What can fast casual restaurants tell you about the neighborhood?

A company’s store locations reflect its overall site selection strategy. Some companies like Whole Foods have relatively affluent, young, urban customer bases, while others, like Dollar General, are more likely to have rural, high school educated customers making under $40,000 per year. The areas around brick and mortar store locations reflect these demographics, since the local area is where the customers live!

At Iggy, we see these POI tracers as complementary to traditional measures of neighborhood change, like the results of the American Community Survey (ACS). Year to year ACS changes are useful only in the most populous areas or when tracking large demographic shifts. And, ACS responses are aggregated to census tracts/block groups, which can be difficult to interpret at the individual level. 

An address in Lewisburg, PA. The percent of households with annual income above $75,000 in the surrounding census tract (light gray boundary) is in the bottom 10th percentile of all tracts in the micropolitan statistical area, according to the 2022 5 year ACS. Most locals would tell you there's little difference between most of this tract and the tract to the west, which is in the 60th percentile.

Using specific POIs as indicators, in combination with models of the catchment area for the store (e.g. the area within walking/driving distance), can give a different, more granular indication of the demographics of a particular area. It’s easy to see how this can be leveraged - say you want to invest in a single family rental in an area that will be attractive to a lot of the college educated workforce fueling a nearby tech hub. The neighborhood around the local Trader Joe’s might be a great place to start your search. 

Some words of caution, though - companies are under no obligation to publish how they select sites, and site selection strategies can vary across geography, or vary over time. Consider Sweetgreen - they have a publicly stated goal to reach 1,000 locations by 2030, but it’s not clear how they’ll manage to get here by sticking with their existing site selection strategy. Additionally, external factors like supply chain considerations or geographic location may prevent a company from expanding to all areas with the right demographics.

One way to address these issues is to average out the variance by looking for clusters of businesses that all serve the same general customer demographic. At Iggy, we’ve created brand segments - groups of brands that broadly target the same customer demographic. For example, our upscale fast casual restaurant segment contains not just Sweetgreen locations, but dozens of “lookalikes” - businesses that appeal to the same customer. Looking for areas where there are multiple POIs in this segment clustered together helps avoid fitting too heavily on any one company’s sites, which could be influenced by non-relevant factors like ability to find the right space.

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