Melaniphy says that infill locations can often cannibalize sales from your existing restaurant(s). Obviously, that is not what you wish to accomplish. This problem can be easily avoided.
Know your existing restaurant’s customer characteristics, trade area, and where the existing restaurant’s most frequent diners reside. Many restaurant chains utilize “customer intercept surveys” to better understand their customers. They plot the customer data so they can visually portray where their customers reside and how often they come to the existing unit(s), (See Chapter 3 in The Restaurant Location Guidebook).
The process of determining sales transfer or cannibalization is simple, but for whatever reason, most food people do not do it. They should! That way you can know what your impact may be and either avoid it or plan for it. Moreover, if you face a franchise situation, you have data and visuals to fight the battle, first with the franchisor, and perhaps, in the courts or in arbitration. The process is as follows:
1. Develop the needed customer data
2. Make it visual – plot the data on a map that clearly shows where you customers are coming from and the likely impact of another unit
3. Estimate the likely impact
There are some computer service firms that provide a sales cannibalization estimate. The good ones always include where your customers are coming from as a basis of estimating the sales that will likely be transfer. Otherwise, it is simply a guessing game without actual data. Without some tangible relationship to the market and your customers, you might as well make the estimate on the back of a napkin and save yourself the money.
The above map is an example of the customer distribution of a quick service food unit. Each dot represents a customer. The inner circle is One Mile from the prospective location and the outer circle covers Two Miles. Note the proposed location to the right depicted with a black box. This example clearly shows that the proposed location would greatly impact the current quick food service unit. Most of the dots were customers who visited the unit several times a week. The proposed unit was rejected when the foodservice owner saw the results.
Alternative ways to determine where your customers originate before coming to your facility are indicated below. All that you need is a typical week’s list of customers and where they originate.
Interview your customers for a week and plot their locations on a map (in my opinion, this is the best approach)
For restaurants, plot credit cards such as American Express, Visa, or MasterCard
Plot coupons, if you obtain an address when the purchase is made
For restaurants, plot reservations, if an address is obtained
Plot anything that will show where your customers originated before coming to your restaurant.
You can read the entire discussion of Cannibalizing in Chapter 28 of Melaniphy’s book, The Restaurant Location Guidebook, a comprehensive guide to picking restaurant and quick service food locations. Click here for more information………….