McDonald's, Starbucks and Subway do not guess where to open. They run detailed trade area analyses, demographic modelling and competitive mapping before committing to any site. Here is what they look at — and how you can replicate it without a corporate research budget.
What franchise location teams actually analyse
A major franchise's location team analyses five categories before approving any new site: trade area demographics (who lives or works within driveable distance), traffic counts (both vehicle and pedestrian), competitive landscape (how many similar brands are present and how well-traded they appear), rent-to-revenue modelling (does the projected trade support the lease cost), and cannibalism risk (would this new site pull customers from an existing company location). Most franchise systems require a site to clear every category before approval — one failing metric is enough to kill an otherwise attractive location.
Trade area models: the numbers franchises actually use
Franchise brands define primary (80% of customers), secondary (15%) and tertiary (5%) trade areas. These radii are not guesses — they are derived from years of customer postcode data at existing locations. Understanding the standard trade area for your business type is the starting point for any serious location analysis.
These thresholds are starting points, not guarantees. A café in a CBD office precinct may need only 800m of trade area because the daytime worker density is so high. A boutique gym in an affluent low-density suburb may draw members from 8–10 km because the nearest comparable facility is far away. The model is a filter, not a formula.
How McDonald's uses the 3-minute drive time standard
McDonald's Australia models its primary trade area as a 3-minute drive time — not a fixed radius. This captures the geographic reality that a site on a major arterial road reaches more households in 3 minutes than a site on a side street. The team then counts the population within that drive time and segments it by household income, household size and daytime worker population. A site needs at least 15,000 people within the 3-minute drive time to be considered viable for a new store.
The franchise location checklist adapted for independents
1. Define your primary trade area radius based on your business type (use the table above) 2. Count the population within it — ABS TableBuilder provides suburb-level data 3. Check daytime worker population separately via ABS Working Population Profile 4. Map every direct competitor within 1.5x your primary trade area 5. Model rent as a percentage of projected monthly revenue (target: under 12% for cafes, under 15% for restaurants) 6. Assess cannibalism risk: would nearby complementary businesses send you customers, or compete for the same slot?
Traffic counts: what franchises measure and how you can approximate it
Major brands pay for vehicle traffic count data from traffic authorities and pedestrian count data from council infrastructure records. They correlate traffic volume with observed trading levels at comparable sites to project revenue potential. Most state road agencies publish average daily traffic (ADT) counts on their websites — this data is free and covers major roads. For pedestrian counts, capital city councils (City of Melbourne, City of Sydney) publish annual pedestrian sensor data that covers key shopping strips.
For a café or food business targeting pedestrian traffic, the minimum thresholds franchise systems use are: 150+ pedestrians per hour past the site for a viable coffee operation; 300+ per hour for a quick-service food concept. These counts should be measured during your target trading hours, not averaged across the day.
Rent-to-revenue: the financial test every franchise applies
Before any franchise approves a site, it must clear a rent-to-revenue test. This is the lease cost as a percentage of projected annual revenue. The approved range varies by brand and business type, but the benchmarks used across the industry are consistent.
For an independent operator, this test is just as important as for a franchise. A café paying $5,000/month in rent needs to project at least $40,000–$50,000/month in revenue to sit within the acceptable range. If the location cannot support that revenue based on trade area analysis, the economics will not work regardless of how good the coffee is.
Why franchises sometimes get it wrong
Even well-resourced franchise systems make location mistakes. The Starbucks Australia retreat in 2008 — closing 61 of 84 stores — is partly a story of locations that cleared the trade area model but failed in practice because the model was calibrated on US customer behaviour rather than Australian café culture. The methodology was sound; the calibration data was wrong. For independent operators, the lesson is that your location data must be Australian-sourced and your revenue projections must be based on comparable Australian businesses, not overseas benchmarks.
The independent advantage: locations franchises cannot take
Independent operators can access locations that franchise systems are structurally unable to approve. Franchise networks have minimum footprint requirements (most QSR brands require 150sqm+ with dedicated car parking), brand consistency standards that exclude heritage buildings and unusual formats, and cannibalism rules that prevent opening near existing franchisees. This creates a genuine opportunity class for independents: laneways, small-format premises under 80sqm, emerging suburbs before rents rise, and locations inside other businesses. None of these sites would pass a franchise approval process. All of them can work for a well-capitalised independent with the right concept.
Where independents beat franchises on location
Laneways and small-format sites under 80sqm — franchise minimum footprints exclude these Emerging suburbs before rents rise — franchise systems require proven trading history Heritage and unusual buildings — brand standards prevent franchise approval Residential-commercial hybrid formats — not compatible with franchise operating models Concession inside complementary businesses — franchisors prohibit this for most systems
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