Location Missteps: Costly errors in site selection

“You know there is a problem when the magician starts to believe his own bullshit.”

People are behaving differently to a few years ago – from Pre-Covid to Post-Covid. Convenience is now at a premium; we see that in the rise of the convenience centres and the decline of the larger malls, especially in the Metros, targeting the upper middle- and higher-income groups.

If you are a franchisor or a franchisee that is looking to open stores, then take note of what Stephen Walters, founder of Galaxy Retail Solutions who was a guest speaker at the Nedbank Executive Mentorship Breakfast held in partnership with Franchise Coaches had to say on location missteps and costly errors that franchisors and franchisees make in site selection.

Malls in most predominantly low income/rural areas are thriving.
Filling stations are benefitting since they represent the essence of what the word ‘convenience’ means.
Coffee shops are now everywhere, and you see digital nomads sitting with laptops in most restaurants.
Deliveries have become commonplace, both through the established brands like Uber Eats to the big supermarkets with their own branded delivery systems and reaching all income areas. Even Ouma is now using uber eats/Mr Delivery willy nilly.

“In the land of the blind the one-eyed is king!”

According to Stephen Walters, who has been studying this science for many years, the buying market is continually changing and it is now not just a question of looking at the LSM statistics of an area but it is now imperative carefully track the flow and support behaviour of visitors. With most markets saturated, the buzz word is ‘customer missions’ and some of the best locations are often outliers – sites that do not conform to the traditional rules of a surrounding catchment – i.e. high inflow and through-flow such as McDonald’s in Old Ford Rd, Durban, most airport sites, tourist spots, selected filling stations or locations where there is limited competition.

What is the cost of choosing a bad location?

“95% of all mistakes concerning site selection can be prevented… but we need to focus and learn from lessons and embrace technology.” That, according to Stephen Walters, is the key to successfully circumventing the site selection dilemma. That, and rentals must never be higher than 7% of your TO – ideally at or under 5%; at 10% the space is too expensive – unless you see sales growth higher than escalation. Keep an eye on escalation if you sign a long term lease as it will follow an exponential curve. To avoid this try to sign a 3-year lease with an option to extend to 5 years or opt for turnover clauses. The current rates are between 6 and 8%. Before signing a lease check what allowances are included, especially things like 3 phase 200 amp power (for QSR) or shopfitting restrictions.

We cannot attribute all successes or failures to the location.

Although site selection is an important element to the overall success of a business, one must consider all the factors that make a business successful such as:-

You = the Manager, Owner or Operator
- Customer service excellence and understanding customer needs
- Having effective leadership and a strong management team
- Effective inventory management that interprets menu offerings, what is selling/what is not and ‘theft management’
The location – site selection with its many components
Financial Management and cashflow
Competitive Pricing and Offers
Adaptability and innovation
Technology integration
Strong brand and marketing
Ambience and displays

New Brands vs Established Brands – A Critical Distinction

A One-Size-Fits-All Approach Doesn’t Work: New brands cannot follow the same site selection strategy as established ones. For example, Kauai can enter a location and succeed based on its strong brand pull – something a new brand simply doesn’t have.
Lack of Brand Awareness & Loyalty: New brands have no customer loyalty or brand recognition, making them more vulnerable to poor site selection and less likely to drive destination traffic in the early stages.
Landlord Reluctance: Landlords tend to favour established brands – especially when a known group is signing the head lease – making it harder for new entrants to secure premium space.
No Existing Location Allocation Strategy (LAS): With no LAS in place, new brands must adopt a more experimental and learning-oriented approach, using pilot stores, comparable or ‘indicator’ brands, and insight-led-judgement to test different location types.
Greater Risk and Need for Customer Mission Fit: Extra caution is needed when placing a new brand. Sites that work for an established concept may fail for a new one if the customer doesn’t yet know or trust the brand. Understand customer missions – why they visit, how frequently, and what drives conversion – is key.

Ignoring a Location Allocation Strategy (LAS)

There are at least 37 Different Location Types: From community centres to CBD nodes, rural hubs to freeway locations, each type serves a unique purpose and customer journey.
What is a LAS? A Location Allocation Strategy (LAS) is a data-driven framework built from the performance of a network of stores. It provides a structured guide to where a brand performs best – based on real-world performance across multiple store types – and highlights locations to avoid.
Why it Matters: The LAS enables smart decisions by identifying site types where the brand has a proven success rate, based on location-specific benchmarks like:-

* Market Share potential
* Trading density (TD)
* Turnover (T))
* Rental-to-revenue ratio
* Customer profile alignment

Key Performance Indicators:

Confusing Synergy with Competition

Misinterpreting the dynamics of synergy (complementary retail draw) and competition (cannibalization) can result in poor clustering choices. Understand when co-tenants drive accumulative value vs dilute your offering.
Opinion – in 90% of the cases it is better to be with the competition side, you are not selling the same brand = price war. If your store is across the street and the competitors are on the other side, then it is shoes vs them. An example: A KFC + McDonald’s = 30% increase if together.
This is one of the key support factors and rates as high as potential and sound site dynamics.

Inadequate On-Site Evaluation

Relying solely on tools like Google Earth or desktop research can lead to blind spots. Spend real time at the site – observe ingress and egress patterns, visibility, footfall, parking, customer types, and time-of-day dynamics. The biggest mistake is not to go out to a particular site – everything may look great on Google earth but missed the fact that, for example, a key road is closed (length construction) cutting the site from almost 60% of the support.

Jumping into Unproven New Developments

Smaller or niche tenants should avoid being early movers in new centres. Let the anchor drive footfall first. On the other hand, big-box brands benefit from being first to shape customer patterns. Overestimating Anchor Impact: A strong tenant (e.g. Checkers or Shoprite) cannot compensate for poor fundamentals. If the centre is weak overall, event the best anchor won’t save it.
If you understand the mentality of a developer, then you will be more considered. They plan for the longer term … you need to make profit almost from day one … not the same thing.

Ignoring Planned Infrastructure Changes:

Overlooked municipal projects – revamps, rezoning, road closures – can dramatically affect future site performance. Always check for proposed developments and planned disruptions.
My hobbyhorse is the sudden revamp, just after a shop has opened. A revamp in a mall can be good for the future, but it is almost a reset of customer behaviour – many customers support the mall differently after the revamp – think about parking and use of entrance. Always ask before taking space – when is the next revamp and what are they planning. If the centre is a few years old, be extra careful.

Common site selection mistakes

Assuming New and Established Brands Can Follow the Same Strategy: Site needs differ drastically depending on whether you’re launching a new brand or expanding an established one. Brand equity influences destination pull, risk tolerance, and visibility requirements.
Lack of a Location Allocation Strategy: Choosing sites without a broader network strategy leads to cannibalization, inefficiencies, and suboptimal market coverage.
Not Assessing Market Potential: Failing to determine whether the local market can support the store at a realistic benchmark capture rate results in poor performance and under-utilization of resources.
Relying on Outdated Perceptions: Areas and consumer behaviour evolve – don’t base decisions on historic performance or ‘gut feel.’ Markets may shift gradually, but the cumulative long-term change is often underestimated.
Misunderstanding Customer Missions: Not recognizing why and how customers visit specific locations (e.g., quick trips vs. planned purchases) can lead to mismatched site selection and format failures.
Overestimating Foot Traffic: Assuming high pedestrian or vehicle traffic will automatically convert to sales without assessing relevance or shopper intent.

Other Key Performance Indicators:

Most shoppers spend more time and money on the level where they have parked – 80% of times the Apex of the mall is at the level with the most direct parking area.
A great location has a combination of indirect competitors + complimentary retail (retailers that attract a similar customer with a similar customer mission. i.e. You sell shoes, the other retailer sells shirts. Art vs furniture, etc.
Lessons from experience: The LAS integrates insights from both successful and underperforming sites. It transforms historical learnings into forward-looking placement strategy – helping prevent repeat mistakes and accelerating growth in proven formats.
Not Assessing Market Potential: ‘Are you Driving Without Fuel?’ – Opening a store without checking market capacity is like driving without petrol – you might get moving, but you won’t get far. It’s better to take a risk in a high-stakes locations (like a casino) where you’ll learn your fate fast, than to bleed slowly in a weak market with no potential.
Relying on Outdated Perceptions: Perception is the mother of all misjudgements. Just because an area performed well in the past doesn’t mean it still does. Consumer behaviour and trading environments change over time. Visiting Kuruman five years ago is irrelevant today – past experience = present market truth. Always validate perceptions with fresh data and current customer insights.
Misunderstanding Customer Missions & Misreading Foot Traffic: Not all foot traffic is equal. If you don’t understand why customers visit a site and what they’re trying to accomplish, you risk format failure. For example, BP Denver on the M2 pumps over 1 million litres/month, yet the traffic is heavily skewed to mornings – great for breakfast, but poor for QSR brands relying on lunch or afternoon trade. Similarly, fuel volume = retail volume. Some QSR brands underperform in high-volume fuel stations or tourist towns because customers seek uniqueness, not generic food.

Bonus Insight: Foot traffic isn’t everything. Malls with high footfall can be misleading. If the flow is fast and transactional, your brand may be ignored. What you need is a ‘cafe society’ environment – people who linger, who align with your brand’s tone, and who convert into actual buyers. Always assess the quality and intent behind foot traffic, not just the quantity.

Stephen Walters is the founder and CEO of Galaxy Retail Solutions. He holds an MA in Retail forecasting models and has 33 Years of experience as a Retail Consultant. He helps diverse businesses with location-based strategies to realign for future growth. Stephen has assisted over 400 top Retail brands with Growth Strategies, Country Development Plans, Site selection, and Retail Audits. Clients include KFC, Leroy Merlin, Advitech, Woolworths, Famous Brands, Midas, AutoZone, and many more.