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| Malls bring traffic and the sales that go with traffic. Malls dictate your hours, and anchors come and go (Bradlees, K Mart) so the traffic varies. Some have food stores (this helps because food shoppers buy beans when the buy food). I have seen the sales ranking of several major franchise operations and the sales in a mall vary all over the lot (see sales), so you are still the captain of the ship and must make something happen. Sales, Locations in the Mall, A Malls, B Malls, C Malls, Strip Centers, Hazards, Strategy to get In, Investment, Research Types of Mall Stores: Summary , Detail Strategy to get a Mall SiteIf you are set on going into a mall here is how a local person can do it. First, I took a season site. I signed a lease on November 4th and opened November 14th in a temporary storefront. I did sales of $55,000 for the five weeks through Christmas and decided to stay. I signed a three month lease with an automatic renewal clause for the temporary site and immediately expanded the inventory and added over 100 coffees. I did well. After seeing the operation for a year or so the Mall offered other malls as expansion opportunities. So I became an acceptable tenant to the mall. If you want to be in malls, this strategy works. Start with a seasonal site in the mall. Move to a more permanent but short term lease. They exist. You could get moved around at the malls discretion but you will be in and they are not willy nilly about it. You could start with a C Mall but the strategy works for all malls where there are vacancies. But if there are vacancies, you must find out why. Then take a permanent site in the mall. Top. InvestmentFor a permanent site be prepared for at least $250,000 depending upon the size of the space. The size of the investment determines the minimum amount of profits you must earn just to get your money out. If your minimum annual profits is $50,000 and profits are 15% of sales then you must have sales of $350,000 ($50,000/15% = $350,000~, when ~ means about). Here is a rotten example. I was looking at mall stores and a well know national franchiser offered me a site in the Cherry Hill Mall in New Jersey. It was a corner, center court location doing a Million Dollars in sales per year. The cost was only $100,000 but the catch was a remaining term on the lease of only 1 year. They said no problem because it would be renewed. The store was making a $100,000 per year. I turned it down cold. Here is why. Cash out to get it: $100,000. Cash in for the year $100,000. No return for risk or anything else. The franchiser said the renewal would be worth it. I knew better because I had a pipeline to other coffee franchisers who were signing a lease for a coffee bar in the same mall. Now, if you are signing a seven year lease and have to spend $250,000 to outfit the store, how much profit do you want over the seven years? I would want at least $500,000 to return the original investment first, and then a return for risk and reward. But everyone is different. I never look at my salary or lack thereof, as a return on investment. No matter what I do, I will be paid for my time, so my salary is a cost of doing business, not a return on investment. Profits provide the return of capital and return on capital. In order to get the $500,000 returned in 7 years you will need to earn $72,000 per year, after taxes. At 15% of sales this means you need sales of $480,000 and pretax profits of $100,000 or so. For temporary sites, be they Kiosks or store fronts, the costs are much lower and you may be able to live with the decor and limit your investment to equipment. Top SalesYour Christmas sales will be 25% of your total sales for the year. Be prepared for long lines of people who NEED your coffee. Sales levels is the magic question. And it depends - location, size mall and so on. But I will venture a list, at some risk. This is so variable it is dangerous and don't depend on this list. Use it as a quick guide, you do your own forecasts and homework.
Locations In Malls
A MallsA Malls - really big, probably have 2 or more coffee stores, and your sales will be in the $750M or higher range. It depends upon how many coffee outlets. There will be many. Department Stores, appliance stores (Kitchen Connection), Beanery, Barney's, YOUR DREAM, and you may have restrictions on what you can sell (you will have restrictions on what you can sell), to name a few, but you will also have lots of credit card carrying customers savoring your aroma's. Anchors. Why is it that many things about coffee are related to seafaring? But here not anchors, anchor stores. Really big chains. Neiman, Lord and Taylor, and Macy's to name a very short list. Millions of square feet, twenty Gaps, thirty shoe stores, twenty Chinese food stands, and a really, really big food court. High rent, high shared expenses - common area charges (pays for the HVAC of the halls for example and cleaning the parking area). Neiman Marcus, Macy's, you know, bigger names. High rents don't equate to success. You have to work hard. It is not unusual for the employees of a store around the corner in the mall to never know that you exist. People in malls have routes and passages. You have to break the routes and make them aware of your presence to be successful. You and to get to the employees of the other stores and a way to do this is to sample. Fill a cart with your favorite drinks and go around and give them out with a big smile. See Sampling, and come back here. B MallsB Malls - slightly smaller than A malls. Some anchors (department stores) from the A list and may have a few C lists but then it is a 4 or 5 anchor mall. Square footage could be 1.5 Million or more.Your coffee store sales will be $400M to $750M depending on type of operation, location and you. Top C MallsC Malls - a couple of department stores but not a Macys, more likely a Boscov's, Bradlees (now gone - tell you something?) or Sears. Probably only 3 anchors. Sales? I was in a C mall and had some years with sales over $300M but none over $400M. The way I got in to a mall was take a temporary store and then expand to a permanent site. No problem. You can do this with minimal investment and pretty good traffic. Top Strip CentersStrip Malls, Power Strips, local strip centers. These are very location sensitive and dangerous. Some work, many don't - they have high turnover. Only you can decide.The major advantage of a strip center is higher visibility from the street and ease of bringing customers to your store. I think advertising works better in strip centers because you don't have the barrier of the large mall.
HazardsExclusives, Common Area Charges, High Rent, Leases, Hours, Karate Kid, Kids, Captive, Competition, Theft Doing business in a mall is no easy task, franchise or independent. You are dealing with people who are big business and your success of failure is not particularly important to them. They don't care if your cookies are the best in the world. If they have given an exclusive to the Cookie Monster down the hall, you will not be allowed to sell your cookies. Hazards Exclusives given to others means you do not have control over your menu. Hazards Common area charges are the costs of hallways, snow plowing, air conditioning the offices and other "common" areas. Typically you pay a per square foot charge based upon the ratio of your space to the total space in the mall. Watch out and duck. Hazards High rents are normal but you get the crowds in successful malls. It is nice to be very busy and malls supply Friday Nights, Saturday Afternoon and Sunday Afternoon crowds. The rest of the time you can sleep. Hazards Leases. Seven years is pretty common because the malls want variety and change to keep consumers coming back. This is fine until your lease is up. Then what? If you are a franchise and the franchiser holds the lease (normal) then you may be out of business, especially if your franchise agreement expires when the lease does (normal). So you have to kiss and schmooze the franchiser and landlord. If this is ok with you, no problem. If you are independent and make waves, be very careful. Hazards Malls open at 9:30 AM. Coffee is a morning business so you give up the morning business. This is an access issue not only in the morning but in general. Yes, malls bring traffic in general, but that very traffic can be a barrier to independent consumers who don't like crowds. This is a toss up. Hazards Karate Kid. I was in a mall where the mall had a show and one of the participants was an actor dressed as a frog. The actor knew karate. Someone made a not so funny remark to the frog and the frog kicked the kid. Big problem. People stayed away for a long time and the mall became known as a dangerous place. This is not uncommon. Hazards Kids. I love my grandkids and my children (now over 30) but crowds of kids in malls are a problem today. Depends on the location but be careful. Stand in that mall hallway for weeks and bring a counter. See if the traffic is circle walking and see if they are carrying bags. If mom's are dropping kids off to get rid of them, there is a problem in the mall. Hazards Captive audiences are wonderful. But you are a captive provider. This means your audience is pretty much limited to the malls audience. It is expensive to bring local people to the mall specifically to see your store. Hazards Competition. Malls rent space and take a percentage of sales. They want tenants and exclusives can be here today and gone tomorrow. Department stores will add and subtract lines and can do so without worrying about getting thrown out of a default in the lease. Department store can kill you. I sold Otagiri Teapots which were pretty good at the time. My Otagiri Santa Teapot retailed for $45. Bradlees brings in a Santa Teapot for $10 and discounts it by 40%. We won in the end because Bradlees went out of business, but my Otagiri Santa Teapot sat for a long time. Hazards DishonestyAs much as we hate to acknowledge it, theft is a common problem. Shop lifting is common. Staff theft is common. I once sat outside of Center Court coffee store and watch a person who had let their coworker go out for a smoke shovel beans into a shopping bag and hand it off to a friend. I am not kidding. I also had a stereo system in the center of my mall store as a prize in a contest. I went into the back room, came out and a few minutes latter realized it was gone. I made whipped cream freshly and maintain the NO2 necessary to do so. At one point a whole case disappeared from the back room and the staff laughed all the way home. Just be prepared and vigilant. Top ResearchBuy some good comfortable shoes (you will need them anyway), a hand counter/clicker, and a big smile and a cup of coffee for mall security. Find a nice perch in the mall and start looking and counting. Observe the people, their character, their ethnicity, their packages (if any), their ages, and most important the number going by the site you have in mind. Do this for everyday of the week. And do it for a couple of weeks. Be sure you love it and can live with the crowds and types of people. You will be a captive in the mall and have little effect on the character and quantity of customers, so make sure you are satisfied. Ask for the sales of the last tenants, not only coffee, but muffins, bagels, and books. Get a feel for the sales and be sure you can live with it. Then decide. Top
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