The following article originally appeared in the April 1992 issue of Signs of the Times magazine.
By Bill Collins
A landmark argument, carefully crafted to show signage’s benefit to a community, has successfully been made in its first attempt. Not only will Germantown, TN, allow Pier 1 Imports to erect a second sign that’s visible to eastbound traffic, but a town planner has acknowledged the intrinsic and primarily economic value of the on-premise sign.
This new argument, which documents the positive impact of proper signage, was pioneered through research by land-use authority R. James Claus, the common-sense delivery of signshop owner Noel Yarger, the financial backing of World Sign Associates, and the cooperation of retailer Pier 1 Imports. Claus and Yarger had presented their new theories to various sign-industry groups during the past year; in Germantown, they succeeded in making their argument work in the real world of planning/zoning hearings.
Claus (of Portland, OR) and Yarger (of South Bend, IN) were joined in their effort by Tim Purpura, the corporate sign manager for Pier 1 Imports, based in Fort Worth, TX. Together, they argued successfully, before the town’s design-review board, that granting a variance would be in the town’s best interest.They presented a detailed argument in person and in report form – to city planner James H. Lewellen — that explained how economic development, tax revenue and public safety would increase if the board granted a variance to their client, retailer Pier 1 Imports.
Yarger, president of North AmericanSigns in South Bend, IN. and Claus, a land appraiser and sign consultant from Portland, OR, had done their homework. They showed how the total of city, county and state tax revenue paid by Pier 1 Imports in Germantown would increase over 25% if the town — a suburb of Memphis, TN — granted the variance. By the time of the hearing, Dec. 17, 1991, Germantown’s nine-member board was ready to approve the request. Yarger, Claus and a local attorney attended the meeting long enough to watch the board approve by a voice vote the variance for a second sign. Based on the recommendation of Lewellen and a three-member subcommittee that had meet one-week earlier, the variance was approved without discussion, and the sign was installed last month.
Sales below projection
Germantown’s Pier 1 Imports store is located at the eastern end of a shopping center that sits at a 45-degree angle to Poplar Ave. When the store opened in April 1991, the Germantown board approved one sign, facing southeast, over the front door. This sign was clearly visible to traffic traveling west on Poplar Ave., but was not visible to eastbound motorists unless they looked back after they had passed the store.
After the store had been open for a few months, Pier 1 Imports’ managers noticed that its sales totaled approximately 25% less than the company had projected – in spite of all the usual promotions, advertising and direct mailings. The report said, “Sales projections were analyzed and projections made based on Pier 1 Imports’ . . . first-year operating figures [at] other Pier 1 stores [which had] previously opened in comparable shopping centers.” After having discussed the store’s problems with customers. Pier 1 managers attributed the poor sales to the store’s lack of identification.
To protect Pier 1 Imports’ Germantown investment, Purpura called in Yarger and Claus. As Yarger explains, he and Claus strategically approached Pier 1 Imports’ variance request from a planner’s perspective. Yarger and Claus decided to make their first pitch to Lewellen, the Germantown planner, because zoning boards and review commissions often take leadership from city planners.
Yarger says that judges recognize that the appraised, taxable value of a piece of land is directly related to the stream of income that can be generated by businesses located on that land. If land is not visible for whatever reason — terrain, man-made barriers such as nearby buildings or lack of signs — that land can lose 30-40% of its potential stream of income. Real-estate appraisals and streams of income are basic legal concepts that are recognized by planners as well as judges, Yarger said.
To craft their presentation for city officials, Yarger and Claus asked Pier 1 Imports officials to prepare documents that would show that the store’s poor sales — 25% below projections — were caused by the lack of “impulse buyers.” Impulse shoppers are people who typically recognize signs along the road and make an impulse decision to drive in and shop. To bolster their argument, Yarger and Claus cited a study by the Holiday Inn lodging chain. The study found that 25% of motorists holding reservations at a motel would not turn their cars around and drive back if they missed the motel on the first pass.
In preparing the report, Yarger and Claus received detailed information from Pier 1 Imports on the cost of advertising, stock, building improvements and labor. In its variance request, Pier 1 Imports explained how much it costs for the company to operate a store with annual gross sales of $1.2 million, the amount projected for the Poplar Ave. location.
Pier 1 Imports stated that 94% of its 168 surveyed stores (Pier 1 operates more than 600 stores in the US and Canada) use more than one sign to gain necessary visibility. In the report, Pier1 Imports asked, “Why is it critical for Pier 1 Imports to gain an additional 20-30% business generated from impulse buyers? . . . In grossing $1.2 million annually,” the report said, “we must first recoup $420,000 for the fixed costs which includes rents, lighting as well as general and administrative overhead.Then we must take $600,000 out of this gross to pay for the merchandise sold. This leaves us with a profit margin of $120,000 . . . If we have a 20% decrease in business, we will be running at no profit …. In fact, we have been forced to lay off store employees in order to keep [the] Germantown [store] operating … People of the [Germantown] area suffer economically when the store does not have the volume . . . to remain profitable.”
In financial tables produced for the report, Pier 1 Imports broke down its projected annual sales by month. The figures also projected how much of the store’s fixed costs needed to be recouped each month, on average, for the store to amortize itself in 10 years and 25 years. Table 1 shows the company’s cost structure for two different scenarios – with the second sign and without the sign.
The retailer also produced Table 2, which shows the amount of taxes the store would pay given its $1.2 million sales projection, and the amount of taxes that would be paid with $900,000 in sales. The overall tax figure is the sum total of personal property (inventory), property and sales taxes.
|Table 1: PIER 1 IMPORTS – GERMANTOWN STORE
Comparison of Gross and Net Incomes
With and Without Adequate Signage
|With Signage||Without Signage|
|Gross Annual Income||$1,200,000||$1,020,000|
|Net Annual Income|
|With 10-yr Recapture||$110,400||$20,400 (-81.52%)|
|With 25-yr Recapture||$132,000||$42,000 (-68.18%)|
|Percentage Annual Yield of Net Income|
|With 10-Yr. Recapture||9.20%||2.00%|
|With 25-Yr. Recapture||11.00%||4.12%|
In the report, Pier 1 Imports also showed how its store — as the anchor tenant of Germantown Village Square shopping center — helped generate traffic, sales and tax revenue for all retailers at the center: “We are a nearly ideal traffic generator [because] our flow of business is relatively even. . . . While many retailers do nearly 50% of their business volume during the Christmas season, this holiday accounts for a little more than 20% of our volume. Pier 1 Imports is a primary, destination-oriented business that will generate business for other stores . . . . As we generate other shopping trips, Germantown gains in both real property-tax revenues and sales-tax revenues.”
|Table 2: PIER 1 VALUATIONS|
|Taxes Paid With Signage *||Taxes Paid Without Signage **|
|Total State Taxes||$ 66,000||$49,500|
|Total County Taxes||$5,616||$4,320|
|Total City Taxes||$ 32,613||$22,260|
|Total Taxes Paid||$104,229||$76,080|
* Based on $1.2 million gross sales
Pier 1 advised that Germantown stands to gain jobs and tax income through the company’s national, regional and local advertising. The company reported, without proper on-premise signage, all the other forms of advertising lose their value. “Our sign,” the report said, “will function as a reinforcement device for the other forms of advertising. We currently spend nearly $124,000 annually in the [Memphis] area for local advertising. This is incorporated into a $24 million annual, national, advertising campaign. Without the reinforcement offered by our logo signage, we will not be able to reinforce our message to the consumer, and we [will] lose the connection of our advertising to the retail store where the advertised products are available.”
Pier 1 Imports argued in its report that public safety actually would be enhanced if the second sign was built. The report cited a study, “Analysis and Modelling Relationships Between Accidents and the Geometric and Traffic Characteristics of the Interstate System,” which stated that guide signs along interstate highways may reduce the chance of traffic accidents. Yarger and Claus argued that clear, legible commercial signs serve the same function as guide signs, and they too prevent accidents.
Yarger and Claus bolstered their traffic-safety argument by citing results from a public-opinion survey of Pier 1 Imports customers in Germantown. This survey, which was conducted in the store by a marketing research firm, showed that 95% of the respondents believe that commercial signs help them know when to change traffic lanes, slow down and make a safe entry into a commercial property. Yarger and Claus argued that, because the store’s one sign was not visible to eastbound traffic, some motorists passed the store before realizing where it was located. Those motorists were then obliged to make “dangerous U turns” in order to reach the store, the report said.
In explaining its business philosophy, Pier 1 Imports stated in the report: “Pier 1 Imports enters a community to become a contributing, supportive partner within the community Because of this, any change that we may ask to the land-use planning rule, we make sure that the request is within the purpose, scope and intent of the rules. We make sure that our requested change(s), or variance, will promote and protect the public health, safety and welfare of the community.”
In perhaps the most compelling legal argument contained in the report, Yarger and Claus argued that Tennessee law obligates the town to grant the variance. The state of Tennessee — like most U.S. states — has ultimate authority over local ordinances. Local ordinances must be authorized by the state legislature, in most cases, through “enabling legislation.” Yarger and Claus pointed out that Tennessee law states that the primary purpose of most local zoning laws is “to protect the public safety, welfare and morals.”
Claus and Yarger argued that the second sign would increase public safety, and that the increased tax payments resulting from a more profitable store would enhance public welfare. They stated that, at 25 in. tall, the letters on the Pier 1 logo sign were the minimum height necessary for safe viewing from Poplar Ave. In calculating the minimum height, Yarger and Claus claimed that a sign’s letters need to measure 1 vertical in. for every 20 ft. of distance between the sign and the viewer. In their calculations, Yarger and Claus estimated that a motorist needed to view Pier 1 Imports’ logo sign from 500 ft. in order to safely operate a vehicle.
Claus and Yarger also noted that they were not arguing for a change in the land’s legal use, as is often the case in traditional zoning-board appeals. Instead, the second sign would allow the land to be used more effectively as retail space, as required in Germantown’s own master plan. The report cited two legal cases, Euclid vs. Ambler Realty [272 US 365, 47 S.Ct.114, 71L.Ed. 303 (1926)] and Nectow vs. The City of Cambridge (277 U.S. 183, 48 S.Ct. 447, 72 L.Ed. 842), which dealt with the question of “highest and best use” of property, and a city’s obligation to promote such use.
In the report, Claus and Yarger estimated that total tax payments to Germantown, Shelby County and the state of Tennessee would increase from $76,000 to more than $100,000 if the additional sign was approved. In making their argument, Claus and Yarger cited formulae for calculating local sales tax revenue and lease revenue to the shopping-center developer. They argued that tax income from retailing is superior to other sources of tax income, because retailers do not make the expensive sewage and solid-waste disposal demands that manufacturers do. In an interview, Yarger pointed out that tax income from retail property is more cost-efficient than taxes collected from residential property. That is because homeowners sometimes have children, who need to attend public schools that are financed largely from local tax revenue.
A word to the wise
Before you adopt Yarger and Claus’ sign variance approach during these recessionary times, make sure you can document your claim that reasonable sign codes boost sales at individual stores and economic development in general. In a telephone interview, city planner James Lewellen, assistant to the director of development for the City of Germantown, TN, said, “There are a lot of reasons why a business doesn’t perform the way it’s supposed to.” He said that with Pier 1 Imports’ Germantown store, “It wasn’t [sufficiently] documented that signage was the only problem.”
This question may be settled soon. Tim Purpura, manager of signage services at Pier 1 Imports, said that the company plans to monitor the Germantown store’s sales over the next few months, to determine if the second sign generates added profits.
Lewellen said the three subcommittee members who recommended the variance were persuaded by two issues: the store’s unique setting at a 45-degree angle to the street, and its need for logo signage tall enough to be visible from the street. “We could see that the business wasn’t performing [as] anticipated. They were asking for a minor variance, and it was a unique situation. We didn’t feel that we were undermining the intent of the sign ordinance” in granting the variance.
“Visibility is important. There’s no point in having a sign on a building if it’s not readable,” Lewellen said. The planner said he agreed that the lack of signage facing eastbound traffic might cause accidents, by requiring motorists to make a U turn into the shopping center.
Yarger and Claus also made the more general argument that signage creates economic growth in an entire community. “I don’t know how much weight the individual members [of the design review commission] gave it, but I thought it was an important point,” Lewellen said. “Had there not been a unique situation, I think they would have needed to go a little further in documenting the economic-development impact” of the variance.
The planner pointed out that Germantown, a fast-growing suburban town of 36,000, has changed in recent years from a mostly residential community to a town with an increasing number of retail businesses.”The commercial interests in Germantown are just beginning to have a larger voice. We think we have good, planned commercial sites, but now the complaints are coming in about . . . the [sales] performance of different stores. . . . We were able to see that if a national tenant [Pier 1 Imports] was not performing at that site, then there were definitely going to be problems with local tenants trying to make a run at it. From that standpoint, the economic-development aspect of it was pretty well documented.”
Lewellen said, before his discussions last fall with Jim Claus, no sign proponents had ever offered him documents to explain why poor signage reduces retail sales. “I was very interested in seeing how you would go about documenting those problems. . . . It was really interesting to find out that, although we were sitting on the opposite sides of the table, we pretty much agreed on the same things. He was not . . . against sign regulations of certain types. I really do believe in controlling the proliferation of signs . . . and trying to maintain some of the aesthetics of a building.”
Pier 1 shoppers support second sign
To strengthen its case before Germantown’s design-review board, Pier 1 Imports asked its own customers if they favored a second sign at the site. The shoppers expressed strong support for the company’s position in a survey conducted by Market Development Assoc., a Memphis, TN, market-research firm.
To solicit customers opinions, three employees of the market research firm interviewed 200 Pier 1 Imports patrons during a three-day period in late September 1991. All interviews took place inside the store.
The survey showed that Pier 1 customers agreed that a second sign, facing eastbound traffic, would increase public safety after dark. Ninety-three percent of surveyed customers answered “Yes” to this question: Assume you are coming from the west and are looking for the Pier 1 Import store at night. Do you feel that the advance notice provided by this Pier 1 Imports sign would allow you more time to slow down and make a safer turn into our entrance?”
Most surveyed customers also said they find signs, in general, to be helpful. They were asked this question “When you go shopping, do you find store identification signs very helpful, somewhat helpful, or not at all helpful?” More than 97% found signs to be either “very helpful (66%) or somewhat helpful” (31%).
When asked about the aesthetic appeal of the Pier 1 Imports logo sign, most felt the proposed sign did not detract from the appearance of the Poplar Ave. commercial area. Only 5.5% answered that the sign would affect the area in a negative way, and 91% said that it would not detract.
In the last survey question, the 200 customers were asked, “Would you that this ‘Pier 1 Imports’ sign clutters the visual neighborhood, and is, therefore, more of a nuisance to the public? Or, would you say that it serves the public by helping to identify the store, and guide motorists?” Only 5% said the sign 1s more of a nuisance, while 90% saw it as a benefit to the public.
|PIER 1 – SURVEY RESULTS
Abbreviated Questions and Responses
|Are signs helpful to you?|
|Not at all helpful||2.5%|
|Does this sign increase public safety?|
|Does this sign affect aesthetics negatively?|
|Is this sign more of a public nuisance or a public benefit?|