There is nothing more exciting to me (and many of you in this business) than to work on a new store prototype: a bare piece of land filled with opportunities and possibilities only limited by our vision and budget.
We go through a wonderful stage of dreaming, imagining, researching and conceptualizing that can be invigorating—and frustrating, to be honest. We begin with a blank sheet of paper and proceed to envision the next generation of retail. We consider the latest equipment, the newest programs, and current trends. The biggest question is always the ROI on a new site. We do studies and projections to minimize risk, but we can never be 100% sure.
I was recently at the NYACS (New York Association of Convenience Stores) show, where I presented some of our newest ground-up projects for the audience to consider. The idea was to inspire them to try new things by showing them success stories. Overall, the presentation was well-received. However, a representative from one company came up to me and said that the company was spending money where it could get the greatest return, and new store development did not do that, in their opinion.
The company saw it as too great of a risk for the projected return. I asked about the retailer’s existing stores and found out that it had been years since any retail and foodservice upgrades had been done to them. They were still “profitably” plugging along.
My question was: Is the company realizing the potential of those legacy sites? The person didn’t have an answer. For me, the answer was, of course, no. To maximize any store potential, it is important that the store stay current in design and product offering, as well as brand identity. Like many of us, the company was so focused on new development that it failed to look at existing legacy assets as an opportunity for additional profit with a great ROI.
Fast-forward a week to the Texas Food and Fuel Show in Fort Worth, Texas. I presented the third annual “Tour of Texas,” during which we went to three sites that were recently built or remodeled with some of the latest and greatest ideas and programs that this industry has to offer (with some help from yours truly). Two of the locations were remodeled.
As I listened to these customers, I heard them talk about not only the cost of the remodels but also the increase in sales from the remodels. Increases of 40% to 79% overall were discussed, with specific category increases of up to 100% in the fountain and 34% to 66% in beer.
From this information, I started to look at the ROI of top-tier remodels, and the numbers were staggering. I emphasize top-tier remodels because I am not talking about simple cosmetic remodels. When we do a top-tier remodel, we go in and analyze the store as it is today, looking at existing traffic patterns, sales, profit centers, operations, and image assessment. We then compare this to opportunities missed by looking at national and regional averages and local competition. Only then do we begin the retail design process.
Both of the retailers featured in the Tour of Texas went through an extensive evaluation process on the way to completing their top-tier remodels. We looked at a variety of opportunities and worked through those options to balance functional design with creative design to land on the best options.
As with all remodels, a “reality check” took place. This is when we review budgets and government requirements to make sure the approach is appropriate. In both cases, we made subtle changes, and the customer did an ROI analysis to make sure that it was a good investment. The decision was made to proceed with the remodel as designed. In both cases, the actual sales numbers far exceeded the projections.
Time to Take a Look
The critical point here is that there are many levels of remodels, from cosmetic to top-tier. The most important number is not always the actual budget—it’s often the ROI.
When was the last time you had an assessment on your existing sites from an independent third party? When was the last time you looked at a significant upgrade to your existing stores? In many cases, this can be the best investment in your future success. Take a chance and assess your opportunities.
It may be the best investment you will make.