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CASE 16 Choosing a Store Location for a Boutique Stephanie Wilson must decide where to open a ready-to- The proposed renovation includes a three-level shopping fa- wear boutique she's been contemplating for several years. cility, low-rate garage with validated parking, and convention Now in her late thirties, she's been working in municipal center complex. Forty shops are planned for the first (ground) government ever since leaving college, where she majored floor, 28 more on the second, and a series of restaurants on in fine arts. She's divorced with two children (ages five and the third eight) and wants her own business, at least partly to be able The location Stephanie is considering is 900 square feet to spend more time with her children. She loves fashion, and situated near the main ground-floor entrance. Rent is $20 feels she has a flair for it, and has taken evening courses in per square foot, for an annual total of $18.000. If sales exceed fashion design and retail management. Recently, she heard $225,000, rent will be calculated at 8 percent of sales. She'll about a plan to rehabilitate an old arcade building in the have to sign a three-year lease. downtown section of her midwestern city. This news crys- tallized her resolve to move now. She's considering three TENDERLOIN VILLAGE locations The gentrified urban area of the city where Stephanie lives is THE DOWNTOWN ARCADE called Tenderloin Village because of its lurid past. Today, however, the neat, well-kept brownstones and comfortable The city's central business district has been ailing for some neighborhood make it feel like a trendy enclave. Many resi- time. The proposed arcade renovation is part of a master re- dents have done the remodeling work themselves and take development plan, with a new department store and several great pride in their neighborhood. office buildings already operating. Completion of the entire About 20 small retailers are now in an area of the village master plan is expected to take another six years. adjacent to the convention center complex, along with some Dating from 1912, the arcade building was once the center vegetarian and nouveau cuisine restaurants. There are also of downtown trade, but it's been vacant for the past 15 years. 3 small women's specialty clothing stores. The site available to Stephanie is on the village's main The location available to Stephanie in Appletree is two street on the ground floor of an old house. Its space is also doors from the local department store chain. At 1.200 square about 900 square feet. Rent is $15,000 annually, with no feet. it's slightly larger than the other two possibilities. But extra charge based on the level of sales. The landlord it's long and narrow24 feet in front by 50 feet deep Rent is knows Stephanie and will require a two-year lease $24 per square foot ($28.800 annually). In addition, on sales that exceed $411.500, rent is 8 percent of sales. There's an APPLETREE MALL additional charge of 1 percent of sales to cover common-area maintenance and mall promotions. The mall's five-year lease This suburban mall has been open for eight years. A success includes an escape clause if sales don't reach $411.500 after ful regional center, it has 3 department stores and 100 smaller two years. shops just off a major interstate highway about eight miles from downtown. Of its 9 women's Clothing retailers 3 are in this case was prepared by Profesor David Ehrlich, Marymount University, a price category considerably higher than what Stephanie has in mind. Appletree has captured the retail business in the city's southwest quadrant, although growth in that sector has DISCUSSION QUESTIONS slowed in the past year. Nevertheless, mall sales are still run- 1. List the pluses and minuses of each location. ning 12 percent ahead of the previous year. Stephanie learned 2. What type of store would be most appropriate for each of plans to develop a second shopping center east of town, location? which would be about the same size and character as Appletree Mall. But groundbreaking is still 18 months away, and no 3. If you were Stephanie, which location would you choose? Why? renting agent has begun to enlist tenants