Running a Shop Finance+Operations

The Perfect Site

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In the world of residential real estate, it is often said the most important thing is: location, location, location. 

The same holds true with commercial real estate, but the criteria for what defines the perfect site can be a little harder to quantify. Good traffic flow, a potential client base and proximity to other businesses are all factors—and need to be considered.

In the quick lube business, shop owners get into a physical shop in one of two ways: acquiring an existing shop or building a new one. In both cases, there are always a number of other considerations, from the size of the property to parking and driveway space.

When deciding to build a new shop, there are factors to consider before the hunt for the perfect location even begins. Bob Seidmeyer, vice president of Allied Lube Texas, a Jiffy Lube franchise, is well versed in the ins and outs of opening a new shop.

"There are a lot of things to consider," Seidmeyer tells NOLN. "One of the most important is to check with the city to make sure they'll approve it. You could spend a lot of time looking and if the city won't approve the permits, then it is just wasted time and effort, and money spent. You have to make sure the city, and possibly even a nearby homeowners association is going to be on board." 

Another equally important consideration is to ensure that the community can support the business. A well-established community may already have a couple of shops running, and while it is always possible to take some of the competition's business, it won't be as easy as heading to virgin territory.

Yet, the bigger issue is determining that the property will suit a shop owner's needs, bring in adequate traffic and have room to expand. 


The Challenge

Seidmeyer says that one challenge many shop owners now face is that the locations to put up stakes simply aren't available – at least not for purchase. Welcome to the uncomfortable reality of "land leases."

"When the prime spots are available, the costs have gone up," says Seidmeyer. "That can be the result of ground lease or land lease."

The very term is one that many may not be familiar with, but it has become far more common. 

Essentially, savvy property owners realize that land is valuable because as author Mark Twain explained, "They're not making it anymore." A ground lease involves leasing the land for a long-term period, typically for 50 to 99 years, to a tenant who constructs a building on the property. As a result, many shop owners face a situation where they may own the building yet not the land it is sitting on. 

"What makes this an issue is that after the lease expires, you may not even own the building," says Seidmeyer.


The Solution

When it comes time to find a location for a shop—and determine that the city will approve the business—owners may want to consider multiple properties and then weigh the options. This may include finding an "A site" as well as  "B" and even "C" sites as fall backs.

"The ground lease might be your A site, but you may still want to consider other locations – the B site and C site that could also work," Seidmeyer says.

The A site could be where everyone wants to be—it could have great traffic, great access and space to grow. Yet, if that requires going with a land lease, the terms should be weighed against a B site. That could be a spot that is a bit more off the beaten path, or could be located behind another tenant. In general, it may have downsides.

This is where a shop owner must weigh the options, is it worth the added time and effort to grow the business via advertisements and promotions or accepting that the land is only leased. 


The Aftermath

Regardless of which option a shop owner might choose, there will still be other issues to address after determining the perfect site.

"You have to make sure you can run utilities to the location," says Seidmeyer. "There are also the traffic patterns to consider, including whether the location will be a stop light and what type of turn cuts there might be – right in or left in. Those are all the things we look at when scouting new locations."

Sizing up the property is also important. The larger the parcel of land, the more it will cost, but other factors need to be considered.

"At many of our shops we have eight to 10 employees, and you need to have parking for those employees, unless they take the bus or have some other way of getting to work," adds Seidmeyer. "That is something shop owners often overlook. If you can, put the parking lot in the back, so your employees aren't making the shop look overly crowded. Customers may drive right on past if they think it is too busy."

When it comes time to select the actual building, Seidmeyer says that to have the bays face the road is a type of free advertising. It tells the would-be customer immediately that the shop is up and running.

"A lot of cities aren't letting us face the road as much, but we like to do so as it allows the consumer to see that there is a shop here," he explains. "Facing the road with glass on the front is also great, so that even when it is cold you can see activity going on." 


The Takeaway

Even after finding a location, it is a good idea to have some backup locations and then be prepared for plenty of other challenges before breaking ground, and certainly before the grand opening. Once the business is up and running the challenges will likely only continue based on the location that was chosen.

"Once you have the location in mind, you still need to think long-term such as population and growth potential," says Seidmeyer. "It just starts with finding the location, but you need to think about whether there are other quick lube operators, and whether the location is in a place that will experience growth or is more mature. When we scout out locations, we always consider the potential for growth."

A final consideration is to ensure that the town or community wants the growth. Thanks to endless sprawl some communities may not opt to widen that two-lane road, so while it may have plenty of traffic – it might not be an ideal location for a shop if customers aren't likely to fight that traffic to get there.

"We haven't experienced that yet," says Seidmeyer. "But it is absolutely something to consider. Finding the right location is really just the first issue in building a new shop."


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