What Do QSR Franchises Look For in a Market?

If you want a successful business, it’s all about location, location, location. But how do you find that magical perfect location?

Today, QSR brands are using a combination of high-powered data science mixed with good old-fashioned legwork to find the best markets to enter. And let’s face it: Getting the real estate equation wrong can have dire consequences in the ultra-competitive QSR market.

“One of the biggest mistakes a franchisor can make, especially in the QSR world, is either overselling or underselling a market,” said Tim White, senior vice president of business intelligence firm Buxton, which uses data to help companies, including those in the QSR space, successfully expand. 

White said that overselling the market results in unhappy franchisees cannibalizing each other’s customers while underselling leaves money on the table. 

So how do you find the perfect market? Well, it’s both an art and a science. But it begins with lots of research. 

First, Know Who Your Customer Is

Before you start expanding, you need to take a deep look at your current customers, the ones driving your success. The good news is the data you need is probably in your possession already. 

If your brand uses an app, you can extract a lot of customer data — where they go, how often they come, what time of day, plus any number of other potential data points. 

“The majority of QSRs want a certain demographic and population, and they are going to look at historical data of their best-performing stores to determine where their next market will be,” said Mark Mele, the chief development officer of Paris Baguette*, a fast-growing, fast-casual franchise with 100 stores in the U.S. and 4,000 globally. 

But that’s just the beginning.  QSR brands need to really get to understand their customers, using both demographic and psychographic data, before they can find more like them.

Then Look At Demographics

According to industry experts, two major pieces of data help you understand what market is right for your business: the average income and population density of an area.

“Brands are going to go where the customer exists,” said Mele. “And most brands are after the same thing. We’re looking for pockets where there is higher income, dual-working parents and progressive neighborhoods. When we approach a market, we’re looking for the best marketplaces with lifestyle centers where millennials are living or whoever it is we need to attract." 

But that’s just the beginning. Mele's marketing team goes deeper, looking at factors such as what the population is willing to spend on breakfast or lunch, to see if his concept would be a good fit into the area. He looks at competition in the area as well as the kinds of other businesses operating in an area.

By using data points that they have gleaned from the Paris Baguette app data, his company uses predictive analytics models to help find the best markets based on data they’ve collected from their current customers. 

But Also Look at Psychographics

But demographic numbers only tell you part of the story, according to White. Buxton recently produced a white paper entitled Restaurant Site Selection: Minimizing Losses, Maximizing Success, which analyzes its approach to new markets. 

“What psychographics allows us to do is to look at lifestyle characteristics, behavioral characteristics and how people live their lives,” said White.  “It allows you to get granular with characteristics.”

Put another way, the psychographic tells you about the why, rather than simply the who of demographics. So if your QSR is all about convenience, you can delve beyond just stats and start targeting people who need more convenient meal options, such as busy parents. 

It All Ends With a Little Legwork

Data can help you find the right market for business, but you still need to see the site in person, talk to the developer and understand the community. 

In other words, use your gut. 

Mele said that although Paris Baguette’s executive real estate committee pours over data from every angle, that is not enough to make an informed decision.

“We can study like crazy on a computer and drill down on a spot through Google Earth and crunch all the numbers. But at the end of the day, we still want to get in a car to get on a plane and go see it. Why? Because it's the human factor. We feel good about seeing it. There's intuition. We’ve got to go feel it," he said.