Marco's Pizza is hungry for a bigger slice of the $37 billion U.S. pizza industry. By the end of 2011, the Toledo, Ohio-based chain of pizza restaurants plans to operate 1,500 store locations in 40 states. If it achieves that objective, Marco's Pizza would catapult to the top five among U.S. pizza chains, based on the number of stores now open among its competitors.
Those rivals include Pizza Hut Inc., which dominates the industry with more than 6,000 stores in the United States. In mid-April, Marco's comprised nearly 160 stores in eight states, with about 30 more locations scheduled to open by the end of 2007 and the chain's territory set to expand to 10 states.
To help carry out its aggressive growth strategy, privately held Marco's turned to MapInfo Corp., a site-selection software and services company based in Troy, N.Y. Marco's executives have employed the technology to target markets for its nationwide expansion and to pinpoint locations with the greatest potential for customer traffic and sales.
The chain, however, doesn't stick to rigid criteria for population and household income since pizza is purchased by a wide spectrum of demographic groups with varying levels of income, company executive Bryon Stephens says. The chain's core customer is a two-income family with children, which Stephens dubs the “kids in cul-de-sacs” crowd. Marco's boasts high-volume stores in small, midsize and large markets.
The MapInfo technology — combining market research, numbers and GIS-based maps — was a cornerstone to launching Marco's growth plan, explains Stephens, vice president of business development at Marco's Franchising LLC. “All of retail is based on location, location, location,” he says. “We cannot sell a franchise, if we do not know where we want to build to have success.”
Roadmap for growth
Accessing MapInfo's software over the Internet, Marco's executives evaluated prospective markets based on projected demand and weighed that information against supply, or competitors already selling pizza in those markets. The MapInfo analysis turned up 3,500 potential store locations, complete with maps, drive times and household income, according to Stephens.
Now Marco's executives and franchisees are sifting through the options to settle on where to set up hundreds more of the chain's 1,200 to 2,200 sq. ft. locations, which are geared toward delivery and takeout orders.
Marco's executives produced data and maps using MapInfo's technology that identified the maximum number of stores a market could support, the potential sites that met or exceeded Marco's per-store sales target of $550,000 a year and the buffer distances between prospective Marco's locations. The overview tracked the store locations of Marco's pizza competitors, pinpointed available sites in shopping centers with 100,000 sq. ft. or more, and displayed neighborhood schools.
MapInfo's basic site-selection software generates demographic reports and maps. Upgraded packages offer more databases such as traffic counts and consumer spending and more customization.
Accomplishing its goal of catering to the “kids in cul-de-sacs” with 1,500 stores by the end of 2011 would put Marco's Pizza on par with Little Caesars, which operates more than 1,500 units in the United States.
The U.S. pizza king is Pizza Hut, with its 6,000 units, followed by Domino's Pizza, with more than 5,000 U.S. units, and Papa John's, with more than 2,600.
Marco's sales have risen by 25% since 2005, the year after longtime restaurant executive Jack Butorac Jr. bought franchising rights for the pizza chain. The company is striving for $75 million to $80 million in sales this year, up from $70 million in 2005, according to Stephens, former vice president of franchise development at the A&W and Long John Silver's fast-food chains. Last year, Marco's ranked 31st on Pizza Today magazine's list of the country's largest pizza chains based on revenue.
Brokers take back seat
For Marco's and other restaurants and retailers, site-selection technology has become as important as local real estate brokers. A key advantage of the technology is that retailers and restaurants can quickly crank out detailed market analyses, shaving months off the time it takes to get up to speed on geographic areas they are considering.
In the not-too-distant past, without these self-generated analyses, retailers and restaurateurs relied more heavily on real estate brokers to guide them through what was a longer site-selection process. Now, many retailers and restaurants first call on site-selection technology companies such as Buxton Co., Claritas Inc., geoVue Inc. and SRC LLC to aid their site-selection homework before calling their real estate brokers.
Marco's entry into the Sacramento, Calif. market exemplifies this new way of doing business. Three Marco's executives recently spent a week there scouting dozens of potential sites they already had identified with the MapInfo technology.
Before Marco's began using the technology in 2004, it would have taken six to 12 months to learn about a market like Sacramento, says Stephens, the Marco's executive. Now, with MapInfo reports in hand, it takes just a few weeks. Through the technology-propelled process, Marco's casts a narrower net in its site searches, he says. The chain plans to open 28 stores in the Sacramento area. The population of the California state capital region climbed 15% from 2000 to 2006.
John Orton, director of client management at MapInfo, says site-selection technology “turns the table” on real estate brokers by handing more power to a retailer or restaurant. With the technology, companies seeking retail space become proactive, rather than reactive.
For Marco's and other restaurants and retailers, the evolving technology provides an unbiased assessment of the potential of a particular brand in a market, Orton says, rather an assessment from a broker whose primary interest is in selling or leasing property.
In a broker-initiated scenario, a prime location could more easily be snapped up by a competing retailer or restaurant, says Robert Buckner, author of a forthcoming book titled “The Science of Site Selection” and a vice president at MapInfo. Using tools from MapInfo or another site-selection vendor may prevent that from happening, Orton says, because the technology narrows decision-making time.
“Most brokers will do only what they are required to do by the retailers. In many cases, it's a basic level of demographics, but nothing intense,” says Tom Smith, a retail development consultant in Marietta, Ga. Brokers who fully comprehend what drives their clients' sales stand out, Smith says.
Site-selection technology for retailers and restaurants is all over the map these days, with big and small vendors marketing software and services packages and the number of industry players growing.
CoStar Group Inc. unveiled its retail product at the 2006 International Council of Shopping Centers convention in Las Vegas. CoStar, a new entrant in the retail site-selection business, is a Bethesda, Md.-based provider of information services for the commercial real estate sector.
The retail version of its flagship product, CoStar Property Professional, provides information on about 450,000 retail properties and more than 1 million store locations. The data is matched with demographics from Claritas and traffic counts from MPSI Systems Inc.'s DataMetrix Inc. unit. Annual costs of CoStar's retail product depends on a number of factors and can range from $155 to $30,000 per month.
“As an industry segment that still shuffles pounds of paper as if it was 1950, retail may be the last mega-asset class in the world without a major information clearinghouse,” says Andrew Florance, president and CEO of CoStar.
Clients of CoStar's retail product include the Chick-fil-A Inc. restaurant chain, the Dippin' Dots ice cream chain, the United Rentals network of equipment rental stores and the Quiznos sub sandwich chain. Among real estate brokerages using the retail component of CoStar's Property Professional are CB Richard Ellis Group Inc., Colliers International, Grubb & Ellis Co., The Staubach Co. and Transwestern Commercial Services.
In April, McLean, Va.-based consulting firm BearingPoint Inc. teamed up with Redlands, Calif.-based ESRI, a provider of mapping and modeling technology, and Cary, N.C.-based SAS Institute Inc., which develops business intelligence software, to introduce the Market Planning and Portfolio Optimization tool for retailers.
What's next?
Among other things, technology such as BearingPoint's helps retailers decide where to open, close or remodel stores. As more firms delve into site selection, the technology will continue to evolve. Some industry experts predict that satellite and photographic images will be incorporated into the process while others believe that the detailed information about household spending will continue to become even more specific.
That “psychographic” information includes personality traits, values, attitudes, interests and lifestyles of consumers. “Those types of data are going to be demanded in site-selection models going forward,” says SRC's Duane-Adams.
MapInfo's Orton agrees. At some point, a standard facet of site-selection technology will be “micro-merchandising,” such as tailoring clothing inventory toward a precise trade area. “The ability to analyze data is going to become granular.”
The demand for site information will drive the industry's future, and data is likely to be accessible at lightning speeds.
John Egan is an Austin-based writer.
COMPANIES SET SIGHTS ON RETAIL
Besides CoStar Group Inc. (www.costar.com), ESRI (www.esri.com) and MapInfo Corp. (www.mapinfo.com), other key players in providing technology for retail site selection include:
Buxton Co. (www.buxtonco.com)
Customers include the California Pizza Kitchen restaurant chain and household goods chain The Container Store.
Claritas Inc. (www.claritas.com)
Customers include department store chain Mervyns and retailer Limited Brands, whose flags include Victoria's Secret, Bath & Body Works and The Limited.
geoVue Inc. (www.geovue.com)
Customers include pizza chains Papa Gino's and Papa Murphy's.
SRC LLC (www.extendthereach.com)
Customers include restaurant chain Chipotle and grocery chain Publix.
Brokers' insights can make a difference
Although technology can generate data that helps executives with site selection, there is still no substitute for the “windshield analysis” provided by local real estate brokers.
The brokers can help a retailer or restaurant evaluate a targeted site by explaining its history and nearby infrastructure including roads, and they may provide entrée to local business relationships, says Monty Warren, vice president of Stirling Properties Inc., a Covington, La.-based real estate services firm.
Technology has transformed the way brokers, too, conduct business, Warren says. But increasingly, in-house real estate executives are dictating the actions of retail brokers, he adds.
The executives still must validate the reams of computer-driven data by conducting what Tom Smith, a retail development consultant in Marietta, Ga. calls old-fashioned windshield analysis. But the data helps narrow the field of choices.
“If you truly believe it's a home run site, the software keeps your wheels within the curbs. It may cause you to take second looks,” Smith says. “Instead of driving all over the field, you're between the curbs.”
That time-saving approach helped Marco's Pizza executives identify new markets for their expansion.
And the technology is becoming highly sophisticated. Libby Duane-Adams, executive vice president and founding partner of privately held SRC LLC, a site-selection technology firm based in Orange, Calif., says its clients can collect country-specific information.
With the computer-provided data, by the time executives fork over thousands of dollars to visit a likely retail market, they are well-educated about its offerings, she says. SRC counts more than 190,000 technology users worldwide.
While retail brokers are hired for their insightful tours and market knowledge, Warren points out that the brokers often wield their own high-tech weapons in the site-selection game.
Through sources such as the CCIM Institute, an education and networking group for commercial real estate brokers, Warren and his colleagues can gather maps, demographics, consumer-spending figures and other data for site searches.
— John Egan
