The town of Easley, South Carolina, has experienced tremendous growth over the past few years. An entrepreneur, Jim Sloan, decided to build the town’s first mega mall. 90% of the mall’s space was quickly taken up with several big brand names and anchor tenants, leaving 32,000 square feet of space left for allocation.

Jim is confident the remaining space is easy to fill as there is significant interest by local and overseas businesses and thus decides to allocate the space according to his own criteria to ensure a healthy tenant mix.

After extensive study, Jim has drawn up a list of 20 different stores he thinks should be considered for the remaining space (listed in the table below). The stores are listed in alphabetical order, along with the floor space required by each store, the annual rent the store would pay for the space, the expected annual sales at the store and the expected upfit cost to renovate the allotted space to make it suitable for the store to use.

Store	Store Type	Square Feet Needed	Annual Rent	Annual Sales	Upfit Cost
Bath and Body Products	Specialty	2000	35,000	650,000	40,000
Beauty Parlour	Service	3000	50,000	500,000	35,000
Children’s Clothing	Apparel	4800	70,000	1,750,000	35,000
Chinese Fast Food	Food	2400	40,000	800,000	27,000
Electronics Store	Specialty	6400	80,000	1,300,000	75,000
Game Arcade	Service	6000	70,000	1,250,000	40,000
Hardware store	Housewares	7200	95,000	1,200,000	55,000
Hobby Store	Specialty	3600	50,000	550,000	29,000
Ice Cream Store	Food	1600	30,000	500,000	20,000
Kitchen Store	Housewares	6400	80,000	900,000	42,000
Lingerie Store	Apparel	3600	55,000	1,250,000	30,000
Luggage Store	Housewares	4000	70,000	650,000	34,000
Men’s Clothing	Apparel	7000	100,000	2,000,000	40,000
Pizza Parlour	Food	4800	62,000	1,200,000	31,000
Shoe Store	Apparel	4800	60,000	1,400,000	40,000
Sports Bar	Food	4000	80,000	1,300,000	50,000
Tex-Mex Fast Food	Food	2400	35,000	1,100,000	35,000
Toy Store	Specialty	4800	70,000	1,000,000	50,000
Travel Agency	Service	2000	30,000	400,000	15,000
Women’s Clothing	Apparel	7000	120,000	2,250,000	65,000

Each store would pay the mall an annual rent for its allotted space. The total rent payments each year must be sufficient to cover the annual fixed cost of maintaining the mall. This cost, which includes security, janitorial services, maintenance and utilities is estimated to be $500,000 per year. In addition, the total upfit amount spent on renovating the space to suit these stores cannot exceed 60% of the actual total annual rent that would be collected.

In order to make the mall more appeal to a wider range of customers, Jim believes it must adhere to certain conditions in terms of the mix of stores. Taking into account the tenants that have already been signed for the mall, he believes the remaining space should contain at least two stores each in apparel, food and specialty types and at least one store each in the housewares and service types. He also thinks that there should be no more than three stores of any type, and that the number of food and service stores should not exceed the total number of stores in the other three types.

The rental agreement will also mandate that the mall receive a fixed percentage of the total annual sales generated by the stores. Thus the mall is interested to maximise the combined revenue of the stores selected.

How does Jim allocate the space?

Answer rating: 100% (QA)

Jim should allocate the space to maximize both the total rent collected and the total sales generated To do this he should prioritize stores that offe... View the full answer