Thursday, July 30, 2009

District Recession Survey – Results are In!

Thank you for a great response. This survey was distributed to over 2,000 practitioners in the field of commercial district management and revitalization all around the country. These findings help highlight the challenges that many of our commercial districts are facing. Here’s a quick run-down of the results, including who’s feeling the pinch and who’s doing well despite the downturn.

Who Responded?

Survey respondents included:

  • 50% - Community-Based Organizations
  • 25% - Business Improvement Districts
  • 12.5% - Main Street Programs
  • 12.5% - Other

Commercial Districts fell into the following categories:

  • 62.5% - Primarily Convenience Retail
  • 31.2% - A Mix of Convenience and Specialty Retail
  • 6.2% - Primarily Specialty and Destination Retail

What did they say?

69% of respondents believe that the economic crisis is moderately affecting their district, while the remaining 31% believe that the crisis has significantly affected their district, resulting in sales decrease of more than 25%.

75% of respondents report their districts have seen an increase in vacancies, while 43.7% have seen more graffiti and vandalism. More loitering and petty theft and crime are affecting 31% of the corridors.

Businesses are Getting Creative

A number of respondents shared with us how their businesses are facing these difficult challenges. In some cases, restaurants are doing more promotion and hosting night activities to maintain the consumer flow. In others, merchants are increasingly taking advantage of free marketing via emails and networking, or have stepped up marketing by offering free samples, book readings, musical performances, specials, etc. These efforts seem to be paying off.

Some store owner's are also getting innovative and partnering with other store owners to share commercial spaces. In one case, a hair salon and a barber shop decided to combine their spaces to avoid rent increases and share the cost of rent and utilities. This was clearly a win-win for the neighborhood and the business owners. The salon was a much needed neighborhood service, and both stores were able to reduce their operational costs in the process.

Some Retail Sectors are Doing Better than Others

People are sticking to buying the basics. Respondents indicated that fast food chains, simple low-priced diners and restaurants, and grocery stores are maintaining or seeing less of a drop in their sales volumes despite the downturn.

Another respondent noted that car repair businesses and the local hardware store have seen slight increase in sales, likely due to people opting to maintain their cars and current homes rather than trading up at this time.

Thanks to everyone who responded - and keep checking the blog for more great articles and research!

Filling Vacancies through Franchise Leasing

Many commercial district managers work closely with their landlords and property owners to help fill vacancies along their commercial corridors. This challenge is made even more difficult as many retail sectors have been forced to retreat from previous expansion plans. The pickings remain slim for many district managers looking to fill vacancies. However, there are bright spots on the horizon. One sector that is expected to grow by almost 20 million square feet in 2009 is the franchise sector. Why is that? Experts believe that the current economic climate will only speed up the number of individuals interested in entrepreneurship and self-employment. This trend will help ensure a steady supply of entrepreneurs willing to take the franchise plunge. It also means opportunities for many commercial districts looking to balance their retail mix and fill critical vacancies.

So, what is a franchise and how does it differ from a chain?
A franchise establishment is a store owned by an individual businesses owner(s) (also called a 'franchisee' or 'operator') who enters into a contractual relationship with a 'franchisor' who grants the right to distribute a uniform set of products, techniques, and trademarks in exchange for a portion of gross monthly sales and/or a royalty fee. A chain store, on the other hand, is a group of stores under the same management and ownship. Some of the most well know examples of franchise establishments are McDonald's, SuperCuts, Subway and GNC (General Nutrition Centers). Do these stores sound familiar? That's because franchise establishments are more likely than chain stores to locate on traditional neighborhood commercial corridors. But buying into a franchise is not cheap. According to Entrepreneur magazine, purchasing a franchise establishments can cost an entrepreneur anywhere from $61,000 (Subway) to $1.7 million (Kentucky Fried Chicken).

Why have so many franchise establishments found homes on traditional commercial corridors?
There is one significant difference between a chain and a franchise that has made franchise establishments more common along traditional commercial corridors. Unlike a chain that is able to gaurantee rent payment to a landlord by leveraging a strong track record and good credit, a franchisee who signs a lease and is typically the one and only person obligated to pay it. There is no corporate gaurantee from the franchisor at the end of the day. This is why, when times were good, many mall owners often steered clear of franchise establishments whenever possible. On the other hand, commercial district landlords were often making a choice between a franchisee or an independent entrepreneur - and in that race, the franchisee often looked likethe better tenant. This heirarchy of retail created stronger opportunities for entrepreneurs along traditional commercial corridors.

How do you find franchise establishments for your district?
Finding a franchise for your district can be a bit more complicated than than reaching out to a chain store. That is because a franchisor needs an entrepreneur to expand, which means that you first need to find the entrepreneur interested in opening a franchise. One suggestion is to thoroughly map the retail and food franchisers in your region - particularly those whose business models work on traditional neighborhood corridors. Then you need to take the time to identify the development directors of each of these companies. These individuals will be in contract with potential entrepreneurs and may help them identify locations for the franchise establishment. A local broker or commercial leasing agent can sometimes help with this process as well.

Image: Edible Arrangements, a franchise growing along a number of traditional commercial corridors, particularly in the New York area.

Monday, July 27, 2009

Is Twitter an Overhyped Small Business Marketing Tool? Maybe, Maybe Not.

For small businesses with little to no marketing budget and also highly dependent on word-of-mouth marking, Twitter can help grow their sales and attract new customers.

So, what is Twitter? Twitter is a text messaging service that allows users to distribute information in real time to a network of individuals who subscribe to receive these "tweets," as these messages are known. Whether Twitter is a good idea for businesses in your district depends on who their target customer is and whether social media is an effective medium to reach those individuals. Sharing information with customers on daily specials/sales or even the moving location of your sidewalk cart (as one street vendor interviewed in a recent article in the NY Times does) can clearly be an effective way to spread the word about your district businesses and district activities in general. However, you need to beware. Not every business or business district is well suited for Twitter, as Steve Straus, a columnist for USA Today notes. A local dry cleaner, for instance, is unlikely to develop a large Twitter following and probably unlikely to have much to contribute in the form of tweets. This means that districts that have a highly concentrated group of convenience retail may also not be the best fit for a Twitter program. But a district with specialty shops and interesting events, or a local cafe ready to share information on a daily sandwich or coffee special, or even book readings or live music, may be a better fit. When the target customer is media savvy and interested...the opportunity may be ripe to take a chance at using this growing form of social media.

"Twitter for Small Businesses: Reconsidered", USA Today
"Mom-and Pop Operators Turn to Social Media", New York Times

Thursday, July 16, 2009

Can Daylighting Waterways Help Local Businesses?

While this recent New York Times article ("The Cheonggyecheon, Once a Highway, Now a Haven") discusses the environmental impact of daylighting waterways, that is, removing the concrete coverings that often hid these small streams and rivers from public veiw, the economic impact of daylighting should also be considered. Businesses in the vicinity of these projects often benefit tremendously when this happens as visitors often also seek places in the nearby vicinity to eat and shop. These waterways are a unique feature that can serve to make the shopping experience more pleasurable...particularly critical as commercial districts continue to compete for scarce shopping dollars. Anything you can do to differentiate yourself....