I came across a post on BusinessPundit about a small surf shop that had opened next door to Ron Jon Surf Shop in Cocoa Beach, Florida.

There are lots of other surf shops around, but a couple of years ago one named Cocoa Beach Surf Company decided to set up right next door to Ron Jon's. Initially I thought it was stupid to set up right next door to their primary competition. Then I realized - that was all part of their strategy.

They set up a tent initially, and many people thought it was just a Ron Jon outdoor sale. Now they are building a huge store in place of the tent, so they must be doing well. Ron Jon does all the advertising, and Cocoa Beach Surf Company gets some of their overflow business. They didn't move next door to attack Ron Jon's (my guess is that they want Ron Jon's to remain successful), they moved next door to feed off of Ron Jon's.

One of the comments talked about how other businesses (copy centers, coffee shops) are opening next to national chains (Kinko's, Starbucks) hoping to feed off the overflow traffic. Some of these moves might be good ideas, but let's talk about one that wasn't so good. China Coast.

China Coast was a new restaurant chain developed by Darden Restaurants in the early 90's. Darden is the parent company of Red Lobster, Olive Garden, Smokey Bones, Bahama Breeze and Seasons 52.

The China Coast concept was upscale Chinese cuisine. The current leader in upscale Chinese cuisine is P.F. Chang's. P.F. Chang's has succeded where China Coast did not.

The major problem and ultimate death of China Coast was a result of location, specifically local market competition. Darden took the same approach for China Coast locations as their previous chains (Red Lobster & Olive Garden). The restaurants were located in a variety of markets in traditional strip mall outparcels. The problem though was that every China Coast was located in a market that had a number of established family-owned Chinese restaurants. Another issue is that many people treat Chinese food as a commodity.

While China Coast did attempt to create a unique atmosphere it still was not worth the premium to most customers who still felt the Chinese food experience required the standard paper-box containers.

I, like many people, tried China Coast once and said, "Why should I pay 100% to 200% more for the same quality of food I can get at China Wok or China Garden or any other local Chinese restaurant?"

There was an easy answer to that question, and it did not bode well for China Coast. I am not sure how Darden missed that in any research they had done.