Hub & Spoke model

Any branch optimization and expansion strategy should have a well-laid out plan regarding Hub & Spoke.

A classic and well-known strategy within the retail sector, implementing a Hub & Spoke model has a play within your branch strategy as well.

The foundation of a Hub & Spoke strategy is born in the Market Analysis phase, where geographic assessments are analyzed and overlaid with branch types that are a fit for that market. They are then perfected in the Design phase where a branch prototype is completed, along with accompanying Kit of Part components for scalability across different branch types and markets.

Here, we’ll break down the key sequential steps to planning and executing a well-planned Hub & Spoke strategy.

Step 1 – Strategic Market Segmentation Analysis

In looking at the broader Market Segmentation Analysis, this geographic assessment is your “50,000 foot” view of expansion areas, which could be at the state or county level, or both. Within this, there will be multiple Trade Areas deemed as viable expansion opportunities.

When working with LEVEL5, the key point of differentiation between other “Real Estate Consultants” is that we only make recommendations in specific Trade Areas where viable sites are available.

The sites of consideration are then ranked in order.

If you’re looking to build multiple branches in multiple geographies over the course of a 5-year aggressive growth plan, LEVEL5 will help you plot your Trade Areas based on different and varying priorities such as growth markets, demographies, loans, deposit, build-out costs, etc.

Step 2 – Branch Type Mix

Once multiple Trade Areas have been identified across a large Market Segment, you need to start thinking about which branch types fit in which Trade Areas, while also considering adjacent trade areas and their branch types.

Choosing the right branch type in a given market can be daunting, and the wrong decision can result in an underperforming branch leaving loans and deposits unclaimed in that Trade Area.

The key branch types of consideration in a Hub & Spoke model are:

• Flagship Branch – Your primary, free-standing branch, likely offering the most services, best experience and boastful brand deployment components
• Satellite Branch – A full-service, free-standing branch, just not to the level of your Flagship
• Headquarters Branch – A full-service branch, embedded in your Headquarters location
• Storefront Branch – A full-service branch embedded in a shopping center
• Micro Branch – A smaller footprint, not offering as many services/functions, but still delivers the transactional needs of your consumers
• Branch with Regional Office – A full-service branch, located far from your headquarters, thus the need for “back office” facilitates to support that “remote” geography

Step 3 – Staffing Models

When a branch type is considered for a specific location, layering a Staffing Model is the next step.

Based on the branch type, total volume of employees can be calculated based on square footage, assumptive traffic patterns, as well as product and service mix.

Staffing specialties to consider are Universal Tellers, as well as Mortgage, Investments, etc. based on the needs of the customer/member in that area.

Step 4 – Technology Models

The final component of a Hub & Spoke model involves the technology and equipment needed to fully execute a branch type. Considerations here are ATM’s, ITM’s, Cash Recyclers, Digital Signage, among others.

Developing your Hub & spoke model

While the four steps outlined above are presented sequentially, their considerations actually should be viewed more as a variable matrix.

Knowing how all the elements intertwine is one thing, but understanding how to execute a Hub & Spoke model, specifically when the disparate parts make up a proforma to aid decisions, is an entirely different task.

Lucky for you, LEVEL5’s Strategy and Site Selection departments do this every day.

If your community bank or credit union is in need of a full branch assessment and right-sizing for a fully formed, well-executed Hub & Spoke retail branch model, you deserve to contact LEVEL5 today.