Labarre Associates, Inc.

Strategic Facility Planning Can Radically Transform Your Branch Facility Operating Cost Structure

While line item cost reduction and strategic cost control programs control the “cost” portion of cost per square foot, strategic facility planning creates value through control of the “square feet” portion. Strategic Facility Planning is a process that aligns the facilities future of the organization with the financial future.  For some, it’s a simple long-term capital plan, while others use the following steps:

1. Where you’ve been – Gathering information about your current and past operating cost, fixed assets, organization, customers, demographics of current locations and other key metrics provides a solid back drop to answer the question – have we been doing a good job (Branch-wise) up till now?

2. Where you’re headed – If you are interested in growing total assets, how will new Branch locations get you there?  Where do you want to be located (Come on – you know.  You just need the research to confirm what you see driving around town).  If there is disagreement regarding locations, what are the facts (traffic counts, demographics etc.) that can support a solid fact-based decision.  What is the pro-forma for these locations and what will be the key success factors?

3. How to get there – Your organizational philosophy about Branch locations is an important first step in deciding where to locate.  However, the realities of the current real estate market, combined with regulatory constraints, like the fixed asset ratio, can severally limit your options in today’s market place.  There are three strategic opportunities in today’s real estate market that have combined to drive new approaches to growing your branch network:

  • Old Starbucks converted to LES Credit UnionAvailability of vacant, stand-alone retail stores in prime locations – You don’t need to read an article to know that Starbuck’s, banks and other retailers have generated quite a number of vacant buildings across the nation.  (See photo at right: a Starbucks converted to LES Credit Union)  “We’ve remodeled both vacant Branches and retail space for clients for about sixty cents on the dollar compared to new construction” said Jay Labarre, AIA, CFM, President and CEO of Labarre Associates.
  • Available retail space in strip shopping centers – especially the coveted “end cap” units, which can be easily converted to drive thrus.
  • Willingness to rethink branch operations – many financial institutions are reducing staffing levels for new branches and the smaller, more compact branches are infused with branding and cross-selling tactics to improve both the customer experience and “share of wallet.”

4. Review, analysis, and consensus building - Strategic facilities planning is not that different from politics.  There may be different contingents within any organization  advocating various approaches to locating branches.  Financial analysis for multiple options provides a foundation for understanding the impact of different approaches and when layered over other data like traffic flow and demographics, the best solution typically rises to the top.

One caveat is “know thy customer.”  Years ago, one financial institution thought they had hit a home-run because they secured a coveted site in a country club area with superb demographics, traffic flow and by every key metric they thought they had a winner.  As it turned out, the location never met expectations. Upon analysis and reflection they realized that they weren’t a country club financial institution.  They quickly relocated to a new location where the demographics more closely matched their customer profile and where their product offerings and income potential had a better match with the demographics.

Financial organizations have had to dramatically alter their approach to managing and growing their branch network.  Banks have focused on acquisitions and Credit Unions are downsizing and locating branches in shopping centers and stand-alone retail locations.

Some organizations like Campus Federal Credit Union in Baton Rouge have taken the time to use the strategic facility planning model in new ways to leverage long-term corporate goals.  “We used the strategic facility planning process, not to identify when we would have to expand our headquarters, but to answer the question ‘how long can we postpone construction of a new facility?’” said Rob Nading, Manager of Facilities and Purchasing at Campus Federal.

All financial institutions have had a laser-like focus on improving operating cost over the past few years.  Those who have embraced new cost control methods have been secure in their repair/ remodel/ expand/ buy/ sell decisions and those who have developed a strategic facilities plan have had a chance to pro-actively improve their future cost structure for branches.

Posted: October 20, 2017