Interesting replies.. as I expected there is a lot of diversity depending on visibility and location. I'm trying to pick a shop location right now.. and have located several potential sites, ranging from 1 room offices on back streets to multiroom storefronts on some of the busier streets in town. Of course if walk in/drive by traffic isn't a factor at all ( someone quoted 5% of their business) I'm not sure why they would chooose to remain in the same location if a cheaper out of the way office would suffice.
There is a few reasons. For instance, the one that comes to mind first is creditability. In our area, if you have a store on the main strip of our town, then you probably have been around for a while, have a good track record, and are succesfull at what you do. That all may not necesarrily be true, but appearance is a big part of being successful. Some times to be successful, you have to look successful. Crowds draw crowds, busy stores draw more customers. When we are slammed and we have customer after customer waiting in the lobby, we tend to get even more busy and people always comment "wow, you guys must be good". Anyways, I am sure you see the pattern.
The other factor is money obviously. While 5% may not be a lot, depending on his rates and depending on what he profits, 5% may be just enough to pay for the difference in rent, thus giving him the image he needs to be successful.
Finally, there is the retail aspect. If you are like some of us, you have a retail front and retail tends to sell better in store front areas, not hole in the walls.
Those are just a few of the thoughts that came to my mind.