Retail sites work for a retailer or they do not. Revenue must exceed expenses and the factors leading to a great retail site all contribute to enough traffic to support the fixed and variable expenses for a location. The site must work for the retailer. The following examples will give you an idea of the thought process for a location.
The president of Wendy's once explained the dynamics of how a site works for a quick service restaurant. At the time the average transaction was $6.58. 1,200 transactions per day are the number needed to make the store profitable.
A quick serve restaurant will have at minimum three registers and preferably four and those cash registers must ring up $450 per hour during the Holy Hours. Those hours are from 11 a.m. to 1 p.m. and from 4 p.m. to 7 p.m. The registers should be ringing up $450 per hour during those hours. Anything else during breakfast, midday, and late night is peripheral to the revenue stream of holy hours.
For Wendy's if a revenue grossed less than $1.1M in NYC this was considered not work the trouble. The average revenue was more akin to $2.5M with the better locations earning over $3.M. Store leases were signed in five year increments after the initial term of ten years for the dynamics of a location change. A site may lose vehicular and or pedestrian traffic with time. Sites near a subway turnstile and bus count of greater than 2.7M were considered and traffic counts had to be at least 27,000 daily.
The quick service restaurant business is about convenience for the customer to get their food and depart. People go to a quick serve to get a pleasant experience and Wendy's sells a variety of fare to please the customer. In getting a real estate site approved by the capital expenditure committee of Wendy's one learned the ins and outs with highway visibility key for Wendy's was just one choice a consumer had for a restaurant and so the easiest restaurant to get in and out was vital in real estate site selection.
A quick serve restaurant will have at minimum three registers and preferably four and those cash registers must ring up $450 per hour during the Holy Hours. Those hours are from 11 a.m. to 1 p.m. and from 4 p.m. to 7 p.m. The registers should be ringing up $450 per hour during those hours. Anything else during breakfast, midday, and late night is peripheral to the revenue stream of holy hours.
For Wendy's if a revenue grossed less than $1.1M in NYC this was considered not work the trouble. The average revenue was more akin to $2.5M with the better locations earning over $3.M. Store leases were signed in five year increments after the initial term of ten years for the dynamics of a location change. A site may lose vehicular and or pedestrian traffic with time. Sites near a subway turnstile and bus count of greater than 2.7M were considered and traffic counts had to be at least 27,000 daily.
The quick service restaurant business is about convenience for the customer to get their food and depart. People go to a quick serve to get a pleasant experience and Wendy's sells a variety of fare to please the customer. In getting a real estate site approved by the capital expenditure committee of Wendy's one learned the ins and outs with highway visibility key for Wendy's was just one choice a consumer had for a restaurant and so the easiest restaurant to get in and out was vital in real estate site selection.
Regal Cinemas
The movie ticket revenue and the movie goer experience for food, beverage, games, and entertainment are two revenue streams sought after. I had the opportunity to work with Regal Cinemas head of all real estate and he broke down the revenue model for the chain at the time. This was pre Covid and the important point is to comprehend the revenue model and apply to other types of retail operations. Working with the head of real estate for Regal learned that a movie theater evaluates a trade area. This is like any retailer to comprehend who is their customer.
The trade area is evaluated for how large an area will travel to the theater. For instance, Concourse Plaza in the Bronx had a trade area mapped out for the retail hub along East 161 Street in the Bronx and the Melrose Train Station. The population that travelled there was 750,000 people with the proximity to Yankee Stadium and the Number 4 Subway. Within that zone take one half of the population as potential movie goers. That would be a population of 750,000 people. Those people go to the theatre 4.2 times per year. The average ticket price net of discounts is $11.25 per person.
Population of 600,000 people x 4.2 times per year x average ticket price $11.25 person = $28,350,00 gross revenue. Rent is kept to more than 30% of revenue = $9.5M. The movie studies collect a percentage of the gross that declines with each week of showing but take another 50% at minimum from the gross for the weeks the movie is running and that is $14.1M.
Gross of $28.4M- Rent $9.5M- Studio Movie Rental $14.1M= $4.8M Net Revenue before Labor and Operating Costs.
The concessions stands are an average of $7.75 per person so the revenue would be bases on $7.75 x population of 750,000= $5.8M. This is before labor, operating costs, and amortizing furniture, fixtures, and improvements.
The logic is to explain that a profitable retailer and comprehend their business model.
Population of 600,000 people x 4.2 times per year x average ticket price $11.25 person = $28,350,00 gross revenue. Rent is kept to more than 30% of revenue = $9.5M. The movie studies collect a percentage of the gross that declines with each week of showing but take another 50% at minimum from the gross for the weeks the movie is running and that is $14.1M.
Gross of $28.4M- Rent $9.5M- Studio Movie Rental $14.1M= $4.8M Net Revenue before Labor and Operating Costs.
The concessions stands are an average of $7.75 per person so the revenue would be bases on $7.75 x population of 750,000= $5.8M. This is before labor, operating costs, and amortizing furniture, fixtures, and improvements.
The logic is to explain that a profitable retailer and comprehend their business model.
Key Food
Supermarkets look at their market and evaluate the potential sales per household. Vital to have enough households around the site for people to travel. If this is in a neighborhood there will be customers that come daily, if on a highway there will be parking requirements for ease of access.
Supermarkets define the trade area and put a value of $100 per household per week. as potential purchases. An example is the 1175 Third Avenue , Manhattan Food Emporium in operating and buying from the Key Food Cooperative. The trade area for the store was defined as being within 8 blocks in all directions. People do not walk more than 8 blocks to a supermarket. Whole Foods will take over the premises for the Food Emporium, Key Food Lease had expired.
Within an 8 Block radius there are 154,000 households per US Demographics. The target households of 154,000 x $100 per week= $15,400,000 potential sales per annum. Take this analysis by week which would be $15,400,000/ 52 weeks= $296,154 sales per week. The profit margin is 18% so profit is $296,154 x 18%= $53,308 per week. The rent on the location was $52,000 per week.
The rule in supermarkets is that one week's profit pays for monthly rent, one week's profit pays for salaries, one week's revenues pays for Furniture, Fixtures, Improvements and Produce, and the last week is the operators profit. These are computations every grocer goes through in evaluating a site.
Supermarkets define the trade area and put a value of $100 per household per week. as potential purchases. An example is the 1175 Third Avenue , Manhattan Food Emporium in operating and buying from the Key Food Cooperative. The trade area for the store was defined as being within 8 blocks in all directions. People do not walk more than 8 blocks to a supermarket. Whole Foods will take over the premises for the Food Emporium, Key Food Lease had expired.
Within an 8 Block radius there are 154,000 households per US Demographics. The target households of 154,000 x $100 per week= $15,400,000 potential sales per annum. Take this analysis by week which would be $15,400,000/ 52 weeks= $296,154 sales per week. The profit margin is 18% so profit is $296,154 x 18%= $53,308 per week. The rent on the location was $52,000 per week.
The rule in supermarkets is that one week's profit pays for monthly rent, one week's profit pays for salaries, one week's revenues pays for Furniture, Fixtures, Improvements and Produce, and the last week is the operators profit. These are computations every grocer goes through in evaluating a site.