Real-Estate Selection a Work in Progress

Using demographic data from its existing location, restaurant chain upstart Johnny's Lunch customized a site-selection index to pinpoint expansion locations.

By Lisa Bertagnoli, Contributing Editor -- Chain Leader, 1/13/2009

Johnny's Lunch executives say its site-selection technology will become more accurate as more stores open and more customer information is fed into the site-selection model.

In early 2007, Johnny's Lunch, a quick-service hot-dog chain based in Toledo, Ohio, hired a site-selection technology firm to help with its first wave of expansion.

Using demographic data from its sole location at the time, in James, Ohio, the firm devised a site-selection index, with 100 being average and 200 being a very good site. Because it was based on only a single location, the index was a "guide, so it wasn't 100 percent accurate," says George Goulson, president of Johnny's Lunch.

Goulson used the index to pinpoint six expansion locations in Michigan. "They opened to our expectations," he says. "But they're in Michigan, and nothing's doing well in Michigan," he adds, referring to that state's dire economy.

This year Johnny's Lunch is expanding into several Western states; the chain has 1,400 stores under contract to open within three to seven years. The index, which Johnny's purchased as software, is saving the concept time and money. "We at least know the area to look at," Goulson says. "It saves us a lot of time in going after locations that don't index well."

The model also gives the chain's network of real-estate brokers "a heads-up as to what we're looking for." And, Goulson says, accuracy will improve as Johnny's opens more locations and has more customer data to feed into the model.

He notes that the index isn't the only factor taken into consideration. "You might have a phenomenal location at 30,000 feet, but on the ground, you might not be able to get to it," Goulson says. "Real estate is not an exact science."

MORE: Real-estate software can help take some of the guesswork out of finding locations for both franchised and company restaurants, but it's not perfect.

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