Iryna Makarenko

Location is one of the most important variables affecting a restaurant's chances for success. For a restaurant chain the site evaluation process is even more complex than for an independent food service facility. With the shift from growth to maturity in the life cycle of restaurant franchise systems and markets tending towards saturation, the greater is the likelihood of cannibalization. One way to better predict the cannibalization effect involves spatial interaction modelling. The aim of this paper is to develop the Huff model for a major full-service restaurant (FSR) chain. Huff's Market Area Planner is used to calibrate the model on customers flow data and derive parameters for distance-decay function and 'attractiveness' variables - restaurant size and traffic count. More specifically the study focuses on simulating a new restaurant opening scenario and investigating the potential impact on the existing restaurants in terms of cannibalized sales volumes. Prediction of cannibalization losses allows the FSR under study to make better-informed decisions with respect to new restaurant introduction resulting in improved profitability for all outlets in any given market. Due to commercial sensitivity, the names of the restaurant chains involved have been omitted to maintain confidentiality.