Choose Your Space Carefully
You have two opposing desires when selecting a location: cost and attractiveness. High traffic count is attractive but expensive. Lots of space is an attraction, but you pay for every square foot. On the other hand, you want to keep costs as low as possible so that you can become profitable. Determining how much you should spend on your location is arguably your most important opening decision. Know how to make it.
Commercial Rent Basics
Typical rent rates for retail space range across a broad spectrum of figures. Low-visibility sites on the outskirts of town might be available from $6 per square foot/year or less. Locations in big-city malls can cost $60 per square foot/year or more. For most game store business models, you’ll consider a location ranging from $10 psf to $20 psf, depending on your local market.
Rent usually includes at least two figures: your rental rate and your “extras”, either in the form of a Common Area Maintenance (CAM) or a triple net (NNN). In either case, you pay additional fees. Think of them like the dealer prep and other add-ons that you pay when you buy a car from a dealer; they’re additional costs, but they break them out so that they can advertise a lower price than you’re actually paying.
When you ask about a rate always ask about the CAM or triple net. When you’re comparing your notes for later, you’re comparing the same figures for each of your possible locations. You can also plug the right figures into your financial calculators.
Common rental terms are usually for a short number of years: one to five are common. Obviously, a lower term is better for you, especially for your first lease (more on that later). A one-year term at $2,000 a month commits you to paying only $24,000. A five-year term means that you owe a $120,000 debt. If the business closes six months later, which debt would you rather have?
In less urban areas, you might be able to find a place offering a month-to-month rate, but that’s uncommon.
Expect that your deposit is non-negotiable. It never hurt to try, but landlords expect small business owners to fail. They think that the deposit might be the only money they are guaranteed to get from you. Your deposit is usually framed in terms of rent: “first three months’ rent”, or “first and last months’ rent.”
The Big Three
Your rent rate, your space, and your location are the largest and most important considerations in your decision-making. Your choices usually involve a bigger space in a cheaper property vs. a smaller space in a more attractive property.
The Benefits of Space
A big space gives you more layout options. You can have the luxurious game room you want with private rooms. You can display all your books face out. You have room for signage and wide lanes of traffic. You have room for luxuries like two bathrooms.
Most importantly, you can display more merchandise. If you open in a 900-square-foot location, you won’t be able to fully stock miniatures, role-playing games, board games and have a large game room. With 6,000 square feet, you can carry nearly any product lines you want and still have room for game space.
Each of these things is a competitive edge—a reason for customers to choose your store for their game-buying purchases.
I maintain a spreadsheet with game store square footage claims. The average game store on my list has about 2,800 total square feet. Of the stores with game space, the average is about 1,000 square feet. About two-thirds of the game stores on my list have game space. For various reasons, I believe the list to be skewed in favor of large stores, however, and that the average store size is smaller than my sampling indicates.
Visibility and Ease of Access
A good location is one that you can give direction to easily. “Take exit 5, turn west and go three blocks” is a good set of directions. You’ll find yourself giving directions on the phone often, and every step is an opportunity to lose a customer who can’t find you. Locations on major streets near highway exits make it easier for customers to find you. Front-facing locations visible from the road are better than suites facing the side.
Spaces that give you pylon sign space are better than those that don’t. Corners are better than in-line suites because you have frontage (and visibility, and space for signage) on two sides.
Wider spaces are often considered more valuable than narrow spaces. Having a wide space visible to the customer is called frontage, and it has a value because it makes the store easier for the customers to find and more visible to the casual shopper.
You can use that trend to your advantage. If you plan to use part of your space for a game room, you don’t need expensive frontage. Sites next door to anchor sites in outdoor shopping centers often have odd-shaped suites adjacent to the anchor—sites without much frontage (and thus unattractive to many potential tenants). You might find that a landlord is eager to negotiate the rent on one of these sites.
Despite all of the industry talk about how gaming stores are destination locations and don’t need a lot of foot traffic, it seems that the stores who place themselves in line with that philosophy fail most often, and stores in more visible locations fare better. While the basic idea might be true, it’s also possible that the other benefits of a good location help the store out. If you’re planning on finding the cheapest retail space possible, no matter where it is, keep in mind this anecdote from Dave Wallace, owner of the Fantasy Shop chain of stores based in Missouri. Dave bought out a failing store and the owner volunteered this gem: “I knew it was in a terrible location, but I couldn’t pass up the rent.” Don’t be that guy.
While the big three often make the decision for you, lesser factors can combine to affect your decision on where to place your store.
You don’t want to open a store a mile away from a large, established game store. It’s worse if that game store’s strengths are similar to yours (you did a marketplace comparison in your business plan, remember?). Try to place yourself at least five miles away from a stable competitor. If you plan to finish off a failing game store, you want to be closer to that store so that you can recover more of the store’s customers, but keep in mind that this placement is clearly a hostile move and will taint your relationship with that store owner.
Sometimes your ideal place is impractical not for reasons of rental rate but because of other items in the lease agreement. The term might be too long. A landlord used to national franchises might insist on a 10-year term, for example.
Similarly, the landlord might insist that you’re responsible for replacing the HVAC unit if it fails during your lease. Don’t sign that! At a later date this column will review lease agreement terms in more detail, but for now just consider that there are non-negotiable items in a lease agreement.
Commercial suites can be in virtually any condition when you look at them. While most tenants prefer the white box look, which allows them to customize the suite in any direction they want, you want to consider a more “lived-in” look to your suite. You might be able to use existing interior walls, flooring options, and other considerations to your advantage in reducing your build-out costs.
One space that you can customize for $12,000 but costs $40,000 over the course of the lease might be a better deal than a space that leases for $36,000 over the same term but costs $20,000 to build out. Keep in mind that you might not be there for very long. You don’t want to spend much money on a build out only to spend more money in a couple of years when you move.
You need parking space, and it should be in front of the store. Near my house there’s a store that concentrates on CCGs, toys and collectibles. It has some D&D minis, but few other games. It has changed hands at least three times in recent memory. Its most recent neighbor lasted less than six months. It’s on a corner with a very high traffic count in both directions, but the parking is in the rear, except for about five spaces of parallel parking on a busy street.
You don’t need a large amount of space, and your business benefits by being a primarily after-work hours business, which means you can share some of the parking spaces used by the neighbors in your shopping center. If you can’t count on at least 10-20 parking spaces in close proximity to your front door, you should probably look for another location.
Summary: My Recommendation
Plan to move. Keep your square footage as low as it needs to be to accommodate your business model. Keep your lease term as short as possible. If you succeed and find that you need more room, you should be able to survive moving your store. If you fail, you limit your liability and retain the ability to recover financially afterward.
Weigh your key factors together. Determine which factor most consistently supports your brand. If your brand is “everything in stock, all the time”, then you need more space. You don’t need visibility as much as you need space. If you plan on high-attendance events, then parking becomes more important, and a higher-rent location with simple directions and ample parking becomes your primary goal.