Premise Lease Negotiations

A Dentists Guide to Selecting a Profitable Clinic Location


Ian D. Toms


June 18, 2020

June 18, 2020

We have all heard the mantra location, location, location!Whether you are a dentist thinking about opening a new clinic, or relocating to improve an existing clinic,location is even more critical in today’s competitive and saturated oral healthcare market. This article considers the three equally critical dimensions of “location”:
   • potential patient demographics within the clinic’s trade area,
   • key concerns related to clinic premises location, and
   • essential lease terms and conditions.Any one of these three key components will impair a clinic’s performance.

Potential Patient Demographics

A savvy dentist needs to understand who is in the trade area when the clinic is open. There may have been times when oral healthcare professionals diagnosed patients without x-rays or other forms of scanning equipment.Now, however, most clinics can further enhance successful treatment outcomes with current scanning technology. The same concept holds true for potential patient demographic analysis.A successful operation determines the area where its potential patients are in order to access a potential new location (aka the trade area). Consider the following questions:

   • How far will a patient travel to the clinic?
   • Would a potential patient go to a competing clinic because the competitor is closer?
   • What opportunities lie within the trade area?(# of competitors? Diagnosis and treatment services offered or not offered by the competition? Expected population growth trends? Population’s age? Cultural background and preferred language? Population’s attitude towards the value of oral healthcare? Financial resources of the potential patient population?)
    • Could your existing practice benefit from a look at the demographic analysis of your trade area and identify untapped opportunities?
    • Could a new practice be located between two existing practices with enough patients?After determining the viability of the opportunity in this manner, you can take the guess work out of it. The American Dental Association indicates that a healthy competition ratio is less than 1 full-time dentist per 1500 or more patients. However, you would also want to know how much each of these patients would spend annually on oral healthcare, the type of treatment they require, and whether there are any specific factors concerning the number of potential patients.

Potential Clinic Locations

Location selection has changed dramatically over time,even over the past 5 years. Many trade areas have no space available for lease or sale for a clinic. In many markets, more than half of the available locations are not “listed” on MLS because there is so much demand for the space that landlords do not have to list or offer a commission for the space, limiting the effectiveness of a commission-based realtor. Unless you retain someone who will “get out there and make it happen”, you will not be aware of all of the opportunities. If and when a possible location within a trade area that has a suitable patient population is available, the location must have superior access and profile. Access includes the patient’s ability to travel to the practice by foot, public transit or, if they drive, key roadways. Patients need ample free parking and the ability to walk a short distance without stairs into the practice when they arrive. Profile refers to the message the clinic location radiates in terms of visibility (signage and sight lines) and that the clinic is clean, professional, efficient, and comfortable. A location with high marks in both categories is called a “category killer” location because this location commands the attention of the majority of the patient population within the trade area. A competitor may open within the trade area, but if their location is harder to get to, subject to pay parking, and does not project a wholesome image, its presence may actually improve the performance of the “category killer” location clinic.

Let me be clear,while it may be very difficult to find exactly the right patient population, the right clinic location, and the right lease, it is not impossible.

Lease Considerations

Suppose you found a trade area with a potential patient population of several thousand people who are exactly the type of patients you wanted to treat. In addition, you have found your dream location – right size, on the busiest corner in the trade area, excellent signage in a clean and bright building with ample free parking right at the door. If the lease does not protect you and your investment, you cannot proceed. There is no point spending millions of dollars to build a new practice if, for example, the lease contains a termination clause, has no options to renew, and/or prohibits you from financing against or selling the clinic. Let me be clear, while it may be very difficult to find exactly the right patient population, the right clinic location, and the right lease, it is not impossible. In today’s market, expectations need to be recalibrated. Recognize that significant effort, patience and the right technical tools administered by expert professionals will provide you with exceptional results.