-selection software, there's less risk of a meltdown. "Before, I could say we were throwing darts, but blindfolded," says Mr. Hill. "After MapInfo, I feel like we have a rifle standing 10 feet from the target."

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