How to open multiple locations

Home Inside FCNews How to open multiple locations

Jan 4/11; Volume 30/Number 14

By Nadia Ramlakhan

Owning a specialty retail store can be difficult; the ups and downs of business depend a lot on changing consumer buying habits, with long work days and weekend shifts as the norm. Sometimes work even has to be brought home at the end of the day. But successful retailers with multiple locations across the country said they have learned to overcome these obstacles and found that opening a second—or third or fourth—location has proven more beneficial in the long run. FCNews outlined some steps to help hesitant dealers get started.

Why should you take the plunge?

Opening a second location is beneficial to a dealer and his business in multiple ways. Two or more stores helps a business gain more exposure, reach a larger audience and target a different market—all factors in generating more profit. “For us, the more stores we open, the more profitable each store is,” said Scott Appel, owner of two Big Bob’s stores in Pennsylvania with two more on the way. “We gain economies of scale by continuing to open stores, which drives down variable costs. Also our buying power increases, which helps increase our gross margins.”

As with any significant business decision, opening another location has its fair share of challenges. “The hardest part is dealing with the red tape from local municipalities with their code and zoning restrictions,” Appel continued.

How do you know when you’re ready?

Kurt Duitsman, owner and president of Floors For Living, has opened 17 Texas locations and recently signed off on his 18th in December. “The best way to know if you are ready is to run your first store by only working onsite one day per week for 60 days,” he said. “If your business is still going at the same level after that then you are ready.”

Duitsman explained that because most owners are hands-on with their businesses, they are successful because they have full control of everything. But when these dealers open a second location, “they lose this control and everything slips.”

Appel suggested keeping an exact pace between openings. “A good pace seems to be one new location per year. Since we have a robust commercial flooring business that is also growing very rapidly, one new Big Bob’s location per year seems about right.”

When is the right time?

Experienced dealers agree there is no perfect time to open another location and suggest getting the ball rolling sooner rather than later. The entire process of opening up the store from market and location selection to store setup could take about six months. “It’s never going to be the perfect time, so you can’t wait; otherwise opportunities will pass you by,” Appel said. “As long as your previous locations are profitable, the right time is right in front of you: here and now.”

What is the first step?

While opening an additional location may entail many different tasks, retailers should first aim to find the right location then focus on hiring an exceptional team, according to Appel. “The first step is finding the best possible location in a market that you have chosen. Choosing the right market and the right location are absolutely critical. Once you have the right market and location, you need to hire the best staff to deliver your brand message.”

Where is the best location?

Because choosing a location is a vital first step, there are a number of factors dealers must take into consideration before they can set up shop. For example, Duitsman advises against opening on a busy highway. “This is a mistake I made. It’s better to put the money into advertising than rent. People will find you if you advertise.”

Duitsman’s “magic number” is 10 miles. “In my area people don’t like to travel too far from their houses. They are not going to travel more than 5 miles away so my stores are 10 miles apart.” With one central warehouse to service these locations, Duitsman said he doesn’t encounter any issues with overlapping customers. “Customers visiting both locations are not common; they either go to one or the other.”

Who can offer assistance?

Some buying groups help their members open new locations by providing resources and advice or conducting research. Gary Brown, owner of Carpet One Floor & Home in Springdale, Ark., solicited the help of Carpet One after deciding he was ready to open a second location. In turn the group was involved in the opening of three of his four stores.

“They check to see which areas are advantageous to move to,” Brown said. He also received input and suggestions from other members. “And conventions are a nice time to brainstorm with one another. [Being a member] gives us insight as to what the future holds in the industry.”

 

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