Here’s a different way of looking at it: I was driving down Columbia Street in the Vancouver suburb of New Westminster a few weeks ago with an out-of-town friend who looked out the window and commented on the number of wedding dress and tuxedo stores in the area. There were as many as 12 in the space of just two blocks, as well as a few wedding photography studios. Nowhere else in B.C.’s Lower Mainland do you find such a plethora of bridal paraphernalia; all in a suburban sleeper community 25 kilometres from Vancouver’s downtown core.
Interestingly enough, all these wedding shops seem to thrive next door to each other, even though they compete. Why? Like auto malls and furniture stores, these shops are ‘clustered’ in one central area so that when you’re buying a wedding dress, you don’t have to drive across town to find another store. It’s convenient for the consumer to have competition next door, and convenient for the retailer to have a critical mass of shoppers who are all in the market for the same thing.
Indeed, ‘food courts’ in retail malls, which are home to many franchises, are clustered in much the same way; shoppers can eat in one main area of the mall where all the food outlets are, without having to hunt around and waste their valuable (shopping) time.
Locating your franchised restaurant close to another restaurant (franchised or not), is not necessarily a ‘bad’ thing. ‘Traffic,’ in this sense, is a good thing and ‘location, location, location’ is always important.
Getting crowded out
Now for the not-so-good news. If you know your restaurant is clustered with other food-service establishments at the time you’re buying the franchise, you’re going into it with both eyes open. You may well want to be in a food-service cluster for the same reason wedding shops, auto malls and furniture stores are: people will consider your area a destination for food.
It’s when surprised by unexpected competition that new franchisees tend to get anxiety attacks. For example, in the community where I live, a mere two blocks west from my house, a new pizza franchise just opened; two blocks north, another pizza outlet opened, virtually in the same week. One operator may well be livid that the other brand opened up a few blocks away, reducing his sales, and neither his franchisor nor the leasing agent knew.
“How would they know?” I asked myself. The buildings are different. The landlords are different. So the two competing pizza operators are constantly battling it out for sales in our neighbourhood, which is great for competition, but perhaps not so great for either franchisee, both of whom are going to lose out on sales.