In my first post entitled “Before you go after low hanging fruit, pick up the ones already on the ground…”, I made the case for tracking the ways your company uses your real estate, as well as the status of any and all activities that affect it, in a central location. As discussed, centralization is helpful to organizations because any department’s action on real estate often indirectly affects many others.
Of all the real estate tracked, new properties are perhaps the most important to each department. While they are a small percentage of the stores served, they often require more work and are the foundation for so many departmental goals. Because of the value of new stores, there tends to be many parallel efforts tracking their progress.
With so much focus on the immediate task of getting stores located, built and open, too often retailers miss the opportunity to leverage key information on development status by tracking and reporting on other metrics from their IWMS solution. Beyond merely serving the store count, the depth of information on deal status affects other departments and can improve the accuracy of other projections in your company.
How New Store Openings Reach Beyond the Development Department
Here are some key examples of how tracking and reporting the right data related to new store development has an affect across the organization:
Sales Plans – All companies project sales from new store development, but even something so simple can be made better:
- Operations should not be penalized by late openings – otherwise they will probably want a say in how/when new stores are budgeted and this adds complication. You can transfer the new store budget to operations once the store opens to properly task them with its performance. Instead, make the total new store budget a responsibility of Real Estate.
- Do you assume a standard calendar pattern on new stores sales? If so, anticipate underperformance in the first few months due to the maturation curve. Combine maturation and seasonality for better budgets.
- Do you budget the sales level that was used for approval? If you don’t budget the amount in the pro forma, you risk approving marginal projects because there are no consequences to bad decisions.
Investor Relations – The end of each fiscal period results in a flurry of activity with everyone wanting an accurate store count. As the leader of Development, you don’t want your team to let up, but some projects will be long shots for that period. By adding a field for “Probability in Current Period” for each deal, with options such as “Definite/Probable/ Possible”, you can reconcile your reporting both up and down. If a project is only “Possible”, count it in the next period.
Incentives – Nearly all Real Estate Departments base incentive pay on metrics. They usually include number of openings, deals signed, and timeliness of openings. Since all of these items are tracked in your IWMS, you can create a dashboard to capture metrics standards by person and simplify your tracking/reporting on this very important element. Other elements some companies include in incentive planning:
- Experience of the Rep – people tenured in a market should be able to produce more, while folks new to an area will take time to build their pipeline. Set realistic targets for each person.
- Quality of Trade Areas Developed – you’ve probably rated your Trade Areas by attractiveness; a Rep that makes their numbers by doing less attractive sites is not furthering your cause. Include some scoring by this measure.
- Performance vs. Pro Forma – I shouldn’t have to say this, but you want profitable Comparing actuals to projections can be a challenge to report. Plan your integrations in such a way that your analogs for supporting approval also support this tracking.
Operations – Hiring, training and business licenses are all first cousins of development, but are they part of your notifications if target dates change? If your project is late, you’ll have excess labor waiting to staff the new store; if your project is running ahead, you might not be able to open early because some elements can’t be accelerated. Will you open so many stores that you need require additional supervisors? Senior managers will need time to rebalance store assignments to the Supervisors, considering logistics and personalities.
Franchise Fees – These fees typically can’t be recognized until the store opens, so why burden the Franchise group with having to track open dates? By simply adding Franchise Fees as a reportable element of your IWMS, you can report with the greatest confidence on the probability of income.
Further, if you franchise after sites are committed, you should also track the status of the franchise efforts in your IWMS. Lastly, if fees are earned on franchise transfers, your IWMS might serve that tracking as well so that the total anticipated fee income can be reported from one place. Combining the best thinking of these uncertainties will greatly improve your forecast of franchise fees.
Lastly, don’t forget Vendors – I’ve been told it can take weeks to re-route trucks. You should share your future development plans with key vendors in case they need to add capacity or buy new trucks to serve you.
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Each of the groups above is greatly affected by the development schedule and will spend at least a modest effort to track openings. Their unique data and calculations are usually very simple compared to the development schedules, making this a relatively easy service to provide. By facilitating their tracking/reporting needs within your IWMS, you can greatly improve accuracy, reduce the effort of that reporting, and serve yourself because your stores will open with far fewer issues.
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