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READER QUESTION ONE

Parents are reluctant to leave children in our play area, even though it's easily seen from the MSR area. Are there security issues we need to address, or is the children's play area a thing of the past?

Jim Caliendo, president, PWCampbell, Pittsburgh

Although the children's play area isn't a thing of the past, we are seeing less usage of kid's areas today. This is not necessarily for security reasons, but for usage of space. Space is at a premium in today's branches and most financial institutions are taking the opportunity to use every square foot for selling product and conducting transactions.

When there is a children's play area, obviously security is number one. You should be sure to place the play area in a location, usually next to a greeter or a waiting area where parents can see their children and have access to them. Usually, we like to make it in a confined area with gate access.

But today's children's play area is very different from play areas of the past. At PWCampbell, we are not seeing a typical kids area where there are toys or blocks, but we are recommending more educational areas for kids, where you may simulate a teller line and have play money and give kids ideas about how banking transactions are conducted. In some upscale areas, credit unions are taking it one step further by utilizing animated computer programs or videos focused on money.

It seems that credit unions are more sensitive than other financial services institutions in providing children's play areas because in general, credit unions take an approach that focuses on a family's total financial needs. So, while we see play areas diminishing, some credit unions feel they are a part of their member service plan.

Bill Dean, VP-Business Administration, NewGround, St. Louis

Parents, by nature, are overprotective and prone to err on the side of safety, due to the violent nature of our news and the state of our culture.

This does not mean that children's areas are becoming obsolete. Kid's areas need to be developed to address two key criteria; one is the primary issue of safety, and the other is the types of children that will be ultimately using the designated area.

Security can be addressed by placing the children's area in a location of the facility's interior where it would be difficult, if not impossible, for a child to move out of the area, while still providing a visual design that allows parents to see their children from the sales and consulting areas.

The second component is to provide a "dynamic" kid's area that captures a child's attention and provides entertainment that keeps them in the space.

Credit unions are looking at video and other multimedia tools, such as MP3 download centers, make-your-own money computer centers, video game centers, and other computer-based entertainment to get children's attention and hold it.

Younger children could have computer-based games, books, floor-level games, or other learning-based tools that capture attention.

The key to children's areas is to know what segment of your member base will be coming into the branch and what expected children's age group will be accompanying the parent. Research shows us that 80% of the financial decisions are either directly made or influenced by women.

Many of these women are either single mothers, working mothers, or stay-at-home mothers that use the facility for various financial needs, so having a larger, multi-age kid's area would most likely attract their attention and allow the branch to engage in cross-selling and relationship development.

Ralph La Macchia, president, La Macchia & Associates, Milwaukee, Wis.

Parents are going to be reluctant to leave their children anywhere they feel there is a potential threat to their well-being. Because of this mentality, parents in major urban areas don't let their children go to the playground alone.

These perceived threats could be caused by the environment in which the children are playing, the possibility of the children walking off on their own, or the past history of the area in which they live. Parents in different geographical areas feel differently, as potential threats vary given the surrounding environment. We have found that in rural areas, a play area is still a great idea.

It works well because the parents would like to have someplace for their children to play while they are conducting their business.

In an urban environment, where play areas might be less welcome, we have found that a building layout that puts play areas further into the interior of the building is a factor that provides some comfort.

Allowing parents to have a direct line of sight to their children, whether they are in an office at the teller line, can alleviate these feelings of fear. We have not had major resistance in areas where we have worked. There are just some people who simply don't want a play area, but not many for reasons of security.

Shaun Pond, SVP-Western Region, IBT, Norcross, Ga.

While children's areas aren't the faddish "add" to every branch that they seemed to be a few years ago, there is still some interest in and demand for such an area in a branch. In a recent survey of more than 700 U.S. adults using financial services, 12% said that they would wish their financial institution offered a child play area (see IBT/MCA 2006 Market Pulse Survey, http://www.ibtsource.com/survey.html).

Spending branch space on a kids' area now usually occurs as the result of a segmentation analysis. Features that differentiate the institution to families with young kids are viewed as a plus, as is creating a branch experience that allows the parent to focus on financial matters.

Good design and layout can mitigate any security issues, or the perception of same.

Moreover, the kids' area shouldn't be presented to the customer as a "park your kid here before transacting branch business" requirement; it should be offered as a choice. If the parent isn't comfortable leaving the child in the play area, they should be encouraged to bring the child (and maybe a toy or two?) with them to the MSR.

READER QUESTION TWO

We would like to partner with a non-competitor to share the cost of a facility that could house us both in a retail environment. What sort of retailer would be a good fit, and what are some of the risks?

Andrea Simler-DeGolier, Retail Coordinator and Conceptioneer, DEI, Cincinnati

Make sure you partner with a business that your members will consider an added convenience or that creates a "one stop shop." For instance you could look into law offices or legal counsel, financial planners if you do not already have this in house, dry cleaners, copy/shipping center, coffee shop or caf?, or even a mini mart/convenience store.

Retailers such as these would allow your members to make better use of their time. Of course there are always risks when you partner with another retailer.

However, make sure you conduct the proper prescreening of the business owner's history, reputation and how they intend to use the space before deciding whether or not they will be a good fit.

Shaun Pond, SVP-Western Region, IBT

Partnering or co-locating with a non-competing retailer can potentially benefit both parties. Retailers can help bring traffic to the branch, offer greater convenience to the consumer, and, can potentially reduce the institution's rent burden.

As in any relationship, compatibility is the key. Some retail uses will place burdens on common areas and parking and make life difficult for branch customers. Others have "frequency of visit" profiles that mean that they won't contribute much to the branch's growth.

And some retail uses may, in the normal course of their operation, produce noises, smells, peak time crushes or other incompatibilities. Where hours of operation don't coincide (and they usually don't), after hours security requires attention.

Where the physical facility is shared (common entrances and exits, limited demising walls), attention to the layout and design of the branch can maximize the potential benefits and minimize the potential drawbacks.

Generalizing broadly, the ideal co-tenant for a financial institution retail branch is a retailer with regular and reliable repeat business and a demand cycle close to that of a branch (e.g. 1 or 2 visits/week), a short "visit time" (e.g. less than 30 minutes), and no current or future potential to offer competing products. The best known example of these is supermarket retailers.

Co-location opportunities may also result from segmentation strategies, (e.g. an institution focusing on small business banking might co-locate with a service provider that attracts that segment).

For example, in a recent market study, 59 percent of the almost 700 U.S. adults surveyed said that offering services such as postage and shipping would enhance their visit to their financial institution's branch.

Ralph La Macchia, La Macchia & Associates

In partnering with a non-competitor to share the cost of a facility, you must first decide the type of partnership you want to enter. Your credit union could own the building and lease space to another user(s), or the credit union could lease space from an outside developer. We have assisted our credit union customers in working through both of these scenarios, and each approach is significantly different. A good rule of thumb is if you are going to be in an area for a considerable period of time, you would like some ownership rights.

When you begin to look at a retail environment, the benefit of sharing with a non-competitor can be a good idea. This decision will drive site and building design, as well as signage. Before you design the space or even select the site, you might want to have in mind what kind of retailer you are looking for, such as a complimentary user.

Some possible tenants could include sundry shops, cell phone companies, computer stores, etc. If you start looking at restaurants or other food-related businesses, one risk might be odors, both inside and out, garbage dumpsters, daily delivery of food, etc. Then the site is going to need to accommodate peak usage that may coincide with the credit union.

We would be less likely to encourage you to partner with a food retailer. Other opportunities are going to be determined by the design of your building. You are more likely to attract retailers if you allow them to have immediate parking in front with direct access to their rental space.

If you start to restrict the retailer's access to the building, or put them on the second floor, and you will limit not only the type of retailers you could attract, but also your rent rates. Most national retailers have specific criteria they demand before they sign a lease.

Also, you may want to determine early on what your growth rates are going to be in that market, then time your leases accordingly. That will also tie into your leasehold improvements and how quickly you can amortize them. You will want to consult a real estate broker or other real estate professional to determine the market rent rates and time it takes to lease space on the market. You can use this information to determine if it is worth the expense of building the lease space in the first place. Also, be cautious of UBIT.

Bill Dean, NewGround

Research has shown that over two-thirds of banking customers are not looking for a relationship with their financial institution, due to mistrust with the frontline experience. Relationship development and specific product and service delivery will be the future action point for financial institutions, where the branch will need to be more of a boutique branch, positioned and designed for the lifestyles, life-stages, and financial product purchase behaviors of the local community.

Financial institutions will need to be selective regarding the types of non-competing retailers they consider, because good retailers will attract traffic that most likely will not be conducive to financial product sales. Wal-Mart, Target, and other big box retailers are not destination centers, but mass needs-providers that generate large traffic volumes. These stores will not attract members that drive business. Specialty stores, probably higher-end retailers, would provide more "destination-driven" shoppers who have decided on a specific item or need, and would be more likely attracted to higher-profit financial products. Risks associated with any co-user are the strength of the co-user's brand, traffic generation, client-type, and lasting power.

Jim Caliendo, PWCampbell

It seems like in our age coffee is the social thing to do, so coffee retailers by far are the leading non-competitive partner credit unions are choosing for their facilities. National and local coffee chains are being put in the space in a leaseback to the financial institution. It's a typical thing that blends in. For those credit unions considering leasing space to a coffee shop or other food service retailer, there are a number of things to consider.

You have to watch for congestion in parking areas and traffic flow interrupting the drive-up and ATMs. Additionally, consider how bringing food preparation into your space will affect your members, from odors and venting to crowds and parking issues.

At PWCampbell, what we are suggesting is that credit unions build a larger facility and use that extra space for growth. Until you can use that additional space, we recommend you bring in synergistic businesses in service industries where there is a mutual sharing of customers. These synergistic businesses include realtors, lawyers, accountants, title companies and mortgage bankers. Since you own the space, you are setting the rate because you are leasing the extra space to them. While a normal branch may total 2,500-3,000 square feet, credit unions taking this approach are doubling that space, offering an opportunity for growth. But until that time, leasing the space to these types of service companies is good business for the credit union and for the service organization.

No matter what path you take, you need to do a financial analysis on who your partner is and how you structure any type of partnership with leases, longevity and sharing of customers.

Have A Question For The Facilities Panel? E-mail Lisa Freeman: lfreeman cujournal.com

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