CHALLENGE
With over 450 stores, privately-held Hobby Lobby had by 2007, expanded west as far as Nevada and Arizona but had stopped short of California, fearing high occupancy costs and red tape. Following the economic downturn of 2008 and the collapse of the California based Mervyn’s chain, Hobby Lobby approached our Bay Area partner (and former Mervyn’s Vice President of Real Estate) about evaluating the resulting vacancies as potential Hobby Lobby locations.

Finding a suitable location for this first unit proved to be challenging for several reasons in that the overall market had to 1) contain sufficient population and income levels supportive of a minimum sales threshold, 2) be isolated enough to serve cost effectively through a single print channel, 3) proximate to a large metropolitan area from which to import a tertiary customer. With input from Hobby Lobby’s in-house sales forecasting resources, the team finally settled upon an ideal site.

STRATEGY
After determining Hobby Lobby’s demographic requirements, distribution constraints and advertising preferences, our team presented Hobby Lobby with a broader perspective introducing them to over 100 prospective “big box” opportunities across the State of California including 25 from the Mervyn’s portfolio. The sites were presented along with an overall strategy during the course of a week long tour of the entire state in early 2009. Still concerned about California’s bureaucratic environment and laws favoring torts, Hobby Lobby opted initially to open only one store as a test case before making a larger commitment to expansion in the state.

RESULTS
In January of 2010, Hobby Lobby’s first California store opened in Visalia, California and Hobby Lobby’s patient approach quickly paid off. Visalia experienced the best two grand opening weeks in chain history and has since settled in at very impressive numbers. Following six months of successful operations in Visalia, Hobby Lobby asked our team to lead its statewide expansion. Hobby Lobby stores in Temecula, Roseville, Rancho Cucamonga, Merced and Modesto opened in the Third Quarter, 2011. Leases have been signed for an additional 6 units and plans call for the opening of 8-10 California units annually for the foreseeable future.

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