Final Project: Culver's Site Selection

Introduction:

Site selection is the process of determining where to locate a business. As location is often the key to a store's success, this process is of utmost importance. Culver's is a restaurant founded in Wisconsin that prides itself on serving fantastically delicious frozen custard to people all across the state and country. 

In order to determine a new location for Culver's, I am going perform a series of analyses. First, I will identify the most attractive markets in which to operate. Next, attractive sites within that market are identified and assessed by the density of supply and demand within the market. After the sites have been assessed, the best site is chosen as the new retail location.

Methods:

First, I created drive time polygons around the existing Culver's restaurants in Wisconsin. I then appended demographic data to the polygons in order to determine key characteristics from the data. 

Next, I located the ideal customers by analyzing demographic data throughout the study area. Culver's is a fairly average fast-food restaurant, and as a result doesn't require an affluent or large customer base in order to thrive. To account for this, I specified my "ideal customer" search filter to show zip codes with median household incomes greater than $40,000 per year (Figure 2). I also added another filter to only show areas with populations larger than 10,000 in order to ensure a modestly strong customer base for the new store location (Figure 3).

Figure 2: Zip Codes with Median Household Incomes >$40,000

Figure 3: Zip Codes with total populations > 10,000

Next, I compared the "Ideal Customers" zip codes to current Culver's locations, to ensure there is enough distance between the two to prevent cannibalization of the customer base. I located possible sites in Ashland, Hayward, and Medford. I created 15 minute drive time trade areas around each of the points. I then used the spatial join tool to count the number of restaurants within 15 minutes of the site. Next, I divided the population of the trade area by the number of restaurants to determine the market saturation (Figure 4). The Medford site has a higher population and less restaurants than either of the others, causing it to have a lower degree of market saturation.

Figure 4: Market saturation of the proposed sites.

I performed the same analysis on the existing store locations in order to compare the market saturation values. The lowest of the proposed saturation values is still higher than many of the existing market saturation values, eliminating some of the concern related to market saturation (Figures 4,5).  

Figure 5: The market saturation of the existing restaurants.

After the sites were selected, the Ashland, Hayward, and Medford sites were ranked by their total populations, median household incomes, how likely persons were to eat unhealthy food, and how many people at at fast food restaurants 9+ times a month. The Medford site was ranked highest, followed by the Hayward site, with the Ashland site ranked third (Figures 6,7).

Figure 6: The ranked sites.

Figure 7: The selected site.

Medford has a large range of influence over the surrounding area. According to gravity model equations, Medford has a tremendously large influence over the surrounding areas. Persons within 5.146 miles to the south, 18.59 miles to the north, and 26.24 miles to the west will all be very likely to travel to Medford when they require goods they are unable to acquire in their towns. This draw will be essential for the restaurant to truly thrive in this location.  



Here are the resulting values from the gravity model calculations: Medford: 4324
Stensonville (South): 583 --> Distance: 6.28 --> breaking point: 1.134mi
Rib Lake (North-by-Northeast): 886 --> Distance: 19.79 --> breaking point: 1.20mi
Lublin (West-by-Southwest): 111 --> Distance: 27.26 --> breaking point: 1.02mi

Site Selection

Introduction:

Site selection is the process of determining where to locate a retail shop. As location is often the key to a store's success, this process is of utmost importance. This is done by first identifying the most attractive markets in which to operate. Next, attractive sites within that market are identified and assessed by the density of supply and demand within the market. After the sites have been assessed, the best site is chosen as the new retail location.

I am going to use this process in order to find the best location for a future Trader Joe's grocery store in Hennepin and Ramsey counties in Minnesota.

Methods:

First, I conducted a market penetration report in order to see how much of an impact Trader Joe's had on the markets of the Minneapolis-St. Paul metro area. The resulting values ranged from <2% of the population to 28%. This result shows how well specific stores are reaching their markets. Areas with higher market penetration don't necessarily need additional stores, as they would only be cannibalizing from their own customer base (Figure 1).

Figure 1: The market penetration of Trader Joe's in Hennepin and Ramsey Counties.

Next, I located the ideal customers by analyzing demographic data throughout the study area. Trader Joe's is a more upscale grocery store, and as a result requires a more affluent customer base in order to thrive. To account for this, I limited the "ideal customer" search filter to only show zip codes with median household incomes greater than $60,000 per year (Figure 2). I also added another filter to only show areas with population growth between 2010-2025 in order to ensure a strong future for the new store location (Figure 3).

Figure 2: Median incomes greater than $60,000

Figure 3: Areas with positive growth rates

After the attractive markets were located, three sites were selected. One of the sites is in Excelsior, in an empty lot in the town's downtown area (Figure 4). The next site is in Wayzata, just down the block from a new lifestyle center. The third location is in Eden Prairie, just outside of Eden Prairie center, a large mall.

Figure 4: The Excelsior site.

After the sites were selected, the Wayzata, Excelsior, and Eden Prairie sites were ranked by their total populations, median household incomes, how likely persons were to spend >$150 dollars per week at food stores, and how many people shop at Trader Joe's. The Excelsior site was ranked highest, followed by the Wayzata site, with the Eden Prairie site ranked third (Figure 5).

Figure 5: The sites, with their resulting ranks.

Excelsior was ranked the highest because of its extremely high median household income of >$107,000. As Trader Joe's market penetration is lower in Excelsior than in Wayzata, adding a store in Excelsior will increase the size of Trader Joe's market without cannibalizing customers from the existing stores.