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A Publication of Spectrum Analysis Australia By Peter Buckingham STRATEGIC NETWORK PLANNING A GUIDE TO START THE STRATEGIC NETWORK PLANNING PROCESS

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TABLE OF CONTENTS 1. CHAPTER 1: Think for the long term 2. CHAPTER 2: Australia Wide Presence 3. CHAPTER 3: Proactive vs. Reactive Network Planning 4. CHAPTER 4: The Plan 5. CHAPTER 5: Not all sites are equal! 6. CHAPTER 6: What can you do to improve your system? 2 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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Chapter 1 Think For The Long Term Building a retail network is normally a long term affair, whether you plan to  company operate your stores, or develop a Franchise System. When we do a  Business Plan, we envisage what will happen over the next few years, and use our  best forecasts to make the long term decisions, and hope all goes to plan. Why is it then when many businesses look at their long term Network Planning,  there is a huge variety of processes used, from being Proactive, such as companies  like McDonalds and Caltex, through to companies that are totally Reactive – where they can be led like a bull with a ring through the nose into a selection of  very good to very poor locations? In many cases the location strategy for  a business is driven by minimising  expenses, and to that end, minimal  staff (and in some cases the Property  department is the waiting room for  retirement). When working in the oil  industry, I must confess that was our  assessment of many of the property  managers of the time! However the decisions this group  makes for your business are some of  the most important long term decisions  that can make or break a company over  the next 10 or 20 years. Poor planning in new store  development leads to the  closures of the next 5 – 10  years, and the costs of those can  be astronomical. Think of  companies that rose like comets  and sunk down just as quickly  (some to try and re energise  again). Names like Starbucks,  Klein’s Jewellers, Allan’s Music,  Pie Face and Clive Peeters come  to mind. 3 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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Chapter 2 Australia Wide Presence Naturally, a business starts in a city or  state, and effectively begins its  expansion there. After a certain length  of time, many successful business  concepts decide to become a national  business, and make decisions on  heading interstate as well as their local  presence. It is at this time that I  believe a proper Strategic Network  Planning process needs to be  considered. City Sydney (incl. Newcastle / Central  Coast / Wollongong) Melbourne (incl. Geelong) Brisbane (incl. Gold Coast & Sunshine Coast) Perth (incl. Rockingham &  Mandurah) Adelaide Population 5,141,783 4,173,248 2,965,630 The first question is how many  stores (or territories) should I have?  In simple terms, this is probably  proportional to population as far as  the ratios from city to city are  concerned. The table below gives an approx.  breakdown of how that sits, based  on Census 2011, the latest full  dataset for Australia. Households 1,802,104 1,497,125 1,069,104 Pop.Ratio 35% 27% 19% 1,728,743 1,225,233 627,090 475,370 11% 8% Source: Housing and Population Census 2011 From this we can see that if we had 100 stores evenly distributed by population  across the 5 main capitals (including the extended cities such as Geelong,  Sunshine and Gold Coasts, Newcastle, Central Coast and Wollongong), we would  have the ratios on the right hand side of the table. Normally if we have 100 sites in the main cities, we have about a further 20 – 40  in other cities and towns. 4 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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Chapter 3 Proactive vs. Reactive Network Planning As businesses grow, it can be easy to not place the necessary resources into  Network Development. I was with one client some years back who had appointed  a new Network Development Manager. I was speaking to him about the “boss’s  expectations”, and he told me his job description was to find the Franchisee,  qualify and approve the Franchisee, find the location and arrange the lease for the  store, arrange the fit out and do everything up to opening.  I commended him on what he could do, and asked how many he was planning to  open in the next 12 months. He told me the boss had set his target at 25. I  suggested he put his undies on the outside and get a cape with a big S for  “Superman” on it! In talking with many experienced Network Development Managers, and I had this  role for Caltex for 3 years myself, the current thinking is if a person had all those  chores, AND had a good pipeline of leads, they would have had a great year if they  achieved 8 – 10 stores. If they are going to achieve a number like 20, believe me they will be accepting  everything put before them, and very little quality will be sought. You may have  heard the 80 / 20 rule as 80% of your problems come from your lowest 20% of  sites. This is a recipe to make that even worse! “ 5 One solution to this is to be Proactive,  and have a plan of where you are  seeking sites and why, and not be  reactive, just accepting what is thrown  before you, with realistic targets. ‐ Peter Buckingham ” https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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Chapter 4 The Plan We have undertaken these types of Projects for many large companies, including  a large US QSR chain coming into Australia. The first thing to try and establish is  how many sites they want to have in 10 – 20 years i.e. what they feel is maturity.  A classic way of expressing the long term targets may be something like the table  below. Total stores (‘mature’ market) Sydney Melbourne Brisbane Perth Adelaide Gold Coast‐Tweed Heads Canberra‐Queanbeyan Newcastle Central Coast Wollongong Sunshine Coast Geelong Townsville‐Thuringowa Hobart Cairns Toowoomba Other Cities > 100,000  Persons Source: Housing and Population Census 2011 2011 Pop  Approx. 200 stores 4,133,890 3,887,600 1,951,446 1,477,097 1,154,115 548,469 404,206 319,893 307,046 252,121 224,485 154,128 152,304 136,696 120,661 108,274 1,026,463 51 47 24 18 14 7 5 4 4 3 3 2 2 2 2 1 11 6 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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A Target Market Index then allows you to describe or work out statistically what  makes your best potential customers and where they come from. From this, the discussion then moves to a more local level where you need to  nominate specific areas or suburbs. We see the Strategic Network Planning being  like in a helicopter 2 kms off the ground, and being able to look down and  nominate areas, or sections of road to say where you believe a store should be  considered long term and why. The analysis comes from evaluating the major drivers of the business, in  conjunction with the site availability and in many cases such as QSR’s and petrol  stations, the traffic actually passing the store. Ideally, we then create a series of maps to show each market, and then do  individual maps to show specific areas, including right down to local areas with a 2  km radius, and even the traffic estimates along the main road.  7 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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With the permission of Magic Hand Car Wash, a company on a strong growth  move at present, we can look at the maps that have been made for Adelaide, and  even a map for a specific area where they want to open a new franchise. Their sweet spot is areas of high socio economics and along roads with high traffic  – all fairly logical for a car wash. This gives a map as shown below: 8 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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On an individual basis, we then can put forward a local area map showing the  exact opportunities, and if the client desires, even the traffic estimates along the  main roads. Claude Roda, the Managing Director of Magic Hand Car Wash says "Having done  the planning, it has made it so much easier to communicate with potential  franchisees, as they understand we have a plan and a logic on where we locate  our new stores". Traffic count information is available from the website www.zenithtraffic.com.au which is jointly operated by Spectrum Analysis. 9 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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Chapter 5 Not All Sites Are Equal! As part of a Strategic Network Planning project, we need to have some form of  prioritisation, as not all opportunities will appear equal. Our view is to create a 3  Tier system, whereby Tier 1 is sites you would like to open immediately if they  became available. Tier 2 are sites we can consider, but really would not want to be  opening too many until at least 50% of the Tier 1’s are opened, and Tier 3 is  probably where we should start to look for sites in 3 – 5 years’ time, after 75% of  the Tier 1’s and 33% of the Tier 2’s are already operating. This is partially to assist you in spreading evenly around the chosen market, and  not end up with all your stores in a specific area. With direction to your Network Development staff, you should be able to open  stores in a preferred order, not just taking what the real estate agents are drip  feeding you, or trying to shove down your throat. 10 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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Chapter 6 What You Can Do To Improve Your System The first thing you need to do is consider the Network Development Area as a  core part of the business and should be home to many of your leading, most  experienced staff. In the oil industry, no one went into this area without a very  solid background as a representative or a manager in their past. Secondly I see some franchise systems where they outsource this area of their  work and to an extent pay for performance. I know of many good companies who  work well in finding sites, but who is steering the ship? My view is this is so  critical; a very senior person needs to be driving. If outsourcing is to occur, the  guidelines and targets must be realistically set, and it is little use in my view just  paying a “spotters fee” or a success fee, as it incentivises the outsourced party to  open as much as possible. I have assisted some consultants in this area, and have  said to the client, that they need to pay a retainer as a major part of the cost, and  by all means some success fee, but keep the balance so the consultant has a  reasonably long term contract to achieve good stores. Finally, whether you do it internally, or use an external consultant to work with  you, make sure you have a Strategic Network Plan to look at the short, medium  and long term goals of your business in terms of site planning and site selection. Search well Grasshopper! 11 https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q

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TURNING DATA INTO SOLUTIONS Spectrum Analysis is the company to help you in making correct site selection and territory planning decisions in the future, by using facts and data to better understand the location BEFORE committing to the lease or purchase of a property, or the sale of a franchise area. Site Selection, Market Analysis and Territory Planning using demographics and statistics are what we live and breathe. www.Spectrumanalysis.com.au www.Spectrumanalysis.com.au www.Spectrumanalysis.com.au www.Spectrumanalysis.com.au SIGN UP OUR NEWSLETTER http://eepurl.com/Kc8Gf https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia https://www.facebook.com/spectrum.australia http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q http://linkd.in/1FFXp5Q  www.spectrumanalysis.com.au  Suite 6, 407 Canterbury Road, Surrey Hills 3127         Phone: (03) 9830 0077

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