The Right Retail Space

Mac Daniels, award-winning centre manager of Eastgate Shopping Centre, chats to Franchise Zone about what franchisees should look for when choosing retail space.


The Right Retail Space

Q: How important is store positioning within a mall?

The right positioning in a mall is critical. Over and above all the ways the right site can influence the success or failure of a business, it is also important to ensure that the rentals can be afforded by the business model.

Q: Are there certain areas that are better suited to certain businesses?

There must be logic behind the positioning of the tenant in the centre namely:

  1. Food shops should be grouped around a supermarket tenant but not in prime locations and not in the highest rental position.
  2. Fashion and clothing should be grouped together and preferably in logical sequence.  These shops require prime positions, preferably in the centre of the main mall and away from the food stores.
  3. Service stores are generally positioned in less attractive retail locations where rents are lower and sizes of shops smaller eg. entrances to the mall.
  4. Specialty shops such as leather, gifts, stationery, cameras, flowers, toys and fabrics need prominent locations and good display frontage.
  5. Restaurants benefit from any position with a view. They can be located throughout the mall and in the main food court area.

Q: How can a business owner/franchise owner choose the right position? What are the things they should look for?

They should look for the following:

  1. Costs: Make sure the store can afford the rentals based on projected turnovers.
  2. Traffic flow past the store: Make sure the shopper demographic matches the description of required customers.

Q: How can a potential rentee evaluate if the rent is fair?

  • The tenant needs to understand its industry’s optimal sales to rent ratio
  • The trading density it needs per square metre to make a profit
  • The expected performance versus production that dictates how much space it needs and what its turnover would be.

Q: When does it make sense to pay more rent for a better position and when does it not?

The geographical area, target market, size of the shopping centre, how large the store is and where in the centre it is situated – all these factors influence how much rent the landlord will charge. A store tucked away in the corner of a shopping centre will see less foot traffic than one at the main entrance.

Q: What are the rentee’s obligations and what are the rentor’s obligations?

Rentee obligations include:

  • Paying rent on time
  • Adhering to all the operational requirements of the centre
  • Compliance with all laws, by-laws and regulations relating to a tenant’s business operation in the centre
  • Keeping the premises in a good operating condition.

Rentor obligations include:

  • Inspecting and repairing common areas
  • Marketing the centre to draw quality foot falls
  • Populating the centre with the right mix of retail stores relevant to the demographic make-up
  • Effecting alterations, improvements and additions to the Centre to keep the property relevant and competitive in the market
  • Maintaining overall tenant relations, customer satisfaction and service delivery.

Q: What questions should a store owner ask before signing a lease?

There are a number of important questions to consider namely:

  • Target market and where their competitors are situated
  • Rent versus location
  • Size of the store and geographical area
  • More often than not, choosing a location is a compromise between the ideal and what the tenant can afford, and all these factors play a role in how much rent the tenant can pay each month.
Franchise Zone
About the Author
Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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