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Branching: Location, Location—Which Location?
Thursday, January 4, 2018 6:45 AM

Anthony Burnett, Customer Experience Director, LEVEL5, LLC

U.S. Consumers and the Branch
There's no denying that the number of branches in operation today is less than before the great recession. However, when you consider a recent IMF study, the number of branches is rising.

Branches per Adult

Per their research, the peak of branches per capita was 35 in 2009. The low point was 33 in 2014, the same level as 10 years earlier. But in 2015, the number of branches per 100,000 U.S. adults started rising again. So let’s talk about one of the key steps in making sure when you do decide to offer a branch, you get what you want.

Good to Great:  Site Selection. The first step in site selection is not the real estate procurement but establishing the business case. Site selection is the marriage of market analysis and real estate procurement. In a fintech and omni-channel banking world, understanding why to invest in the branch is crucial. For credit unions, the why is about loans and deposits.

Begin with the End in Mind. When it comes to site selection, the approach matters. Here’s why: If the business opportunity in a market can support the branch (historically branch profitability is achieved at $25 million in new deposits) then the critical component that takes the opportunity from good to great is how to procure the real estate.

Face the Brutal Facts. Selecting the best site for a branch or main office opportunity is not a matter of selecting the right broker. Brokers can serve a role in selecting a site, but brokers are not the answer. In site selection (market analysis and real estate), it is about realizing business opportunity, which of course is loans and deposits.

A Retail Perspective. In retail development, there are two users that every owner wants: pharmacies and credit unions. Owners of land understand the correlation of location and performance, and they understand that business opportunity is worth a hefty price.

Good Is the Enemy of Great. What if you could get the property you want, but the owner doesn't know their end user is a credit union? If they knew, you could avoid the premium for the industry and have a greater opportunity for the business to perform.

Furthermore, what if their site selection approach allowed them to negotiate contracts and perform all due diligence (surveys, environmental; and geotechnical test)? 

Brokers don’t study markets to define loans and deposits, they don’t negotiate contracts, and they don't handle due diligence. So, site selection in today's competitive market is so much more.

Actionable Strategy—Getting What You Want. For a branch or main office opportunity to be realized, the process has to move from strategy into action. Many firms speak to market opportunity or operations analysis, and even more firms design and construct financial facilities. However, it is taking action on the best location that brings branching and main office solutions to life.

Site selection is only one piece of the puzzle to successful branching, but going from good to great can be the key to achieving your branching goals.

If you want to learn more on this topic and others about branching, click here.

LEVEL5 is an endorsed business partner of Credit Union Resources, Inc., a wholly owned subsidiary of the Cornerstone Credit Union League.