The number of restaurants in the United States is at its all time high and is on the rise with individuals

spending more and more money on food away from home. In an industry that generates a large magnitude of revenues, restaurant chains cannot afford to open new establishments in the wrong location. A lasting competitive advantage is crucial as the market is becoming saturated with a growing number of restaurants. Restaurants can obtain a competitive advantage by working on their menu, atmosphere, pricing, service and management but all these factors are short-lived. The location of a restaurant, however, is a more long-term advantage that a restaurant can achieve. If a restaurant is located close to their target audience, it could minimize the risk involved in opening a new location. 1. Describe the psychological profiling (PYSTE) clustering system. Select an industry, other than restaurants, and explain how the software can be used for that industry. For Red Lobster, various forms of technology are used to create outputs for potential new sites of the restaurant. Software based modules, like MapInfo, have features including geographic information systems (GIS) that analyze trade areas. When these systems are used, researchers are able to geocode cities down to the individual block in order to create psychographic profiles. These profiles breakdown locations into clusters, which define trade areas based on consumer income, the consumer behavior of the household and geographic area. This granular way of looking at trade areas allows Red Lobster to ultimately forecast how these clusters will affect the performance of a new site located there. When looking at other industries: XXXXXXXXXXXX Allyson s part XXXXXXXXXXXXXXXXXXXXXXXX 2. What are the major differences in site location for a restaurant vs. a retail store vs. a manufacturing plant? Restaurants and retail stores are revenue focused whereas manufacturing plants are cost focused. While service organizations such as restaurants and retail stores select site locations based on customer and labor force population, competition, and storefront appeal to increase profitability, manufacturing plants seek to lower transportation costs via ease of shipment, save money on utility and taxes, and obtain a good deal on location size in order to minimize costs. Service Organization (Restaurant & Retail store) y Population o Density - A large customer base ensures greater amount of sales. Restaurants and retail stores generally seek storefronts on or near busy intersections and popular shopping districts. o Purchasing power - Customers with the capability and willingness to spend are desirable. There is no point in establishing a storefront in financially handicapped areas. Labor

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o Cost - Lower labor costs from minimum wage, health benefits, retirement plans, etc. o Availability - Seek out areas with an acceptable amount of labor force available. Competition - Competitors are a sign of interest in a particular market segment. Infrastructure o Accessibility - Acceptable size of parking lot and accessibility are desirable. o Appeal - Nice looking storefront will help draw in customers. A good layout sets the tone of the atmosphere.

Manufacturing Plant y Site o Cost - Base cost (price for square footage) is a major deciding factor. o Size - Each plant has their own space requirements for machinery and storage. Unused space is a waste of money whereas a lack of space can lead to production constraints and inability to meet high demand. Labor o Cost - Lower labor costs from minimum wage, health benefits, retirement plans, etc. o Availability - Seek out areas with large concentration of needed labor force. Look for clusters of skilled labor required. Energy and utility, taxes - Seek out areas with lower rates. Transportation - Distance and time constraints are integral for scheduling purposes. o Raw materials - Ease of obtaining raw materials. o Finished goods - Price of shipping finished goods.

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3. Which three density classes do you think the chain has the most restaurants in? Why? The target market of red lobster comprises of mostly married families with children. The restaurant chain focuses on households with around 2-4 people and with an average income range of $40,000 - $100,000. The target audience also comprises of high school and college children as well as mainly blue-collared workers. Red Lobster, along with other restaurant chains, places a high importance on trade areas to form the foundation for determining the next location. Red Lobster defines its trade areas based on market size and population density. Trade area sales usually comprise of 60-80% of total unit sales. However, the extent is limited depending on the presence of strong competitors around the area. Beyond this, sales are also based on pass through traffic and the amount of residential, work or shopping activity around that area. Red Lobster restaurants are mostly located in suburban areas and in small towns but majority of their restaurants are concentrated in rural areas. Although the population in urban areas is denser than the population in the rural areas, the reason for this rural concentration is that the

restaurant chains main driver of sales is the residential market. The residential driver is the main contributor of the restaurants unit sales performance.

As organizations strive to gain and retain customers in todays ultra-competitive environment, target marketing is no longer a luxury -- its a necessity. To succeed, organizations must quickly identify their highest valued customers and prospects and predict their behavior. With this insight, marketers can then decisively select the perfect locations to draw these customers to their franchise and win their loyalty. The PSYTE system offers comprehensive information culled from dozens of consumer and geographic databases and uses algorithms that group the over 208,000 U.S. neighborhoods into one of 72 clusters. Clusters are broken down by population density, household income, marital status, and presence of children each with its own demographic character and colorful name. The intelligent MapInfo system can characterize the behavior of every clustered customer from their favorite films and foods to their preferred attire and leisure pursuits. The PSYTE system could help businesses in virtually every industry bolster their marketing performance. Below are a handful of examples: Retail The system enables retailers to more effectively stock its stores, tailor coupons and other offers to select customers, and prioritize product allocations to specific stores with the highest profit potential. Financial Services PSYTE clustering allows financial institutions to tailor services and marketing programs to specific branch locations and customers. It identifies preferred account holders and prospects as well as cross-selling opportunities. It also helps them determine choice locations for new offices, to consolidate existing sites, and to place ATMs. Media PSYTE clustering helps newspapers and magazines maximize subscriber revenues and advertising rates. Outdoor media companies use the system to place advertisers billboard in prime highway locations. Internet service providers use it to localize messages, offers, and content on landing pages. Real Estate The system would also be useful for real-estate firms looking to choose the best site for a new housing or commercial development. It lets realtors and brokers rapidly profile the best tenants for these developments and show them where they can be reached.