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My column on franchising this week contained an oversight (or, at least, a concession to word counts). Besides statistics about residential density and disposable income, and entrepreneurs asking to start branches in their communities, there’s another factor that has a lot to do with where chains choose to locate: Where everybody else has gone before them.
I noted this in a post about Busboys & Poets-driven economic development, which will create a small retail cluster in Hyattsville. Big franchises really, really want to see a first mover be successful before taking the risk of locating in a marginal area. That concern trumps their traditional metrics, which is why you don’t see much retail even high-income places like Hillcrest. And it’s why the city spent $900,000 to bring Yes! Organic Market to Ward 8. As the city’s guy in charge of business attraction wrote in a Wilson Quarterly article this spring, as soon as the grocery store shows that people east of the river will spend money on fresh veggies, it’s more likely that others will follow.
Sometimes, of course, this doesn’t necessarily serve residents. Liberty Tax Service, for example, told me they’d locate right next to an H&R Block any day, figuring that their superior services would steal the clientele their rival had already done the research to find—but not adding anything new or needed to the neighborhood. Similar thing with yogurt places. They’re not too concerned with putting franchises in already yogurt-dense areas, because they believe their product is better than the competition.
Ultimately, this might lead to market saturation. But if you have faith in your froyo, you’re willing to take that risk.
“There’s going to be a shakeout. There has to be,” said John Kane, the area developer for Yogen Fruz franchises. “The market can’t support thousands and thousands of yogurt places. But when there is a shakeout, we feel like we’ll be in a good position.”