What Do Restaurant Franchises Look For in a Market?

When a restaurant franchise has plans to expand, it must first determine where to focus its expansion efforts. It may already have an exceptional lineup of franchisee prospects, but identifying target markets is an equally essential step.

1851 spoke with experts in the restaurant franchise segment to discuss what they typically look for when choosing a target market for expansion.

Real Estate Availability

In order to expand into a new market, franchises need to ensure there is real estate availability in the area. If a restaurant’s concept is more non-traditional, a customized dining space may be more difficult to find. It’s also important for restaurant franchises to evaluate the area’s real estate inventory with its growth strategy in mind. If the current inventory doesn’t match the franchise’s growth goals, the market might not be the best fit.

According to Leandro Gasparin, vice president of franchise operations at Popeyes, the brand evaluates four main criteria before developing a new market, one of which is real estate availability. “Real estate availability is a key point to determine the restaurant format strategy,” he said. “In rural areas, we will penetrate the market with freestanding formats, while we will explore smaller formats in more dense areas with limited real estate availability.”

An Underserved Market

Many restaurant franchisors research their desired markets and determine if there is a need for their consumer offering or business model before pursuing expansion efforts there. If the area has an underserved market for the restaurant’s concept, it might be a good opportunity for the franchisor to take advantage of that market.

For example, 810 Billiards & Bowling*, a new pool, bowling and dining concept, chose to expand outside of its home state of South Carolina by finding an area that lacked any entertainment concepts.

“Chandler, Arizona doesn’t have anything like this,” said Poonam Manek, future franchise owner of the brand’s Chandler location. “They have one bowling alley. Nothing small or boutique or locally owned focused on providing that extra level of service where you’re not a number — you’re a person.”

An Existing Brand Presence

Another important factor restaurant franchisors consider in target markets is whether or not the brand already has an established and successful presence in the region. If the brand is already well-loved by consumers in neighboring areas, it is more likely to experience profitable expansion efforts in that region.

That is one reason why Toppers Pizza*, the fast-growing, tech-driven pizza delivery franchise with nearly 70 corporate- and franchise-owned locations across 12 states, chose to continue expanding in the state of Minnesota. After seeing a 21% increase in year-over-year sales at its Minnesota locations in 2020, the brand decided to build off of its established presence.

"I believe that Minnesota has the prime customers for Toppers Pizza,” said Caro Johnson, a long-time franchisee with the brand. “Pizza is a comfort food, and we're in the Midwest — it's an accepted food that can be eaten weekly without tiring, and we are in the perfect position to provide quality food to excited, engaged customers.”

Toppers is not the only pizza franchise that approaches its franchise development strategy in this way. Little Caesars®, a global pizza brand that currently operates in 27 countries and territories, also determines the right target markets by evaluating success in nearby regions, especially when it comes to international expansion.

When Little Caesars targeted Malaysia as part of its international growth plan, it first examined the level of success the brand had in its neighboring country, Singapore. “We knew that our great-tasting pizza, unmatched level of convenience and value would resonate in Malaysia as it has in Singapore,” said Marc DaSilva, vice president of international development for the brand.

A Fast-Growing City

The COVID-19 pandemic and its lockdown restrictions caused cooped-up Americans to pack up and move, with more than seven million households moving to a different county in 2020 — nearly half a million more households than in 2019. This influx included movement from large metropolitan areas to fast-growing mid-sized and smaller cities, and many restaurant franchises chose to take advantage of that.

Any fast-growing city is going to need restaurant concepts to fit the demand. 810 Billiards & Bowling saw Dallas/Fort Worth and its booming growth in 2020 as a lucrative opportunity for expansion. A recent study found that 1.35 million people have moved to Dallas since 2010, and another 1.3 million could be on their way in the following decade.

“Dallas is a booming metropolis with hard-working people who value their time and money,” said  CEO Mike Siniscalchi. “That’s why 810 Billiards & Bowling is primed for success in this area. The competition just can’t match our value.”

When restaurant franchises are determining a target market, one thing is key — research, research and more research. In order to find lucrative market opportunities, Gasparin says Popeye’s relies on its data-driven approach.

“We use different sources to collect the information needed,” he said. “We also have a model to determine market opportunities and identify optimized trade areas for potential new Popeyes restaurants.”