A site selection model proposal based on trade area analysis of international quick service restaurants

Site selection decisions of international quick service restaurants, which have developed both qualitatively and quantitatively with the emergence of globalization, have gained great prominence in parallel with the changes in lifestyles, urban spaces and eating-drinking habits. Today urban development is discussed not only in spatial terms but also in social, economic and cultural terms that indirectly affect urban environments. International quick service restaurants, which have the capacity to respond to urban expectations and fast lifestyles, have lately become more significant for cities. This research focuses on the use of trade area analysis as a tool in site selection decisions of international quick service restaurants; in this context, it also focuses on the analysis of trade area characteristics. Problems arise when quick service restaurants fail to apply contemporary methods to site selection decisions or when economic and spatial relationships are not established properly with trade areas, giving rise to further complications about the unknown extent to which trade area characteristics influence site selection decisions. At this junction, the main question this thesis attempts to answer is: "What is the level of dependence between the economic volume and trade area characteristics concerning site selection decisions of international quick service restaurants?" Against this backdrop, the aim of this research is to analyse and measure the dependence level between the economic volumes of quick service restaurants, and the urban, demographic and socioeconomic data of their trade areas within the context of these restaurants' site selection decisions in Turkey. Following this aim, this research has two objectives. First, it aims to analytically examine the trade area models and analysis methods in literature, and then it aims to determine a contemporary method based on this evaluation. The second objective consists of understanding better the expansion strategies of the quick service restaurant sector in Turkey in the scope of cities and trade areas; identifying the real estate development criteria; revealing the interlinkages between the trade area characteristics and the location of quick service restaurants, and finally determining more accurately the potential markets for quick service restaurants. As such, this research tackles the problem of not knowing the effects of trade area characteristics on international quick service sector's site selection decisions by applying the developed methodological framework. Then, a site selection model based on trade area analysis is proposed for quick service restaurants in Turkey. This research consists of five chapters. The first chapter examines the concept of site selection from past to present, presents the authenticity of this research for international quick service restaurants and the state-of-art of literature on site selection, and establishes the theoretical framework for research. This part also includes the definition of research problem, the determination of research questions, the explanations of research aims and objectives, and finally the research method to be employed in this research. The second chapter of the research titled "Identifying and Examining the Concepts of International Quick Service Restaurants and Trade Areas" presents a theoretical and conceptual background that defines the components of international quick service restaurants and the components of trade areas that constitute the basic subject matter of this research. It primarily examines the effects of people's eating out habits on the food and beverage industry; makes general definitions and provides principal information about the food and beverage sector and quick service restaurants. In this context, it is seen that the principal reason why food and beverage operations exist is people's desire to eat outside of home. Changes in lifestyles, urbanization, increasing levels of disposable household income, the enjoyment of the food and the environment in addition to the need for eating and an increase in the diversity of the eating and drinking experience are used in the site selection model proposed in this study, as the primary factors influencing the preferences for eating in the quick services restaurants, a branch of food and beverage operations. Literature review is carried out to examine the development trends, development processes and the current state of quick service restaurants in the world and in Turkey. Following the replacement of physical shopping with social shopping, food and beverage industry has undergone a more rapid development than any other industry. The rapidly growing food and beverage industry is expected to grow further in the coming years not only in the saturated markets of America and Europe, but also in Asia Pacific, the Middle East and Africa. The growth of international quick service restaurants in Turkey shows a similar trend. The fact that quick service restaurants in Turkey take up the largest share of out-of-home consumption expenditures is directly related to the increase in household income, increase in overall education level, urbanisation and the increase in the number of quick service restaurants due to high demand. In this study, these factors are taken into account in the framework of site selection criteria of quick service restaurants. After principal information on international quick service restaurants is presented, the second main topic of the research, that is trade area and trade area analysis definitions are made, and the methods that determine trade area boundaries are analysed. The concept of trade area, which has various definitions, is considered in this research as the area where the target consumer mass is located, unlike the commonly used definition in spatial planning that it is an urban area on which commercial activity takes place. Since time is a very important asset today, trade areas are formed by drawing circles around restaurant locations based on the criterion of time-related pedestrian and vehicle distance. Geographical data is obtained through these areas and the spatial relation in the site selection model is established by these fields. While discussing the trade area types and trade area characteristics, this study investigates the relationships between retail sales and population (from demographic data), income (from socioeconomic data), and commercial functions and transportation (from urban data). In order to get an accurate trade area market potential, all data related to population is included in the analysis and income data is included as average household income. Competition status is analysed both in the subheadings of international quick service restaurants and local restaurants, and transportation is considered to include metro stops, bus stops, and main meeting points in trade areas. Finally, the second chapter analyses trade area characteristics of quick service restaurants and location criteria that should be taken into account in accurate site selection decisions. Prominent location criteria for proper site selection are: the location of the restaurant, visibility, ease of accessibility (for pedestrians and vehicles), the location of rivals, the existence of houses, shopping malls, offices, schools, amusement centres and other similar urban equipment, the existence of transportation equipment such as metro stations, parking lots, and overpasses. On the other hand, the requirements to accurately identify trade area boundaries for quick service restaurants are: the identification of the customer profile, knowing the number of customers living within the trade area, measuring to what extent the competition within trade area affects the attraction power of the equipment in the trade area, and measuring the accessibility level within the trade area. All these requirements are taken into consideration in the analysis. The third chapter of the research titled "Evaluation of Analysis Methods by Trade Area Models for Site Selection of International Quick Service Restaurants" aims to answer the first research question concerning the trade area models. To this end it scrutinizes the question of how trade area market potential should be measured to reflect the contemporary dynamics of our day and age, by examining trade area models and analysis methods from past to present. Trade area models and analysis methods are evaluated analytically in the context of international quick service restaurants. The shortcomings of the Proximal Area Model, Reilly's Law of Retail Gravitation, the Central Place Theory, the Huff Model, the Analogue Model and the Geographical Interdependence Models are discussed with regard to the contemporary site selection decisions of international quick service restaurants. In line with the information and findings obtained in this section, a model that integrates GIS and Regression Analysis is offered for making accurate site selection decisions. Unlike the Proximal Area Model, this model allows the addition of multiple criteria in the model. Unlike Reilly's Model, the population is considered to be heterogeneous and can be included in different categories, and travel distance and duration can also be individually modelled. The proposed site selection model is not theoretical like Central Place Theory but applicable, and can be used in different production/demand conditions. Compared to Huff Model, this model allows many more criteria to be included in addition to store variety; unlike Analog Model which is subjective, it is a statistical and objective model; and unlike Geographical Interdependence Model, it proposes potential markets based on the calculation of sales forecasts. As such, it can be considered as a contemporary model proposal in which GIS and Regression Analysis Methods are integrated to overcome the shortcomings of the traditional trade area models (encountered in literature review and analysed in this research) in the site selection decisions of international quick service restaurants. In the fourth chapter, titled "Provincial Level Evaluation of International Quick Service Restaurants and a Site Selection Model Proposal Based on Trade Area Analysis", the novel part of the research is presented. To answer the second research question of the thesis, this part first evaluates quick service restaurants on the provincial level. While analysing the relationship between the number of international quick service restaurants and the provincial level demographic and socio-economic variables in Turkey using Correlation Analysis, the 5-year process up to 2016 is taken into consideration so that the analysis can be interpreted correctly. It is seen that the number of international quick service restaurants in Turkey has steadily increased over the years and that they have been positioned from small cities to big ones and from the eastern to western regions in Turkey. By determining the number of the designated international quick service restaurant locations in Turkey, the characteristics of cities are obtained, data and data sources are provided and the relationship between this data and the number of international quick service restaurants is explained using Correlation Analysis. The results of Correlation Analysis indicate that there is a significant and positive correlation between the number of quick service restaurants in Turkey and Turkish provincial development index, Socio Economic Status (SES) data and city population data. On the other hand, the results point to a weak correlation between the number of restaurants and household income data. Accordingly, the international quick service restaurants should take into consideration the provincial development index, SES data and province population in site selection decisions for restaurants in Turkey. To answer the third and the fourth research questions of the thesis, the relationship between the trade volume of international quick service restaurants and urban, demographic and socio-economic data of the trade area is measured and modelled. In this respect, a methodological framework for proposing a site selection model based on trade area analysis is presented. Then, data and data sources used in the proposal of site selection model based on trade area analysis of international quick service restaurants are examined. In this analysis, Total Sales Data, which consists of a total of instore sales and delivery service sales of 146 selected international quick service restaurants in Turkey, is used as the dependent variable; and the threefold data set that consists of restaurant data, demographic &socio-economic and urban data is used as the independent variable. The site selection model based on trade area analysis is established by testing these data with Multiple Regression Analysis, and the resulting values of this new model are shared. In the light of the findings, a statistically significant relationship is found between data that includes respectively Total Restaurants Sales Data and Take-Away Service Sales, Land Use Type – Residential & Commercial, Number of International Quick Service Restaurants, Number of 1st degree Competitor Restaurants, Ease of Parking, Pedestrian Intensity Index, Number of Schools, Household Income, SES ABC1C2 – Age Range 19-34. This result indicates that the dependent variable of the restaurant sales data can be explained by the independent variables in the model; it also suggests that, based on the numbers obtained, these correlations are high and that all the variables used in the model are statistically significant. Accordingly, the hypothesis of this thesis, that "In terms of site selection, there is a strong relationship between the economic volumes of international quick service restaurants, and the urban, demographic and socio-economic data of trade areas", is statistically verified. This research proposes that in the frame of the suggested site selection model based on trade area analysis, correct locations can be chosen owing to the trade area data that has an impact on economic volume. It also indicates that correct locations can also be chosen through the calculation of sales estimation that results from the application of the variables and variable coefficients in the model to a given location. The fifth and final chapter of the research evaluates the findings of the model within the framework of the research scope and presents the implications for the future. The relationship between the answers of the main thesis question and sub-research questions is established, the conceptual model put forward by this thesis and the findings of application product are discussed, and the original value of this research is mentioned. The feasibility of the integrated model, established using the GIS and Regression Analysis method, is discussed in terms of international quick service restaurants' site selection decisions. The contribution of the applicable model to literature is presented and topics for future research are suggested. In conclusion, this research reveals that the potential markets for international quick service restaurants in Turkey are the provinces with high ranks in development index, SES and provincial population, and that these provinces are predominantly located in the western region, southern and western coastal region and mid-Anatolian region of Turkey. As for site selection decisions based on trade area analysis; the higher the amount of delivery service sales in a given trade area, the number of international quick service restaurants, the number of schools, ease of parking, pedestrian traffic, household income, the co-existence of housing and trade zones in land use, the number of people from A, B, C1 and C2 socioeconomic levels with ages ranging between 19-34; and the lower the number of first degree competitor restaurants; the higher the economic volume of a trade area will be. It is put forward that, using the abovementioned data, potential trade areas can be determined correctly for international quick service restaurants. In this study, the social, cultural and political aspects of worldwide competition are taken into consideration to offer a contemporary site selection approach, and the proposed site selection model based on trade area analysis establishes properly the relationship between economics and geography. As such, it is argued that site selection decisions made in alignment with urban planning principles will contribute to land use planning, and that correct spatial locations for economic activities will contribute to the development of better planned and more liveable cities. The applicable site selection model put forward in this thesis will guide the project developers, architects, urban planners, sociologists, and retailers in diverse fields such as site selection, spatial planning, and determination of urban policies and commercial zoning policies. This research will contribute to the country's economy by guiding profitable investments made with the right investment decisions. It will also offer guidance to the international quick restaurant chains that consider entering Turkey the first time as well as retail sectors from different categories by offering a framework that identifies, in the city and regional planning system, the forces behind the correct expansion strategies and investments.