For real estate investors, understanding the difference between location-based and destination businesses is crucial. Some businesses thrive on high foot traffic and accessibility, while others succeed by offering something so unique that customers are willing to travel for it. Each model impacts property value, tenant stability, and long-term returns, making it essential to align investment strategy with the right type of business for a given property.
Location-Based Businesses: Success Through Convenience
A location-based business depends on visibility, accessibility, and high daily traffic. These businesses are positioned where demand already exists, benefiting from impulse visits and routine consumer behavior. The primary goal is to be the easiest, most convenient choice for customers.
Examples of location-based businesses include:
- Quick-Service Restaurants (QSRs) – Chains like McDonald’s, Dunkin’, and Chipotle rely on high-traffic intersections and drive-thru access.
- Gas Stations & Convenience Stores – Positioned along major roads and commuter routes to capture passing traffic.
- Grocery Stores & Pharmacies – Serve densely populated areas where customers visit frequently for necessities.
- Retail Strip Centers – Tenants such as dry cleaners, nail salons, and liquor stores depend on routine local traffic. (See this also.)
For investors, site selection is everything when dealing with location-based businesses. High-visibility corridors, strong population density, and easy parking access all contribute to tenant success. These businesses often sign triple-net (NNN) leases, providing predictable rental income with minimal landlord responsibilities. However, competition can be intense—if a competitor opens nearby, tenants may struggle to maintain foot traffic.
Destination Businesses: Attracting Customers Beyond Location
Unlike location-based businesses that depend on convenience, destination businesses succeed because customers seek them out. These businesses don’t rely on high foot traffic or prime retail locations—they create their own demand through specialty services, exclusivity, and customer loyalty.
Common types of destination businesses include:
- Luxury Auto Repair Shops – Specializing in brands like Rolls-Royce or Ferrari, attracting customers from miles away.
- Fine Dining Restaurants – High-end establishments that offer unique, sought-after culinary experiences.
- Boutique Fitness Studios – Niche gyms, personal training centers, and specialized wellness programs that build loyal memberships.
- Specialty Retailers – High-end watch dealers, bespoke tailors, and vintage collectors that thrive on brand reputation and exclusivity.
For real estate investors, these tenants present a unique opportunity. Since destination businesses aren’t reliant on daily foot traffic, they can thrive in secondary or emerging markets, where real estate costs are lower. However, success depends on the tenant’s brand strength—an unproven destination business carries higher risk than an established convenience-driven tenant.
Choosing the Right Investment Strategy
Not every property is suited for both business models, and smart investors know when to prioritize traffic-dependent tenants versus destination businesses with high-margin potential.
Invest in location-based businesses if:
✔️ You prefer stable, high-traffic properties with NNN leases.
✔️ You want low-risk, consistent rental income.
✔️ The property is in a prime commercial area.
Invest in destination businesses if:
✔️ You want higher rental upside from niche, high-margin tenants.
✔️ You are targeting emerging markets or specialty properties.
✔️ You are willing to assess tenant branding and reputation.
Key Takeaways for Real Estate Investors
Understanding the difference between location-based and destination businesses is critical for maximizing returns and reducing risk. A property’s success isn’t just about where it’s located—it’s about who’s inside and how they generate revenue. The most successful investors align tenant selection, lease structure, and market positioning to create high-performing commercial properties that thrive in any economic climate.
ATTAIN : The Official International Wealth Success Companion and Guide to Wealth Building Since 1966
ATTAIN, formerly simply called the IW$ Newsletter, has been published monthly since 1966, is your trusted guide to building wealth and achieving financial freedom. Each issue delivers 16+ pages of actionable insights, including:
- Money-making ideas for part-time ventures, real businesses, and franchises.
- Funding sources like lenders, government grants, and real estate financing tips.
- Export-import trade leads, mail-order opportunities, and cosigner listings.
Subscribers also receive a FREE classified ad in every issue, reaching an international audience of entrepreneurs and investors—perfect for finding partners, funding, or selling products.
Available in
- print (U.S. only),
- PDF by email,
- or as a lifetime subscription,
ATTAIN will inspire and empower you every month.
If you can dream it, IWS will show you how!