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It started, as so many small business ventures do, with a shudder of career restlessness spurred on by a sense of opportunity.

In late 2006, Marc Javet, a sales and marketing veteran in the food industry, was working for Starbucks in Toronto. His friend Mark Wilson, a chef, had a job at Nestlé Canada. From years of experience, the two knew that the "home meal replacement" market—fresh, ready-to-eat meals for harried urbanites—was sizzling, and they figured it still had plenty of room for a couple of newbie entrepreneurs. "It all started with takeout rotisserie chicken in supermarkets," recounts Javet. "We wanted to capitalize on that trend." They settled on a plan to open high-end food shops where Torontonians could pick up prepared gourmet fare on their way home, cooked by Wilson and his fellow chefs in an open kitchen behind the counter. "Nobody was doing exactly what we wanted to do," says Javet.

Over the next several months, the duo prepared a business plan, did market research and lined up financing. Their three- to five-year plan was to open four or five Marckets, as they decided to brand the concept, using a confection of their given names. But in a city full of discerning foodies and bustling neighbourhoods, Javet and Wilson understood they'd need to find just the right place to get started: a location with enough untapped affluence to generate traffic, but not on an A-list retail strip with ruinously expensive rents and entrenched competitors. They wanted an area that was "about to hit."

That's what everyone wants.

Launching any new venture involves many components: financing, partnership agreements, marketing strategies. But upstart retailers like Javet and Wilson obsess about the address, and for good reason. The history of retailing is filled with tales of merchants who were brilliantly prescient in their location choices, and others who totally misread their markets and fell flat. In the 1970s, the T. Eaton Co. became a textbook example of the latter when it built huge department stores in the increasingly empty downtowns of small Canadian cities; far from reviving the cores, the stores failed as consumers kept taking their business to suburban malls. By contrast, successful independents like sports-gear retailer Sporting Life and Pusateri's, a high-end supermarket, became success stories partly because of inspired choices for their first outlets: visible and easily accessible sites in up-and-coming Toronto neighbourhoods.

The selection process almost always comes down to balancing the competing demands facing new businesses. Is it better to head for the safety of a mall or go for the unpredictable world of Main Street retail? Are you a bona-fide destination store with a specialty no one else has mastered, or are there dozens of small businesses vying to eat off your plate? Do you wager everything and locate next to your toughest rival, or opt instead for the terra nova approach? In many ways, these questions are much like the one that many a home buyer struggles with: Should we buy the best house on a crummy street, or that fixer-upper on the best street?

Experts acknowledge that making a smart location choice often involves going with your hunches. But they warn that it's critically important to do your homework and then avoid the temptation to throw it all away for a low-traffic site simply because it's cheap and available. "It's astounding how many people skimp," says Toronto retail consultant Richard Talbot. "No one knows where they are."

KNOW YOUR CUSTOMERS

Long before Javet and Wilson considered specific sites, they worked on defining their business's competitive positioning and clientele. "We didn't want to be a bargain-basement concept, so that allowed us to look at where this place would fit best," says Javet. It may sound self-evident, but the first step in choosing a location is to understand what you do. Some retailers deal with their customers every day or every week, so convenience is key; others—such as clothing and electronics stores—have a more sporadic relationship with their clientele and must draw on a larger base of prospective customers.

For their part, Javet and Wilson were looking for a storefront site that would be on the way home for residents who've had a long day, want a decent meal but don't feel like cooking. Once they'd fixed on upscale downtowners, the two men pored over Statistics Canada reports, looking for Toronto neighbourhoods with sufficiently high average income levels and plenty of families and professionals. They also dug up analyses of the dynamics of the meal-replacement market in trade journals and attended trade shows to see who else was playing in this field. In the age of the Internet, such information is only keystrokes away. "You've got to dig," says Javet, "but it's all online."

Statscan's fine-grain census data, broken down by postal codes, is an essential resource for new retailers. "The demographics are pretty critical," says John Crombie, national retail director for real-estate agency Cushman & Wakefield LePage. "It may confirm what they know, or it may make them think twice." Failing to heed the local demographics can soon lead to disaster. Talbot cites the case of a Middle Eastern supermarket that recently opened near his office in Unionville, Ontario. While Greater Toronto has a large Middle Eastern population, Asians are the dominant group in Unionville. "I would say it's not a brilliant place to put a halal store," says Talbot.

But demographics are just one piece of the location puzzle. Consultant Stephen Knight, president of Sitings Realty Ltd. in Vancouver, advises his clients to appraise the broader "trading area" to see how they'd fit into the metropolitan fabric. That means plotting the locations of competitors and assessing transportation networks. "You have to decide whether or not you're serving a local market and how customers will arrive at your store," adds Jim Smerdon, senior associate with Colliers International Realty Advisors in Vancouver. "You start to carve up the market by basically putting pins on maps."

When Mountain Equipment Co-op looks for a new location, the B.C.-based sporting-goods chain goes into great detail in assessing the "propensity level" of an area, says vice-president of operations Gary Faryon—for example, weighing the concentration of nearby recreation and sports facilities such as hiking trails and ski resorts. "We build a matrix and score each city for recreational opportunities," says Faryon. While smaller retailers may not have the destination draw that MEC does, the point is that it's important to figure out how the new business will fit with the rhythms and tastes of an area.

And that's where gut instinct enters the picture. Faryon recalls doing due diligence on a new MEC store that opened in Quebec City in 2004. Long before settling on a site, he spent two days walking the city, looking for pedestrians who seemed to fit the profile of a MEC customer: health-conscious, active, out and about at night. He eventually homed in on an older area between the core and the historic precinct that had once been home to the city's department stores. "We don't need to do traffic counts. We go there and observe."

KNOW YOUR NEIGHBOURS

By the spring of 2007, Javet and Wilson had identified 10 prospective neighbourhoods, then narrowed their search to a short list of two. In the process of weeding out possibilities, they eliminated some seemingly obvious choices, such as a busy, upscale stretch of Bayview Avenue, in the heart of one of Toronto's more affluent neighbourhoods, Leaside. On paper, Bayview seemed like a perfect location. But with high rents on the street and plenty of high-end food stores, the partners felt it would be a hard strip to crack, in spite of all the walk-by traffic. "To start a new concept in a highly competitive area would have been all that much more challenging," says Javet.

The mix of neighbours or co-tenants is a critical factor in any location decision, but the calculus can be complex. For some retailers, for instance, the best choice may be to ride someone else's coattails. "If you have a concept and want to reach a larger trading area, you may want to be next to a retailer with a larger draw," says Knight. "You want to benefit from their traffic."

That's how Joe Calvano, founder and CEO of Dollar Giant, started back in 2001. A former Kmart executive, Calvano had his eye on the fragmented deep-discount sector. He figured there was a niche for dollar stores that didn't feel like dollar stores, and that would appeal to moms and teens. "We knew we weren't going to be doing a lot of advertising, so we wanted a location with high traffic that was easy to see and on the way to destination shopping." He settled on a 2,000-square-foot store in Burnaby, B.C., just down the street from a Wal-Mart that attracted his target audience. The gambit worked: today, Dollar Giant has 60 outlets across the country, many of them in power malls anchored by large merchandisers.

But that's not the only way to tap rivals' drawing power. Most big cities have strips where retailers specializing in certain product categories will cluster together, creating convenience and choice for consumers, as well as intense competition among those businesses. In Toronto, for example, a stretch of Mount Pleasant Road, an uptown artery, is dominated by fine-art and antique dealers. Edmonton's lively Whyte Avenue, in turn, is home to many of the city's best bars and large-format eateries. And Vancouver's Yaletown has come to be known as a neighbourhood patronized by upscale condo dwellers searching for designer furnishings. These areas become destinations unto themselves, and all the players benefit. Says Jim Smerdon, "There's a good reason for locating near competitors."

Sticking close to rivals isn't the only approach, of course. Small retailers may seek out locations where there are no competitors, with an eye to locking up a market. Fresh & Wild, a produce retailer modelled on Whole Foods, chose as one of its first locations the ground floor of a newly constructed downtown condo tower, situated at an intersection with virtually no access to supermarkets. But, as Knight points out, there are no guarantees that exclusivity will endure, especially if the concept proves successful. "The reality is that someone could always go in across the street."

In the case of Marcket, Wilson and Javet zeroed in on a stretch of St. Clair Avenue West, a long-neglected artery that has shown signs of new life in recent years. They had confidence that the area was trending up because Javet's former employer, Starbucks—a company that selects locations with scientific precision—had opened a coffee shop in the neighbourhood a few years earlier. The arrival of a Starbucks is often a sign of maturing gentrification (a phenomenon dubbed "the Venti Indicator" in retail circles), which was just the sort of wave they wanted Marcket to ride.

For intrepid merchants looking to explore relatively untapped areas, the trick is to figure out whether a worn-looking retail strip or mall is trending up or down. It's something of a chicken-and-egg problem. A great retailer or restaurant can draw business and help to revive a flagging area. Faryon says Mountain Equipment Co-op sees itself as an agent of revitalization, something that's factored into its location decisions. "We rarely go into established retail areas. We prefer going into changing areas."

Still, a profusion of dollar stores, vacancies and rundown shops can discourage shoppers. Nor is it always obvious whether a retail strip is on an upswing or a downswing. So, for upstart businesses, it's critical to assess whether an area merely has the potential to be revitalized, or if the gentrification cycle has actually taken hold. "You may be ahead of the curve," says Crombie of Cushman & Wakefield LePage. "The question is, how long you can survive in that kind of environment."

Entrepreneurs seeking off-beat locations must also determine whether sluggish retail zones are the way they are due to passing shifts in the local market or because of external forces, such as a dug-in sidewalk drug trade or a collection of suburban big-box malls sucking consumers away from core areas. While the outward pull of big-box stores is tough to reverse, other factors can be corrected. Determined retailers can sometimes overturn unnecessarily onerous traffic restrictions—excessive turn restrictions, medians, surface transit rights-of-way and pedestrian-only zones, such as the car-free Sparks Street Mall in downtown Ottawa. Richard Talbot mentions the case of Kitchener, Ontario's main drag, King Street. Even though it cuts through the central business district, the street became filled with strip clubs and vacant storefronts. The problem turned out to be one of perception: The city had blocked on-street parking, and despite large lots a few blocks away, consumers avoided King. Working with the local government and the Business Improvement Area, Talbot persuaded the municipality to create 20 new on-street spaces. "Once we fixed the on-street parking," he says, "the retail started to come back."

THE INTANGIBLES

Thanks to that Starbucks and their familiarity with the St. Clair West neighbourhood, the Marcket duo were confident that the area's retail fortunes were improving. Last summer, they vetted about four vacant shops on the stretch before settling on a 1,500-square-foot space kitty-corner from the Starbucks. Situated on a T-intersection on the sunny side of the street, it's a high-visibility spot positioned near a popular café and the local video store.

Once entrepreneurs have found their neighourhood, experts say, they must pay close attention to this kind of fine-grain detail. For example, visibility is essential, especially for retailers who sell goods that people purchase infrequently, such as furniture or mattresses. While stores that peddle commodities and convenience items—food markets, pharmacies—want to be as accessible to frequent customers as possible, specialty stores need the visibility so they can remind consumers of their presence and their brand. Parking is another critical consideration. Retailers whose customers tend to arrive by car won't survive if shoppers anticipate parking problems.

The side of the street makes a difference, too. Pedestrians prefer to shop on the sunny side, so those locations tend to be more sought after, and more expensive. Certain retailers seek out the "going to work" side (coffee shops, for example), whereas others are more suited to the "coming home" side—liquor and grocery stores, gas stations and other chore-oriented businesses. Such patterns can be sussed out through traffic counts (surveys showing the number of vehicles and pedestrians passing through a location each day or at particular times) or simple observation.

Marcket's new home seems to have all the right ingredients: Situated near a streetcar stop, it is on the way home for many affluent residents. Yet the building has a dubious past: A one-storey structure once split into a laundromat and a roti joint, it previously housed a specialty pizza restaurant. Part of a franchise, the restaurant was one of several prosperous eateries catering to neighbourhood families. It tanked partly because the location isn't ideal for a restaurant: Its street-front patio is too exposed, the space too large, the road traffic too heavy.

For all that, the Marcket partners weren't daunted. "This one just felt like it was the right space," says Wilson. Soon after they signed the lease and months before opening, they erected a large, eye-catching sign over the front door, heralding their imminent arrival. The goal: to get their store's name out and seed word-of-mouth buzz among the locals that a new neighbour bearing savoury treats would soon be on the scene.

Wilson and Javet's location-scouting was a vital step in getting successfully off the ground, but the partners know there's much more to survival in retail. Without sound financial controls and a plan, even a well-situated business will founder. Talbot mentions a fish market that opened in a retail plaza not far from his office. The location had visibility and drive-by traffic, and the new store was well equipped and seemed poised to fill an existing gap for local food retailers. But there was a problem: The young couple behind it had blown all their capital on equipment, leaving nothing for advertising and to see them through the lean, early period. The business burned through all its cash, then went under. "They lasted for three months," says Talbot. "Absolutely tragic. You've got to do a proper business plan."

Marcket Fine Foods, which threw open its doors last fall, has survived its crucial first six months. Traffic has been gradually building as locals test the gourmet goodies inside. But it won't be until the fall at the earliest that the founders will be out of the retail woods and ready to think about the planned expansion. Indeed, having placed their bets on a location that felt right, the partners understand that, now, it's all about follow-through. "You can plan it for 10 years," muses Wilson, "but you can't get that operational understanding until you jump in and do it."