How to Choose a Restaurant Location that Sets You Up for SuccessThe location — and cost of that location — can make or break your business before you even open.
You have a brilliant restaurant concept and you’ve written a winning restaurant business plan. Now, if you haven’t done so already, it’s time to find a location — one that will make, not break, your new business even before it gets off the ground.
Finding the perfect location takes a keen eye and a heaping helping of research.
Your best bet is to work with a restaurant consultant who’s intimately familiar with the area you want to move into to, or a brokerage firm. “If you’re doing it yourself, you need to spend a lot of time doing your homework,” said Stephen Zagor, dean of business and management programs at Institute of Culinary Education.
Make sure the neighborhood’s a fit
Is the area populated by the market you’re going after?
“You would not go to a retirement community with a sports bar concept,” said Kevin Burke, founder and managing partner of Trinity Capital and a frequent consultant to restaurant companies and franchisees.
Demographics companies can supply information such as age, gender, ethnicity and income, all plotted on a map. But you should also do some detective work of your own. Make like a private eye and stake out the street you’re considering. Watch who goes in and out of businesses at different times of day, and take notes.
You might do exit interviews with people leaving restaurants similar to yours. Ask about their restaurant spending and their level of interest in your concept. You could even send surveys to nearby office buildings to gauge whether people would come out and eat with you, or hire a company that does this type of psychographic research.
Evaluate the competitive landscape
Analytics firms such as Buxton will give you the sales volumes of every retail establishment in the area, based on sales tax. “Look at the competitive set and how you stack up,” said Burke.
Keep in mind that competition isn’t necessarily a bad thing. “Sometimes if you have a McDonald’s and a KFC on a corner, if you add a Taco Bell it actually makes all their sales go up because it makes it a destination,” he noted.
Or as Zagor put it, “The collective draw of many is better than the single draw of one.”
The key, Burke explained, it to make sure your restaurant would enhance what’s already there versus creating head-to-head competition. “You don’t want to be the second burger concept.”
Look at traffic volume
A destination restaurant with great publicity can lure customers just about anywhere. But most restaurants will want to be where people already are.
The highway department may be able to give you traffic counts for the intersection you’re considering, or you can ask it to install, for a not-insubstantial fee, a pneumatic road tube to count how many cars roll by.
You also can do your own low-tech traffic count, Burke advised, by setting up a tripod, taking video for an hour at key times of day and evening and counting non-police, non-commercial vehicles.
The answer to how much traffic is “enough” is complicated and depends on the time of day and what crowd you’re hoping to serve. (If you’re near a university and expect to serve students traveling on foot, the car count might not even matter.) But more is obviously better. “Operators will say there’s no such thing as high enough — there’s always room to serve more people,” said Burke.
Study traffic patterns
It’s just as important to study traffic patterns as traffic counts.
If breakfast will be the bread-and-butter meal for your restaurant, you’ll want to be on the side of the street that carries traffic into the business center. If you’re banking on serving the dinner crowd, the reverse is likely true. If drivers have to make a left-hand turn against several lanes of traffic to get to you, especially if there’s no turn arrow, you’re sunk.
A lot of restaurant owners instinctively want to be on a quiet street instead of a main avenue, but that could be a mistake, since there’s less visibility, Zagor noted.
Avoid physical and psychological barriers
The physical location should pave the way for easy entry. For example, said Zagor, “People don’t like to go up stairs or down stairs to eat food in restaurants.”
If the spot’s on a corner and there’s no turn lane, there may not be a curb cut — and the city might not let you put one in. If it won’t, “that makes that corner a bad corner,” said Burke.
Unless you’re in a dense urban area, lack of nearby parking is another barrier to avoid. Burke recommending having 25 parking spaces if you’re fast food establishment, and “a lot more” if you’re casual dining.
Psychological barriers can just as important to bypass. You want to avoid “the street that doesn’t have all the good businesses next to it,” said Zagor. Don’t be the restaurant surrounded by all the “shabby little stores.”
Stand-alone or shopping pad?
Think about whether your concept would be better off on a shopping pad or in a stand-alone building.
“A lot of these big malls are getting killed by Amazon and to a lesser degree Walmart and Target, so right now being on a shopping center pad lately has been bad. That’s something you’ve got to consider,” said Burke.
If you’re in a strip, an end cap (at the end of the strip) is typically more desirable (and more expensive) than an inline space, especially if you want to have outdoor seating.
Make sure you can afford the rent
Don’t fall in love with a space you can’t afford. “It’s really easy to get enchanted with a location,” said Zagor. But if the market won’t support your costs, take a pass.
“The lease and the location are going to be there throughout your business life. It needs to be something that is really carefully considered [so as] not to stack the deck against you before you even open the door.” -Stephen Zagor.
Except in major metropolitan areas like New York City, rent in most cases should be less than 7 percent of sales, according to Zagor. Burke said the target is 7 percent for a casual dining restaurant and 8 to 8 ½ percent for quick-service restaurant.
Remember to factor in other fees, such as common area maintenance fees and landlord assessments.
In terms of the size of the space, err on the side of smaller, Zagor advised. “Number one, it costs less to build and to run. Number two, it’s better to look busier than you are than empty and large. Number three, how to expand is a better problem to have than how to contract.”
Consider the build-out costs
No matter what space you lease, you’ll need to do some construction to create the kitchen and dining area you need — and to meet health and building codes. Your best bet: Lease a space that’s been a restaurant before or is a restaurant currently.
“Over half the cost of building a restaurant is infrastructure — plumbing, electric, gas, fire suppression — not the pretty stuff,” said Zagor. Leasing a space that was or is a restaurant “is much easier than starting it from scratch.”
Don’t discount a space occupied by a restaurant that’s still in business. “Everybody will sell, it’s just a matter of price,” Zagor noted.
If you’re not experienced with building, have an expert look at the space. “I would never look at a location without being joined in my quest by someone that knows how to build a business physically, whether it’s a contractor or engineer,” said Zagor.
Plan to adjust the business plan
Once you’ve found the space, you’ll need to go back and update your business plan with actual lease costs.
If you have a unique selling proposition, you’ve done your homework on costs and sales projections and the location you’ve chosen is visible, accessible, affordable and offers a demographic that fits your primary market, you should be sitting pretty.