Case Study $$ Chapter $8$

Where to Locate Next

The Wendy$$s Co$.$ has some tough decisions ahead. The third$-$largest quick$-$service hamburger chain in the United States is planning to expand by opening around $1000$ new restaurants by the end of $2020\mathrm{.}59$ While a majority of the stores will be franchises, Wendy$$s management must decide on the locations of the stores because the company invests in the real estate for the new locations.

Experts suggest that a restaurant$$s location is the most important factor for business success. You can have great food and excellent customer service, but if you don$$t have the right customers coming through the door, the restaurant will not survive. Selecting a new restaurant location can be a daunting task as there are many different considerations. Management must look at factors such as local traffic patterns, neighbourhood demographics, availability of labour to staff the store, and the locations of competitors. In the fast$-$food industry, the real estate and building are significant capital investments, making the selection of a new location a risky decision.

Wendy$$s is taking advantage of technology to help decide where to locate new stores. Management uses Esri, a geographic information system $($GIS$),$ to determine where to build new locations. Esri is a software mapping solution that allows Wendy$$s decision makers to predict and assess the values and the risks associated with potential new locations by simply clicking on a map. The software provides information on auto traffic, consumer demographics, area safety, competitors, commercial mix, and other factors about a possible geographic location. The GIS integrates all of this information into a sales forecasting model to support decisions related to both opening new stores and closing or relocating other locations.

This information is invaluable to support decisions on Wendy$$s new locations as the company can use it to supplement their own data. While the GIS is able to integrate their past sales data, the company does not always have access to other data needed. For example, unlike many other retail industries, fast$-$food restaurants do not use customer loyalty programs. Therefore, it is harder for them to collect demographic information about customers. As a result, the investment in the software is worthwhile for Wendy$$s to meet its planned growth challenge.

Discussion Questions

$1.$ How does the GIS help Wendy$$s managers improve their decisions on store locations?

$2.$ Are the store location decisions certain or uncertain decisions?

$3.$ How can intuition contribute to Wendy$$s decision$-$making process?