Article

Location matters: Are you on the wrong side of the road?

Most Investors understand the importance of analyzing demographics and traffic counts, but asking the question: "Is this location on the right side of the road?" is just as important.

April 4, 2016

By Keelee Peterson, associate director, Calkain Companies.

Americans are always on the go and in a rush. Whether they are going to work, school, baseball practice, dance lessons, the gym, or simply home, it is a never ending cycle.

The fact that the quick service restaurant, formerly known as fast food, has become such a success, not just in America, but around the world, is no secret. With less time to ourselves, convenience has become the norm and is no longer the exception. So, whether one needs to stop off for that much needed cup of coffee in order to make it through their hour long commute, or to grab dinner since there will be no time to make any, their first thought is typically: "It has to be somewhere that I can get in and get out….quickly!"  

Most Investors understand the importance of analyzing demographics and traffic counts, but asking the question: "Is this location on the right side of the road?" is just as important. In the world of QSR investing, it is essential that a tenant understand the right side of the road vs. the wrong side of the road; a.k.a., the Breakfast side vs. Dinner side.  By choosing the correct side of the road a tenant is able to maximize their sales growth potential. By understanding the importance of this question, an investor will be able to capitalize on all facets of his or her investment.

In a country where approximately 128 million individuals commute to work every day, proper placement of a QSR establishment is essential. Real estate investors and developers understand the meaning and importance of "Location, Location, Location." However, for the average consumer, it is more about "Convenience, Convenience, Convenience!" That means anyone interested in developing a location for a QSR concept or purchasing a QSR asset should probably look a bit deeper than the chosen site than just being a great location.

The Breakfast side vs. Dinner side concept seems like such a simplistic point of view to understand, yet many seem to overlook this underwriting tool. Those professionals that focus their efforts on searching for and selecting sites for tenants understand the importance of their location's placement, but we've all seen shuttered QSRs as well as some concepts moving directly across the street from their previous location. 

Imagine rushing out the door in the morning, but you forget your coffee. Your only thought is to find the nearest Dunkin' Donuts or Starbucks as fast as you can. Unfortunately, the only one you find happens to be located on the wrong side of the street and in order to get to it, you are required to perform the "commuter contortionist move" (a U-turn up ahead, a left turn over there, then take the second parking lot because the first is blocked, and then circle the building so that you can come in at the drive-thru just right.)  This is not what typically registers on the average consumers "Convenience, Convenience, Convenience" scale. 

Tenants such as Starbucks, Dunkin' Donuts, and Bojangles' are typically going to search for sites that are located on the breakfast side of the road which follows the morning commuter traffic, since the majority of their sales are made up of breakfast sales. Locations such as Wendy's and Taco Bell are going to seek out locations on the dinner side of the road.

We recommend looking, not only at demographics, traffic counts, and ease of left turn, but also ask "is this on the breakfast side of the dinner side of the road." By doing this, a QSR investor will be able to gain even better insight about their investment, and also be able to plan for the future should the current tenant ever decide to leave.

Real estate investing can be a risky game of chance, but when an investor makes it a priority to analyze every aspect of an investment, that risk is drastically reduced. No one person can accurately predict the future, but by educating yourself on what matters most, and by hiring the best team possible, you will no doubt be lead to the correct side of the road.