A quick service restaurant company had millions of happy customers, but as its footprint kept growing, franchisees felt they were getting diminishing returns. Hundreds of newly opened stores were not achieving their expected returns, yet the company had announced plans to expand even more. RestaurantCo was at an impasse, in need of a new growth strategy.
That’s when RestaurantCo’s leaders asked us to help them assess the full potential for the brand and devise a new approach to location development. They wanted to ensure that the next wave of locations would maximize returns without cannibalizing existing locations. With thousands of sites in the US, there was no more low-hanging fruit. Success demanded a much more sophisticated approach to identifying new sites.
In response, we deployed Vantage, a proprietary location intelligence solution that uses enhanced data sets, advanced analytics, and user-friendly visualization to support footprint optimization decisions. Powered by geospatial data and proprietary algorithms, Vantage can accurately predict the performance of proposed sites, revealing which are most likely to thrive and which might undermine existing sites.
As a first step, we partnered with RestaurantCo’s development team and franchisees to better understand the performance of RestaurantCo’s most recent store openings. This analysis confirmed that better site selection could indeed have led to better store performance. We discovered that RestaurantCo’s newest sites were achieving diminishing cash-on-cash returns over time. The primary cause was an increase in stores that were underperforming due to subpar locations. Our Vantage tool would have advised against the majority of those openings.
Next, we used Vantage to assess RestaurantCo’s white space potential. Applying machine learning algorithms to hundreds of geocoded variables from advanced data sets, we identified thousands of sites that would secure profitable development. These variables included area demographics, the location of other retailers and competitors, traffic, and insights on customer mobility generated by commercially available mobile phone location data.
Key insights from Vantage helped identify thousands of high-ROI locations, well beyond initial expectations. Our models ranked these opportunities according to their varying levels of attractiveness and also suggested which store format was most appropriate in each location. With these findings, RestaurantCo’s development team and franchisees committed to increase the number of new builds by a factor of 1.5 over the next five years.
RestaurantCo continues to use a tailored version of Vantage to generate its own site-specific predictions about every new store it opens. The customized solution is continuously refreshed with new data, and its user-friendly interface allows RestaurantCo’s development team and franchisees to explore attractive trade areas for future stores. In addition to securing higher performances for new stores, this analytics-driven approach has enabled RestaurantCo to improve buy-in and trust from its franchisees and to accelerate growth.