Amid all the day-to-day challenges of running your business—tracking inventory, managing employees, combating theft, bookkeeping—scouting out a new location can slip through the cracks. Don’t let it. To paraphrase an old adage: In the brick-and-mortar retail world the three most important decisions are location, location, and location.
So how do you find the perfect spot for your next store? Start with the customer. When considering a neighborhood you’ll want to look at the demographics of the population—age, income, number of people in a household—to make sure they’re strong enough to sustain your business. Factor in both residents of the community as well as those who pass through regularly or come to the area to work.
If you’re confident of your customer base, the next step is to look at neighborhood traffic patterns—particularly those of streets where potential locations are available. Are there other retailers nearby who will draw people into the area or the shopping complex? Are there businesses nearby that will heighten both road and foot traffic? Are there competitors nearby? If so, that’s not necessarily a bad thing—unless you can’t manage a pricing or service edge.
Once you’ve found a good spot for your business, you’ll still need to negotiate terms. If you’re leasing a location, ideally, your attorney will look at things like the term of the lease, buildout allowance, and the condition of the property. Shopping center leases typically include a description of the “permitted use” for the premises—or the business you're engaged in. Check to ensure that this description isn't too narrow, and be sure to add “and related goods and services” to the wording the landlord comes up with. That way you won’t have to ask for approval every time you add a new product or service to your inventory.
Depending on the real estate market, you may also be able to ask for a few months of free rent or a “tenant improvement allowance,” which is basically a credit for money you put into improving the space. If you ask, most landlords will give you 30 to 60 days rent free to install your fixtures and spruce up before you start paying rent. Another key term to seek is a cap on your liability should you need to close your business before the lease expires. If your new store should fail and close, you want to avoid being responsible for rent on an empty space.
Finally, shopping center leases always spell out the “permitted use” for the premises—a description of the business you're engaged in. Make sure this description isn't too narrow, and always add “and related goods and services” to whatever description the landlord comes up with. You don’t want to have to get the landlord’s approval every time you add a new product or service to your inventory. u
Before you buy, or lease, ask yourself…
…is the facility large enough for your business? Does it offer room for all the retail, office, storage, or workroom space you need?
…does the building need any repairs?
…is ventilation adequate?
…are the lease terms and rent favorable?
…is the location convenient for your customers?
…is the population density of the area sufficient for your sales needs?
…is the facility located in a safe neighborhood with a low crime rate?
… are neighboring businesses likely to attract customers who will also patronize your business?
…are competitors located close to the facility? If so, can you compete with them?
…can suppliers make deliveries conveniently at this location? •