melanie o’connell underwood economic development

Melanie O’Connell Underwood Economic Development Consulting, LLC 933 Muirfield Dr. Mooresville, NC 28115 704-662-9747 office 704-650-8212 cell [email protected]

August 13, 2015 Mayor Elbert Richardson Town of Troutman P.O. Box 26 Troutman, NC 28166 Mr. Mayor, Melanie O’Connell Underwood Economic Development Consulting (MOUEDC) is pleased to present this report to the Town of Troutman and town board for review. The following research represents information gathered from resources ranging from existing information and websites, to personal interviews and state reports available on the date of this presentation. Thus the data gathered is limited in scope by the agreed upon duties and reporting time frame. Please call if you have any questions. I am excited about the prospects for future growth and tax-based revenue for the Troutman area. Sincerely yours, Melanie O’Connell Underwood, CEcD President MOUEDC

ABC Store Feasibility Study for Troutman, N.C.

By: Melanie O’Connell Underwood Economic Development Consulting, LLC

August 2015

Troutman ABC Feasibility Study 1 MOUEDC LLC Town of Troutman August 2015

Scope of Work and Overview The purpose of this report is to research the feasibility of locating an alcoholic beverage control (ABC) store within Troutman, NC. The study concentrates on market potential, start up costs, factors to consider in site location, and available buildings/acreage to renovate/build. Metrics detailed in this report primarily were sourced from the NC ABC Commission, local and other ABC entities and recent reports for Troutman done by Troutman staff and others. Together conclusions are recommended for the overall viability and potential of each site or project. While Iredell County has not passed a “liquor by the drink” law, the City of Troutman did in November 2014. Currently, those residents living within and near Troutman must travel to either Statesville or Mooresville, NC to buy spirited liquor. One study indicates that consumers typically will travel up to 18 miles to “specialty stores”, such as an ABC store proposed within the Troutman city limits (BrightLocal.com). According to the North Carolina ABC Commission a profit can be shown within 2-3 years of opening if annual sales meet $1,000,000. Assembling combined current population density with future estimates for growth within and surrounding the city, an ABC store appears viable if current economic conditions persist. Research Methods: Interviews A total of eight (8) ABC industry representatives were interviewed, including ABC board chairs, general managers, ABC Board finance managers, and the NC ABC Commissioner’s office. An additional national site consultant who specializes in retail was conferred. Site visits were conducted with an Iredell County General Contractor (commercial) to determine building and or renovation/upfit costs. The information was combined with data from national research on retail trends and more specifically the alcohol industry. Cost of Start up Based on information gathered from available sources, decisions on start-up costs fall into six major categories:

1) Inventory (Merchandise) 2) Fixtures (shelving, counters, display cases) 3) Electronic equipment (computers, registers, credit card systems) 4) Security system 5) General- other miscellaneous considerations 6) Construction


As is often the case in making decisions in opening a retail store, there are alternative selections in size, scope or location that could either provide savings in the startup costs or provide cost over runs on the budget. Thus, in each of the categories the costs may vary widely as further indicated below. Costs: Metrics from Interviews Officials from five ABC entities were interviewed: Mooresville, Statesville, Catawba County, Hendersonville and the North Carolina State ABC Commission. For comparative reasons, an ABC board manager representative from Hendersonville, NC was interviewed to discuss start-up costs of a store opened within the past three years. Averaging estimated expenses from four ABC Boards (some of which were able to look at ledgers and give more detailed answers) as well as estimates provided by the state ABC Commission, startup expenses from the five organizations averaged $241,000 to open a store. These startup expenses do not include construction costs or the cost of the lot/building. 1) INVENTORY Initial inventory decisions include both quantity and variety of store stock. Depending on available capital and the size of the retail space, the inventory can be expanded beyond the basics to provide more variety, specialty products, seasonal offerings, or “higher-end” choices. With a current total of 2,200 selections available from the North Carolina Stock List, decisions must be made on how much back room stock is desired, how much can safely be warehoused, and how often the store should reorder. National data reveal flavored spirits are growing ten times faster than the regular spirits (The Beverage Info Handbook, 2013). Truck shipments for liquor restocking are accessible at any time, and are available in various sizes. Smaller trucks enable partial sized orders. The delivery cost is the same per case, $3.90, no matter how many cases are ordered or how many bottles are in each case. Cases vary in size, as smaller specialty liquors may have only one to three bottles per case. Therefore, based on shipping, extra large or heavier cases do not cost more on a per bottle basis. Among the four local ABC boards interviewed, no two philosophies were the same on how much inventory per square foot to maintain. One local board prefers to receive stock only once a month, based on their thought that “inventory is money, so let the State of North Carolina carry the inventory for them until they need it”. Other boards prefer to order weekly or bi-weekly and to keep a larger back stock inventory “to make every attempt to have what the customer wants”. Another board with multiple stores chooses to order a truck shipment weekly, moving cases often from store to store. The interviewed North Carolina ABC Board general managers estimate that their stock inventory ranges from $120,000 for smaller stores to orders for larger stores of $175,000. The most common response was $120,000, typically a full truck of 1450 cases. This is based on a retail space from 3000 to 4000 square feet (not total building size).


2) ELECTRONIC EQUIPMENT Each store is required to purchase a computer system with the ability and software to connect to the North Carolina ABC Commission system. Stock ordering, sales reports and tax reports are all completed through the on-line ABC system. Cash registers and credit card processing are connected to the computer system as well. Cost for computer system estimates ranged from $15,000 to $30,000, with a most frequent estimate of $20,000. The system installation company must be chosen from the state list of authorized agencies to both install and maintain computer operations. 3) STORE FIXTURES Necessary fixtures consist of shelving, counters and display cases. Great savings can be found in purchasing used fixtures. There are multiple regional companies that sell both new and used retail fixtures. Estimates ranged from $15,000 to $100,000. The most frequent estimates were in the $15,000 to $20,000 range for used fixtures and $40,000 to $65,000 for new higher-end fixtures with more modern looking materials. 4) SECURITY SYSTEMS Security systems are essential for the protection and safety of employees and customers, to deter theft, for verification of disputed sales, and observation of footage if a theft or crime has occurred. Based on the information gathered, the quality of the security system will, over time, pay for itself in theft prevention. The number of cameras is optional; however, at a minimum, cameras should be placed behind the counters near the registers. A camera in this location will help with register safety and can have the ability to take a picture of each transaction. One community gave an example of how they successfully used security footage from register cameras to prove a credit card was used for a purchase when the sale was being disputed. Estimates ranged from $3,000 to $7,000 for initial purchase and installation of a security system. 5) GENERAL AND OTHER COSTS Other miscellaneous store opening costs are herein categorized as general. These costs range from office furniture, supplies and employee salaries (salaries prior to opening), to insurance, bonding, licensing and signage. As indicated earlier, it is possible to be conservative on items such as used office furniture. There is no required State of North Carolina permits or mandated employee training for store employees (per ABC Commission interview). Other cost savings include the use of more part-time employees when possible. Part-time employees do not require benefits such as insurance, vacation pay, and retirement contributions. The Mooresville stores utilize more part-time employees than full-time. Among the part-time employees the majority are retired individuals.


6) CONSTRUCTION COSTS MOUEDC visited three prospective existing building sites with Bob Palmes of G.L. Wilson General Contractors in Statesville. Based on his observations the following construction estimates were provided: A) $85 per square foot to renovate the former (KFC) restaurant site B) $12,000 to demolish the former restaurant (KFC) site C) $70 per square foot to renovate other building shells (Troutman Village space) D) $150 to $200 per square foot to construct a new building on undeveloped land Mr. Palmes indicated at the KFC restaurant the best scenario if considering this site would be to demolish the building and build from scratch based on the existing building layout, small size, location of coolers, and electrical system placement. Using the mean ranges the data is tabulated in Table 1: Table 1 Area A Area B Area C Area D State ABC Inventory $120,000 $115,000 $163,000 $135,000 $100,000 Fixtures 23,000 35,000 65,000 65,000 100,000 Security 6,500 17,000 4,000 1,600 NA Computer 7,000 17,000 30,000 20,000 NA General* 33,000 33,000 33,000 32,000 50,000 TOTALS $189,500 $217,000 $295,000 $253,600 $250,000

{AVERAGE TOTAL Startup Expenses $241,000} * If not specified, calculated from known expenses


Market Research and Demographics CENSUS POLULATION DATA Situated geographically on Interstate 77 approximately midway between Mooresville and Statesville, the Troutman community is in a prime geographical position to continue rapid residential increases. Population in Troutman exhibited tremendous growth over the past twenty years. Census data from 1990 to 2010 indicated the town added 890 people, for a 59.6% increase. It should be noted the data does not reflect growth from those newer residents living in the Troutman outskirts near the city limits. The Census figures indicate that 70% are over the age of 21, the legal drinking age. These population figures, listed in the right hand column, are further broken down into one-mile radii up to 12- miles from the town center. For estimation purposes, downtown Troutman is roughly 10 miles from both of the nearest ABC stores in Statesville and Mooresville. Using a 5-mile radius figure that is roughly half the distance between the competing towns, a total of 16,855 people would potentially drive to a closer Troutman ABC store. (See below): Table 2 Mile 2010 Pop 70% over 21 1 1962 1373 2 4890 3423 3 7922 5545 5 24078 16855 (Five -‐mile radius) 7 55756 39029 10 112394 78656 12 146054 102238 (from Census 2010) Thus 24,078 x 70% = 16,855 people are of legal age that may shop at a (closer) store located in Troutman. TROUTMAN LANDUSE PLAN 2035/ PLANNING DEPARTMENT STATISTICS The 2015 “Troutman Land Use Plan 2035” estimates an additional 682 people will reside in town between 2015-2035. This will bring an additional 28.6 % growth (from Division of Community Assistance, NC Department of Commerce). Examinations of records from the Troutman Planning Department for residential lots evidence the potential for exponential growth.


According to Troutman Town Planning Director Erika Martin, in the past nine months developers have spoken with Planning regarding the potential to develop almost 2000 new residential lots in multiple locations. These lots vary in development from the concept stage to those currently in construction. If (conservatively), 25 percent of the potential lots are developed, using a census average of 2.54 people per household, the town would potentially grow by over 1,000 residents for a 51% increase. This is a much higher percentage than anticipated in the Land Use Plan for 2035. Growth of this magnitude would accelerate store customer visitations, rapidly expanding sales over time. TRAFFIC COUNT RESEARCH – AVERAGE DAILY TRAFFIC (Town of Troutman US Highway 21/NC 115 Traffic Circulation Plan) The best prospective customers for any retail store are those who currently pass the store (“known potential customers”). Updated traffic counts were completed as part of the July 2015 US Highway 21/NC 115 Corridor “Traffic Circulation Plan”, completed by Kimley-Horn and Associates. In this corridor study, the highest Average Daily Traffic (AADT) was along Main Street (Highway 21/115) between Old Mountain Road to the north and Perth Road to the south. Outside of interstate traffic, the 15,505 Average Daily Traffic at this location was the highest in the community on a Friday. The lowest traffic day studied was a Sunday, a day ABC stores are closed by North Carolina law. Count locations are indicated below in Figure A:


Figure A:

(Figure A from Kimley- Horn, 2015)

Town of TroutmanTraffic Circulation Plan

Legend

Data Collection

NOT TO SCALE

ADT Count Locations

1. Main Street (US 21/NC 115) – between Moose Club Road and Old Mountain Road

2. Main Street (US 21/NC 115) – between Old Mountain Road and Perth Road

3. Main Street (US 21/NC 115) – between Perth Road and Byers Road

4. Main Street (US 21/NC 115) – between Byers Road and Houston Road

5. Main Street (US 21/NC 115) – between Houston Road and Westmoreland Road

6. Eastway Drive – between Main Street and Old Murdock Road

7. Lytton Street – between Mills Avenue and Good Man Road

8. Old Mountain Road – west of Main Street (US 21/NC 115)

9. Murdock Road – east of Main Street (US 21/NC 115)

10.Perth Road – west of Main Street (US 21/NC 115)

Study Corridor

ADT Count LocationXX 1 98

2

7

4

5

3

1010

6• Thursday, January 29, 2015 –Sunday, February 1, 2015

• Collected by National Data & Surveying Services

Old MountainRd

Existing Conditions


The actual traffic counts are listed below in Figure B:

(Figure B from Kimley-Horn, 2015) The above-mentioned 21/115 roadway accesses all of the potential buildings as discussed in a later section below. AVERAGE DRIVE TIME TO SHOPPING MOUEDC researched average drive times to retail facilities. A 2014 survey completed by the company BrightLocal.com reported that among US consumers, drive time for all local consumer shopping averaged 17 minutes (Figure C). Survey results ranged from 12 minutes for more commonly used businesses, to 23 minutes for highly specialized stores. A specialty business such as an ABC Store averaged an 18-minute drive, only one minute higher than the overall average drive time. Thus the 18-minute drive time can be used for potential customer reach.

Town of TroutmanTraffic Circulation Plan

Legend

NOT TO SCALE

Study Corridor

ADT Count LocationXX

1 98

2

7

4

5

3

1010

6

Count Location

Average Daily Traffic (ADT)[vehicles per day]

Thursday Friday Saturday Sunday

1 8,138 8,362 5,755 4,388

2 14,245 15,505 11,304 8,298

3 10,923 11,828 9,283 6,691

4 12,055 12,860 10,375 7,571

5 12,380 13,167 11,316 9,248

6 1,179 1,200 809 837

7 99 93 74 57

8 10,062 11,348 7,969 6,032

9 3,356 3,802 1,982 1,453

10 5,844 6,522 5,567 4,355

Old MountainRd


• As an example of this utility, using the 18-minute figure with an average speed of 45 mph

renders a distance of 13.5 miles consumers will drive to reach the ABC store (18- minute drive time X (.75 hours) = 13.5 miles).

Figure C: Average drive times to local businesses, (from BrightLocal.com, 2014)


CityData.gov information compiled in Table 3 revealed the population for Troutman by one-mile radii from downtown: Table 3: Troutman vicinity population by decade and one-mile radii Mile Radius

Total Pop. in 2000

Population in 2010

% Change 2000-‐2010

1 1817 1962 8.0 2 3625 4890 34.9 3 5798 7922 36.6 5 19420 24078 24.0 7 47702 55756 16.9

10 86949 112394 29.3 12 112653 146054 29.6

Tabulated data from city-data.gov NORTH CAROLINA ABC REVENUE DATA MOUEDC conducted research on North Carolina ABC Boards with similar sized population constituency. Troutman has a population of 2,383; there are eight communities in North Carolina with towns ranging from 2000 to 2500 that also have an ABC Board and retail store. The average ABC revenue of these eight communities is $1,108,141, with 3.44% net profits (NC ABC revenue reports). This data is similar to figures obtained from NC ABC managers and commissioners interviewed, who stated a minimum of $1,000,000 in gross annual sales is needed to break even. Table 4: * 8 Communities with Population Between 2000-2500 and an ABC Store TOWN NAME TOWN POP. COUNTY GROSS SALES $ NET PROFIT %

Franklinton 2026 Franklin $845,152 6.28 Belville 2061 Brunswick 2,870,820 5.43 Hertford 2166 Perquimans 880,266 5.52 Laurel Park 2186 Henderson 1,079,248 2.25 Spruce Pine 2209 Mitchell 1,145,441 3.45 Madison 2216 Rockingham 1,071,080 2.91 Norwood 2368 Stanly 482,340 2.12 Maxton 2402 Robeson/

Scotland 490,683 -0.45


*Many factors contribute to profits; some stores are located in highly economically depressed, high poverty areas, and some stores are newly opened with the communities paying down the construction costs.

Ø The NC ABC Commission considers the $1,000,000 gross threshold as the “standard minimum gross” to break even (as stated in interviews).

April through June sales records for all North Carolina ABC stores show an average sale on a credit card of $28.76 per transaction. Debit card sales were slightly less at $26.33 (very few report cash sale records). Using an average of $27.50 for the two, to reach $1,000,000 in revenue approximately 36,363 sales must occur to meet the threshold. OTHER ALCOHOL SALES DATA In its 2014 annual poll on alcohol consumption, Gallup Polling reported that nationally, 64% of the people polled have occasion to drink alcohol. For those polled that drink on a regular basis, 4.1 average alcoholic drinks were consumed within the past seven days. Additionally, 23% of Americans who drink alcohol said liquor is their beverage of choice. Beer was listed with the highest consumption of 41%, wine second at 31% (gallup.com, sample size 1,013 people in all 50 states +/- 4%). Table 5: Gallup polling: July 2009 July 2014 Have occasion to drink alcohol Yes 64% 64% No 36% 36% Number of alcoholic beverages consumed in past seven days * 8 or more 09% 14% 1 to 7 51% 50% Zero 34% 35% Average number 4.8 drinks 4.1 drinks Alcoholic beverages consumed most often * Beer 40% 41% Wine 34% 31% Liquor 21% 23% (“Number of drinks consumed and alcoholic beverage drunk most often are based on drinkers” gallup.com).


The 2012 report stated further, “Younger adults’ or millennials’ preferences have shifted toward both liquor and wine, but more so toward liquor, over the past two decades. Those between the ages of 30 and 49 have moved exclusively toward liquor” (gallup.com, 2012). Incorporating statistics from the Gallup poll (Table 5), and the Census existing population figures within a five-mile radius of Troutman (Table 2), then estimated sales are $1,386,027.50 as calculated below:

• 16855 total population living within a 5-‐mile made radius are age 21+ (70%) • 16,855 x 23% who drink spirits as their alcohol of choice= 3877 • 3877 drinkers x average 4 drinks/week = 15,508 drinks/week of spirit alcohol in

total population • 15,508 x 52 weeks a year = 806,416 drinks per year • 806,416 x 1.5 oz. of alcohol per drink (1 shot) = 1,209,624 ounces of alcohol • 1,209,624 / 24 servings per bottle = 50,401 bottles • 50,401 bottles x average sale of $27.5 = $1,386,027.50

(Assuming one bottle per sale)

Thus, based on our estimated model calculations, estimated sales would annually reach $1,386,027.50. Disclaimer: this information model is for estimation purposes based on best-case scenarios utilizing the above referenced information gathered by others. Typically estimates vary with poll accuracy and local/regional/national economic trends and ultimately. Other variables include assumptions regarding the homogeneity of drinking across the greater Troutman vicinity. Finally, demographic profiles may change over time, altering sales.

Ø According to the North Carolina ABC Commission the revenue from the sale of spirited alcohol is distributed as follows:

• 53-54 % returned to suppliers • 23-24% taxes • 23-24% gross store profit

Following the disbursement of supplier cost and taxes, the remaining gross profit is used for the payment of salaries, monthly building payments, utilities, insurance, supplies and other smaller costs. The remaining amount after expenses is available for the local board as revenue (NC ABC Commission, June 2015).


LIQUOR TRENDS From a national standpoint according to statistica.com, southerners consume more spirited liquors; yet, North Carolina ranks 48th in liquor consumption due to general social conservatism. The conservative tide may be changing with the older, traditional, more conservative church rolls dwindling in favor of larger “mega-churches” attracting the younger demographic. Highest demographic groups included non-church goers, in fact the highest liquor-consuming percentile is among higher educated, higher income, non - churched, non-protestant white males aged 18-49, who tend to consume more alcohol per capita (Gallup, 1992-2012). Another trend in liquor sales is the establishment of the young upwardly mobile adult active in social-media. According to Ipsos.com, (2013), liquor branding via social media has fueled an ever - growing portion of advertising. Young professionals are also buying more premium brands within the past decade, even more local “craft spirits” to increase both self-esteem and social esteem. All of the larger liquor companies now produce a host of premium brand offerings at much higher prices. Ipsos revealed that in many areas, premium brands are outselling traditional offerings. Also adding to liquor popularity is the rise of ready to drink products, or RTD’s. These premixed products are made for convenience and to introduce new mixing ideas. They are quickly joining flavored liquors and liqueurs in the fastest growing sectors of the alcohol industry. Thus drinking behavior is changing within the new generation of consumers, the post recession millennials (euromonitor.com, June, 2015). SALES FORECAST Although beer is still the top selling alcoholic beverage nationally, the 2013 beverage Group Handbook Advance reports that over the previous five years (2007-2012), beer consumption has declined 4.5% while wine has grown 9.0% and spirits has grown 13.3%.

Figure D: Alcoholic beverage sales, by percent growth or decline, from 2007 to 2012 (Compiled from 2013 Beverage Group Handbook Advance)

-‐5.00%

0.00%

5.00%

10.00%

15.00%

2007-‐2012 Five Year Alchol Sales

Beer

Wine

Spirits


By examining the consumption and the location of the consumption, 76% of alcohol is consumed off-premises from the sale and 24% is consumed on-premises. In other words, 76% of alcohol is sold in a retail location and consumed in a residential/private location, and 24% is consumed in a public location such as a restaurant, bar, or ABC permitted facility like a banquet hall (Source 2013 Beverage Group Handbook Advance).

Figure E : Location of Alcohol Consumption (Adapted from: 2013 Beverage Group Handbook Advance) Restaurants are required to purchase spirited liquor from ABC stores, and by law, not directly from either the state or wholesale suppliers. As a result, restaurant mixed beverage sales (“MBX”) increase the revenue numbers more than just the ABC store walk-in traffic alone. Based on interviews, estimates are it will take 2-3 years to become profitable with accelerated restaurant or hotel sales. Currently two Troutman restaurants have alcohol permits that are serviced from Mooresville stores. It is anticipated these sales will transfer to the Troutman ABC store if opened. Future commercial establishments will increase sales with the opening of each establishment or permitted location (restaurants, hotels, special events etc.), as typically sales increase to meet the restaurant needs. The four interviewed ABC Boards reported that difficult economic times will affect total revenue in a store, but the volume, or number of bottles sold through retail sales remains steady. This was evident in the economic downturn beginning in 2008. The customers began to choose lower priced options, smaller bottle sizes, and there were fewer sales of higher priced specialty or premium bottles. One respondent surveyed stated that, “alcohol sales are recession proof”. Consequently sales will still occur, just at lower dollar amounts, with bottle volume sales the same. The exception to steady sales is the occasional special event in the area such as a golf tournament. The Catawba County ABC said the Rock Barn Golf Tournament in Conover provided a temporary sales spike. A similar temporary spike could be anticipated during racing weekends in our area when many guests visit and rent rooms in the county. Historically, where a recession will affect sales is the mixed beverage sales (MBX) industry. Fewer people go out to eat and travel to bars or stay in hotels with bars.

LocaFon of Alcohol ConsumpFon

On-‐Premise ConsumpSon


One major way retailers can keep up with consumers is being willing to change and stay current on evolving trends. This is true in the spirited alcohol industry where flavored spirits are growing faster than total spirits. Managers are reporting they now are looking for ways to increase the amount of sales floor space as more flavors and choices are coming out than ever before. The shortage in warehousing is balanced when possible with higher shelving. Although privatizing the North Carolina ABC system is not likely in the near future, this research would not be complete without mentioning the argument of privatization. There have been continual attempts to privatize ABC sales in North Carolina by allowing direct sales from beverage wholesalers. If privatization were to occur, the possibility exists that the local ABC Board would no longer be responsible for sales but still be financially liable for any real estate leased or purchased. Site Location LOCATION CONSIDERATIONS In making a site location decision a number of factors will influence the site choice. Site location factors are listed below as either primary or secondary. Depending on the unique situation of each facility, the model is dynamic, with some factors changing from primary to secondary, or vice versa. Site Location Factors: not in order of importance Primary Factors

• Location • Cost • Building or land size • Traffic patterns • Visibility • Accessibility, Roads • Utilities • Zoning • Safety

Secondary Factors

• Economic conditions • Quality employees, especially management • Ample parking • Population growth • Competition (determined by ABC Board) • Customer drive time


• General appearance of the surrounding area • Curb appeal, first impressions

Frank Raeon, a Principal of the company Location Decision Advisors is author of the book, The ABC’s of Site Selection. Direct correspondence with the consultant explained his formula called “PASTA V”. When looking for client sites in the national retail and restaurant sectors Mr. Raeon looks for sites that best meet these criteria (not in order of importance). “PASTA V criteria:

ü Both adequate and conveniently situated Parking ü Easy Access (“People hate medians. Also, they welcome full turning movements as

opposed to being restricted by ‘right ins and right outs”’). ü Good Signage – “the more the better” ü Traffic “by the front door; being around the corner or just off the corner can be a

deterrent to sales - maybe even the kiss of death". ü Activity in the area; “I like to be in busy business corridors which generate traffic 12-15

hours a day, typically 7 days a week”. ü Unobstructed Visibility; “If trees or buildings block either my sign(s) or my windows my

business will suffer and sales will never be maximized”. (Used with permission, Frank Raeon, 2015) LOCATION THEORY FROM INTERVIEWS Interviewees collectively provided first hand knowledge of the North Carolina spirited alcohol industry and shared their opinions on what is important to have a successful ABC store location. Two factors were tied for first place in their site location selection:

Ø Traffic counts Ø Location near an anchor store.

Traffic counts determine the number of potential customers passing by. The proximity to an anchor store brings in additional potential customer traffic, as well as built- in free marketing opportunities. Since North Carolina laws prohibit advertising of ABC retail stores, this free marketing by an anchor can be critical in generating customer traffic. Interviewees generally stated that an anchor store that sold food was favored, such as a grocery store or Super Wal-Mart. One store manager took their explanation a step further and said, “locating near a grocery store is ideal”, because the next stop a customer makes after leaving the ABC store is the grocery store for accessory items such as soft drinks, mixers, lemons and limes.


Specific to a potential Troutman location, ABC personnel were asked about the opinion of locating at Exit 42 where the anchor store would be a Lowe’s home store rather than a grocery store. Although all the interviewees agreed the area had good traffic counts and liked the area, the Lowe’s anchor was an unknown influence. Nobody had experience near a Lowes anchor from the eight people interviewed. There are pluses and minuses of locating at Exit 42. Plus An existing anchor in place Good accessibility and traffic through two major roads, an interstate and NC highway Anticipate extensive new development surrounding sites Lots are graded and ready Utilities are available Minus Existing anchor is not a grocery store Land is priced high, as if considerable commercial development was already in place Careful consideration should also be given to stand-alone ABC retail stores that do not have other businesses nearby that will also draw in traffic. Unless there are other compelling reasons for their location, such as interstate traffic, these potential sites are not recommended. Safety was the second most cited location criteria the interviewees mentioned in importance. One manager said approximately half the sales were to women. It was critical the store be in a safe environment, well lit, and with close, ample parking. A building with physical traits such as an updated façade and modern inside layout were regarded as part of the welcoming and safe appeal. The last items mentioned by the eight interviewees were accessibility and visibility. Customers want to easily find the business and have an uncomplicated method to access the site. The store will not be successful if it is at the back of a shopping area and difficult to find or see. In particular, with the limitations from sign ordinances and the inability to advertise by law, visibility gains even more importance. In summation, the eight interviewees’ site factors as compared to the national site consultant are comparable: Local Interviewees National Site Consultant Traffic Traffic Accessibility Access Visibility Visibility of the building site Parking Parking Located near an anchor store Activity in the area Safety Signage

Melanie O'Connell …, 8/12/2015 11:49 AMComment [1]:


According to one employee at the Raleigh NC ABC Commission headquarters, by North Carolina law, all retail ABC stores “must maintain a minimum 50 foot setback, door to door, from any school, daycare, or church” (Laurie Lee, NC ABC Commission). Each of the top three proposed sites below meet these setback criteria. One store manager said, “many customers have told them they drive to this particular store which is farther away because the employees are more friendly and helpful, it is easy to get into, the store is well lit, it has ample parking, and the appearance and décor does not give the store an older look”. OTHER GENERAL LOCATION FACTOR In consideration of obstructions such as speed bumps, gates, medians, one way streets or disconnected outparcel paved areas, the traffic engineer, developer or Department of Transportation staff should be consulted prior to locating within a new shopping center. An approved town “business” zoning classification will be required. All sites recommended for final consideration are zoned for business. The site currently zoned residential did not make the final recommendation list. Many ABC store operators expressed the opinion that they wished they had more space available for expansion. Before breaking ground, the business plan should consider ideas for future growth. If possible, a building that is expandable should receive high consideration. Per ABC Store interviewees, when possible a building with a loading dock is highly preferred. Merchandise can be offloaded with a hand truck but it is very time consuming. Currently only one of the vacant buildings considered for this project has a loading dock. That building is the former Galaxy Foods site, but it is not recommended as a top contender. POTENTIAL SITES As a general rule when planning space requirements for an ABC store the space is split approximately half for retail space and half for back-stock inventory. ABC Commission personnel at the state level reported that at a minimum a store should be 2,000 square feet (sf). However based on their experience, general managers, indicate this size is much too small, and revealed that at least 3,000 sf is necessary, with the provision extra inventory space is available at sister stores. Hendersonville, NC built their new store in 2012 at 4,000 sf space, but does not plan to maintain a large inventory. Their inventory will be stored at sister stores. In comparison, when they built new stores from the ground up, both Statesville and Mooresville built 8,000 sf of space for their stores.


• Statesville downtown, in former grocery store is 11,000 sf with 3200 sf of retail • Statesville I-77/ Garner Bagnal Boulevard is 8,000 sf with 3,390 sf of retail space. • Mooresville stores range from 7200 to 8000 total square feet with approximately half in

retail space Therefore, without Troutman having a sister store to help in storing stock, a minimum square footage of 5,000 sf is recommended to allow for both adequate inventory room and retail space. The following high-traffic prominent sites are available in Troutman, both buildings and vacant acreage summarized separately.


Prospective Building Sites Site 1 Former Kentucky Fried Chicken (KFC) building, Troutman Village Shopping Center:

o 2,240 sf vacant building o 1.19- acre outparcel o Food Lion grocery store anchor o Lease price is $3,000 per month o Sales price $750,000 o No loading dock o Owner Preston Cornelius and Family, 704-664-5460

Former KFC site (below):


Site 2

o Left (north) end unit, currently vacant space, Troutman Village Shopping Center o 7,268 sf o No loading dock o Lease price is $6,000 a month, ($9.90 sf), plus common area charges, calculated on

square footage within whole shopping center (for example, snow removal). o Two-year lease required o Beaver Sports Properties, Inc. 828-612-0928, Represented by Linda Hoke

Site 3


o Former Bank of America Building o 2,200 sf o 3.12 acres o Lease price $2483 a month, ($13 per sf) o Purchase is not an option at this time. o Will not allow expansion o Agent is CBRE, represented by Berry Allison, 980-641-6300 o Owner is First State Investors, PO Box 961025 Fort Worth, Texas 76161

Site 4


o Galaxy Foods- vacant o 14,000 sf o Has loading dock o $850,000 sales price, will lease but prefers to sell o They have several interested buyers who would buy, renovate and lease out if there is a

tenant o Rep by Jay Snover, Legacy Real Estate, 704-634-4555

Sites 5 and 6


o Northwest intersection of Main Street and Talley Street o 1100 sf, side of building is $1200 month o 2600 sf, back side of building, $2500 month o No loading dock o Represented by KW Commercial, Roger McCamaron, 704-785-4212

Side view

Prospective Land Sites


Sites 7 and 8

o The Charles Center, near the northern intersection of I-77, Exit 42 o Lot 5, undeveloped, 1.37 Acres, $503,500 o Lot 7, undeveloped, 1.19 acres, $494,000 o “Edwin Hunter” 704-880-3494, 704-437-1742 o Two provided drawings from landwatch.com:

Sites 9 and 10


o Exit 42 near Lowe’s o Merrifield Realty, Patrick Vermillion or Eric Nichols, 704-367-5003 o Garland Hughes returned the call, o 1.82 acres across the road from Sheetz, $750,000 o 4.85 acres behind Sheetz, across from to Lowe’s parking $1,250,000

Site 11


o Downtown Troutman o 1.31 acres o Intersection of Main and Eastway Streets, Side is E. Church Street, Rear is North Street o No anchor retail nearby o Zoned residential o Provided drawing by Landwatch.com

(Provided by website Landwatch.com)

Site 12


o Exit 42 o 1.34 acres to the west of Highway 21/115 o Across from McDonald’s, Auto Zone and Lowes o $1,300,000

Top: provided drawing from Landwatch.com:

Site 13


o 1.55 acres o $799,000 o Across from Lowes, to the west of Highway 21/115 near Bojangles o Provided drawing from Landwatch.com


LOCATION CONCLUSIONS Top five recommended options: Site A. North (left) end unit of Troutman Village Existing 7,268 square feet of space Costs: Rent $6,000/ month, x 12 $72,000 Renovation $70/ sf x 7268 sf $508,760 (Full space priced: however, warehouse will cost less to renovate) ________ Total $580,760 B. Rent and Expand Kentucky Fried Chicken Building $3,000/ month x 12 $36,000 Renovations $85 x 2240 sf $190,400 Expansion $150 x 2500 sf added $375,000 Total $601,400 C. Buy and Expand Kentucky Fried Chicken Building Purchase $750,000 $750,000 Renovation $85 x 2240 sf $190,000 Expansion $150 x 2500 sf added $375,000 Total $1,315,400 D. Buy, Demolish and Build on Kentucky Fried Chicken Purchase $750,000 Demolish $12,000 Build new $150 x 5000 sf $750,000 Total $1,512,000 E. Buy Land and Build at Exit 42 Land, 1.82 acres across from Sheetz, North side of 21 Buy $750,000 Build new $150 x 5000 sf $750,000 Total $1,500,000


Exit 42 Land Sold Comparatives (“comps”) Exit 42: Sheetz Gas Station 1.776 acre 1,100,000 $619,369 per acre 12/27/2012 Exit 42: McDonalds 1.18 acre 900.000 $762,712 per acre 2/23/2009 Exit 42: Norlinaz .9 acre 590,000 $540,000 per acre 7/16/2010


Conclusion There are many factors that influence the location of a retail store. Using the unique opportunity to get direct, in-depth information from personnel working in the ABC store business, site location factors were drilled down to those that most impact success. This feasibility study examined five main considerations: Potential Customers Research revealed that determining the number of potential customers is the most important factor in assessing location. Given that the locations researched were all located along Main Street/Highway21/115, potential customers will come from traffic where as many as 12,000 to 15,000 average daily cars pass the sites. General population within reasonable driving distance is a major resource. A total of 16,855 local residents over the age of 21 are located within a 5-mile radius of downtown Troutman. With the upswing in residential development noted during planning department discussions, these newcomers will add to potential customer inventory. Research indicated that customers typically are willing to drive up to 18 minutes to visit a specialty store such as an ABC facility. Estimated Sales Data indicated that nationally, approximately 64% of the population has an occasion to drink alcohol, and 23% consume liquor. This percentage of drinkers consuming spirited alcohol is growing, in part due to the increase in production of flavored spirits, premium higher-end liquor, ready-to-drink prepackaged mixed products, and the demographic influx of millennial, or younger drinkers. Based on our research an estimated $1.3 million in sales could occur annually at a proposed new Troutman ABC store. This exceeds the minimum threshold generally stated by the North Carolina ABC Commission of $1,000,000. Using the average 3.44% (net profit) of ABC Boards in the eight towns with a comparable population to Troutman, $44,720 will be available annually to pay down the debt on a new facility. Using the much higher 7.5% net profit ratio for the four ABC Boards interviewed, there will be $97,500 available to meet annual debt. Melanie O’Connell Underwood Economic Development Consulting believes a realistic profit ratio is closer to 6% based on the wealth of the interviewed communities, population growth, and likely continued commercial growth. Startup Cost The costs of startup expenses, excluding construction costs, are broken into five major categories: inventory, fixtures, security, computers, and general. Using knowledge and records from four NC ABC Boards and the North Carolina ABC Commission, costs are estimated to be $241,000 to open a store.


Facility Cost Construction costs will vary depending on the choice of renovation and or expansion of an existing structure, or building new. Prices range from $70 a square foot at the low end for renovating an existing shell requiring no demolition, to as much as $200 a square foot to build a new building with higher-end upfit. Based on sites in the final recommendations, construction cost ranges from $508,760 for renovation of 7,628 square feet of existing space downtown to $1.5 million to buy land and build a 5,000 square foot new structure at Exit 42. Location MOUEDC recommends considering locations at the former Kentucky Fried Chicken building, the nearby vacant 7,268 sf space in Troutman Village shopping center, and vacant property at the Exit-42 near the Lowe’s store. Depending on the financials and length of the loan the ABC Board decides to undertake, the ABC Board will have a choice regarding the size and prominence of their store. Public financing for this type of project is favorable in the current economy. Interest rates are approximately 3.5% for this type of project. Based on an interest rate of 3.5%, with a 15-year amortization, financing a facility will cost the following: Loan amount Annual Debt Service $600,000 $51,480 $800,000 $68,640 $1,000,000 $85,788 $1,300,000 $109,620 $1,500,000 $126,480 Using these figures and previous projections of $44,720 to $97,500 available to pay off the debt, it is recommended properties costing above $1,000,000 be eliminated. In summation, given the supporting population, estimated sales, startup cost and estimated facility cost, the information and data gathered supports the success of an ABC store in Troutman if acquisition expenses meets the budget, and the facility is properly located and managed. A special note of appreciation is given to the staff and boards of the Statesville and Mooresville ABC Boards. Although a new Troutman store has the potential to pull customers away from the Statesville or Mooresville stores they were not hesitant to share their knowledge. The staffs have offered to help in any way possible including ordering stock and set up.


References Abernathy, Ray. (7/8/2015), Catawba County ABC Board General Manager, Interview The Beverage Group Handbook Advance, 2013 The Beverage Info Handbook, 2013 Brightlocal. Com, 2014, Diving Times to Local Businesses Brown, Nathan. Finance Manager, Mooresville ABC Board, Interview City-Data.gov, 5-mile population radius English, Powers, General Manager, Hendersonville ABC Board, Interview Euromonitor.com, June 2015 Fox, Kim. Store Manager, Mooresville ABC Board, Interview Gallup.com, 2015, 2014, 2012, 2009, Annual Survey of Alcohol Consumption Goins, Ben. Chairman, Mooresville ABC Board, Interview Kimley-Horn and Associates, 2015 US Highway 21/NC 115 Corridor, Traffic Circulation Plan Ipsos.com Iredell County Register of Deeds, Deed Records, 2015 Iredell County Tax Department, 2015 GIS files Irvin, .General Manager Mooresville ABC Board, Interview Lee, Laurie. Director of Audits, NC ABC Commission, Interview Martin, Erika. Planning Director, Town of Troutman, Interview McMahon, Tom, Owner, Sperry Van Ness Realty, Interview Nicholson, Tip. ( , Statesville ABC Board General Manager, Interview North Carolina ABC Commission, 2014 Annual Reports Palmes, Bob. GL Wilson General Contractors, Interview Raeon, Frank. The A B C’s of Site Selection, Xlibris, LLC Raeon, Frank, Principal, Location Decision Advisors, email, 7/18/2015 Statistica.com, Town of Troutman, Permits 14-15 Town of Troutman Residential and Non-Residential Projects, 2014-2015 Town of Troutman, Zoning Map, 2015 Town of Troutman Land Use Plan, 2035, Div. of Community Assist., NC Dept. of Commerce U.S. Census Bureau, 2010, Decennial Census

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