Beneath MarketingSeason 2Episode 2
Choose the neighbour before the house… unless the neighbour is your own branch
In short: A new branch earns its place by the sales it adds, not the sales it moves from its sibling. An 8-week cannibalization test, and when to site further out.
The proverb is right about picking a site. But the neighbour everyone forgets is the one whose rent you pay
Abstract
Before you lease, ask about the neighbours. But the neighbour nobody asks about is your own nearby branch. A new branch earns its place by the sales it adds, not the sales it moves from its sibling. Here’s a way to measure the difference, and a rule for when to push the next site further out.
Before you sign the next site, work out how much it will take from your nearby branch; a branch earns its place by what it adds, not by what it moves.
When to come back to this episode: Before you sign a site near an existing branch, then in months 3 and 6 after opening, to measure the moved sales for real.
The best opening of the year
Composite example, not a specific client
the new branch, a few minutes from an older one, opened above plan. Its photo made the first page of the monthly report. On page four, a small line: the old branch was down.
The explanations were ready: “the season”, “the roadworks outside”, “the new manager isn’t as good as the last one”. Nobody put the two lines side by side.
Last episode I said the napkin payback sum ignores something on purpose. This is it.
The proverb is right
“Al-jar qabl al-dar”, choose the neighbour before the house, is one of the truest things our elders said. Before you buy a home, find out who lives next door.
It holds for shops too. Before signing you ask: who are the neighbours? A restaurant that pulls a crowd? A school that blocks the street at noon? A competitor selling your category at half the price? Most group owners apply the proverb superbly. They study competitors, count cars, and ask about every unit in the row.
…unless the neighbour is your own branch
But they apply it to every neighbour except one: their own. The sister branch never appears in the competitor study because it’s “ours”. It never appears in the new branch’s plan because its sales are counted somewhere else. So the new branch’s closest competitor gets erased from the map.
The doctrine puts it in one sentence: a new branch earns its place by the sales it adds, not the sales it moves from a sister branch.1 A customer who used to drive eight minutes to your old branch and now drives three to the new one hasn’t added a single riyal. You paid for a whole fit-out to save him five minutes.
What the researchers found
In 1963 the American geographer David Huff proposed a simple model: the probability a customer picks a store depends on its attractiveness and its distance, relative to the alternatives on offer.2 Your nearby branch is one of those alternatives, exactly like any competitor.
In 2012, Joseph Pancras, S. Sriram and V. Kumar studied a fast-food chain in a large U.S. city. On average, 86.7% of a new outlet’s sales were genuinely incremental; the rest, about 13%, came from nearby outlets. Each extra mile between two outlets cut the sales lost to cannibalization by 28.1%, and at ten miles there was virtually none.3
ChartU.S. figures, not a Riyadh benchmark
Cannibalization is real, and it fades with distance
Source: Pancras, Sriram & Kumar, Management Science 58(11), 2012.
Data as a table
| Value | |
|---|---|
| Genuinely incremental | 86.7% |
| From nearby outlets | 13.3% |
| Mile | Index |
|---|---|
| 1 | 100.0 |
| 2 | 71.9 |
| 3 | 51.7 |
| 4 | 37.2 |
| 5 | 26.7 |
| 6 | 19.2 |
| 7 | 13.8 |
| 8 | 9.9 |
| 9 | 7.1 |
| 10 | 5.1 |
Careful: these are American figures from a city measured in miles and car trips, not a Riyadh district. Don’t transfer the percentage or the distance. What transfers is the lesson: cannibalization is real, and it fades with distance.
The other side comes from Arturs Kalnins in 2004, studying Texas hotels. In franchised chains, a new nearby unit ate into the incumbent’s revenue. In company-owned chains, a new nearby unit was associated with higher revenue at the incumbent.4 Sometimes the neighbour helps: it raises the brand’s presence, or catches demand that was going to a competitor.
The honest summary: cannibalization is neither fate nor myth. It might be 5%, it might be 40%, it might even be negative. Don’t assume it in either direction. Measure it. I found no published Saudi study measuring it between restaurant branches, so the number you need is sitting in your own point-of-sale data.
The napkin: eight weeks before and after
It’s the same method we used for offers in Season 1: compare against a branch where nothing changed.5
- The sister branch: its weekly sales for the eight weeks before the new one opened, and the eight weeks after.
- The comparison branch: a similar branch further away, whose catchment doesn’t overlap the new one, over the same weeks.
- Net decline = the sister’s change − the comparison branch’s change. Ramadan, paydays and the heat hit both.
- Cannibalization share = net decline in riyals ÷ the new branch’s sales over the same period.
Illustrative arithmetic
the sister sells SAR 150,000 a week and drops 12% after the opening. The comparison branch drops 3% over the same weeks. Net decline is 9%, or SAR 13,500 a week. The new branch sells SAR 90,000 a week. Share = 13,500 ÷ 90,000 = 15%.
Before opening you already have a first estimate: the share of current delivery orders coming from addresses inside the new site’s catchment.6 If the sister rises instead of falling, that’s the Kalnins case: record it, don’t call it luck. And remember the first weeks after an opening carry curiosity traffic, so measure again in months three and six.
SimulatorIllustrative
How much of the new branch came from its sibling?
Enter eight weeks before and after for two branches, the sister and a distant comparison, and watch the net decline turn into a cannibalization share, then into real payback months.
Result at the default values (turn on JavaScript to move the numbers).
- Cannibalization share
- 15%
- Moved from the sister, weekly
- 13,500 a week
- Real payback
- 28.2 months, not the napkin’s 24
Watch Real payback 28.2 months: between 18 and 30, stretched. Sign only with a written lever plan. Measure again at months 3 and 6: curiosity traffic in the first weeks fades.
Rule source: Revenue Engineering Doctrine: the opening gate and the payback bands (18 and 30 months)
Three lights, the worst one wins: the share against your written limit, the Doctrine’s payback bands on real payback, and the sister’s peak utilisation (no new branch next to one that isn’t full).
Data as a table
| Week | Sister (SAR) | If nothing had changed (SAR) |
|---|---|---|
| −8 | 150,000 | 150,000 |
| −4 | 150,000 | 150,000 |
| −1 | 150,000 | 150,000 |
| 0 | 132,000 | 145,500 |
| 4 | 132,000 | 145,500 |
| 8 | 132,000 | 145,500 |
| The new branch’s weekly sales | SAR |
|---|---|
| Moved from the sister | 13,500 |
| Truly added | 76,500 |
| Total | 90,000 |
How it’s calculated
- Net decline (points) = sister’s change − comparison branch’s change
- Moved from the sister a week = −net decline × sister’s weekly sales
- Cannibalization share = moved ÷ the new branch’s sales
- Effective contribution = napkin contribution × (1 − share), never boosted
- Real payback = capex ÷ effective contribution
Where the money leaks
Go back to last episode’s napkin. A SAR 1,200,000 branch leaves SAR 50,000 a month and pays back in 24 months. But if 15% of that contribution was moved from the sister, what it actually added to the group is SAR 42,500, and real payback is about 28 months. The same branch, already “stretched”, slid toward the edge of “not yet” without anything in it changing.
ChartIllustrative example
Same branch, longer payback
Source: Episode's illustrative arithmetic; bands from the Doctrine.
Data as a table
| Payback months | |
|---|---|
| Napkin: 1,200,000 ÷ 50,000 | 24 |
| After cannibalization: 1,200,000 ÷ 42,500 | 28.2 |
The second leak is human. The old branch’s decline gets pinned on its manager. He’s held to account, maybe replaced, for a decision taken at head office. You lose a good manager over a map nobody drew.
The Sunday-morning question
One question, one metric, one rule
| Question | “How much of the new branch’s sales came from its sibling?” |
|---|---|
| Metric | Cannibalization share: the sister’s net decline (after subtracting the comparison branch’s change) ÷ the new branch’s sales, eight weeks before and after |
| Decision rule | If the share exceeds the limit you wrote in advance (I usually start at 20%), the next site moves out of the two branches’ circle. And no new branch next to one that isn’t full at peak. |
This week
- Draw your branches’ circles on one map, drive-time and delivery radius, and mark the overlaps.
- Run the napkin on your latest opening: nearest sister, a distant comparison branch, eight weeks before and after.
- Write your cannibalization limit next to last episode’s payback ceiling, before the next site.
Your branch is a neighbour too
The proverb needs no editing. It only needs one more name on the list of neighbours: yours.
Credit where it’s due: the gravity model is David Huff’s, the cannibalization figures are Pancras, Sriram and Kumar’s, and the warning that a neighbour can help is Kalnins’s. The proverb belongs to our elders. All I did was put the sister branch into the neighbour study.
And if you push the next site further out, where does it go? Usually to the street everyone says is the best. Next episode: “The most expensive street in Riyadh… and you paid for its traffic.”
Sources and notes
Revenue Engineering Doctrine: Thesis 4, the branch satiety curve, and the lexicon entry cannibalization rate.
David L. Huff, “A Probabilistic Analysis of Shopping Center Trade Areas”, Land Economics 39(1), 1963, pp. 81–90. doi.org/10.2307/3144521 (opens in a new tab)
Joseph Pancras, S. Sriram & V. Kumar, “Empirical Investigation of Retail Expansion and Cannibalization in a Dynamic Environment”, Management Science 58(11), 2012, pp. 2001–2018. doi.org/10.1287/mnsc.1120.1540 (opens in a new tab) . Data from a fast-food chain in a large U.S. city; cited to illustrate the idea, not as a Riyadh benchmark.
Arturs Kalnins, “An Empirical Analysis of Territorial Encroachment Within Franchised and Company-Owned Branded Chains”, Marketing Science 23(4), 2004, pp. 476–489. doi.org/10.1287/mksc.1040.0082 (opens in a new tab) . Texas hotels, 1990s.
Beneath Marketing, Episode 2: The offer brought in sales… or would they have come anyway?, and holdout group.
Channel Ledger: delivery radius and the satiety curve, the Saudi Scale Playbook: Gate 2, and the opening gate’s capacity signal.
Cite this
English
Alhajj, S. (2026, September 29). Choose the neighbour before the house… unless the neighbour is your own branch. Beneath Marketing, season 2, episode 2 (BM S2.E2). seiflden.com. https://seiflden.com/insights/neighbour-branch-cannibalization/
Arabic
الحاج، سيف الدين (29 سبتمبر 2026). «الجار قبل الدار… إلا إذا كان الجار فرعك». «تحت التسويق»، الموسم 2، الحلقة 2 (BM S2.E2). seiflden.com. https://seiflden.com/ar/insights/neighbour-branch-cannibalization/