Location, location, location . . .The old real estate maxim is just as valid in restaurant siting as it is in the purchase of a residence. The right spot can make your life easy. The wrong spot can drain your bank account quicker than you can say ‘insolvent’.
The surrounding demographics are important
For a start, take the general area you’re located in. What are its demographic details? For those of you who are not quite familiar with this term, it means information about the surrounding population. What is the average age? What is the average disposable income? What is the proportion of adults to children? All this information is vital to restaurant success.
Suburbs change over time. Take a new housing estate, for example:
During its early years every one is mortgaged up to the eyebrows, supporting young children and trying to buy decent furniture. If you locate anything but a take-away there you’re going to lose your shirt. The residents don’t have the money or the time. Once or twice a year they bundle up the kids and traipse off to Hungry Jack’s.
Locations can become suitable over time
That same estate can be a different proposition at another time. Eventually, the mortgages get paid off or payments reduce in comparison to income, the kids get older and can look after themselves and the family has some spare money. From about the fifteen year mark you have a good potential location for a restaurant, as long as you don’t go too far up-market. Something cheap and cheerful will probably do quite well.
If we continue to track the development of the estate, it will eventually become mature. The people will become older and more discerning, their income will grow and restaurant opportunities in the mid market level will become viable — but only for twenty years or so. Long enough for two successive restaurant owners to have made money for ten years each. A third will possibly get burnt.
Avoid areas with elderly demographics
This is because the estate will eventually become geriatric; the inhabitants will get old and venture out of their houses less and less. Old people become set in their ways and prefer to eat at home in familiar surroundings. An intensive care restaurant may be the go — pureed steaks, oxygen and pacemaker batteries. You’ll revel in their stories of times when a main course cost threepence, and they’ll pay you in small change from a well worn purse.
Locations undergo generation change
Twenty years further down the track the estate may undergo a renaissance. The old people may disappear and be replaced with upwardly mobile, trendy
DINKS (double income, no kids). If you get in quick and do it well before the rents get too high you can make very good money. If you wait too long there will be lots of competition and your landlord will get the lion’s share of the profits.
So, where are you located? Is your market level and concept appropriate to your area? You could be trying to drive a square peg into a round hole. It usually starts with something like: ‘What a lovely old house; it’d make a great restaurant,’ and deteriorates from there.
Finding the 'golden' location
Restaurants usually need to be located where there are plenty of people in the right frame of mind. This needs some explanation: Near a theatre is good; in between the theatre and its major car park is even better. People will pass your door on their way to or from the theatre and will be in ‘let’s spend our disposable income’ mode. Over the road from the dole office is bad.
Parking and access is also very important. I see restaurants open in the most outrageous places. There seems to be a misconception that highly visible locations guarantee success. Take major road intersections, for instance. Every one will see you, but more often than not there is no parking nearby. People don’t like to walk (or stagger, as the case may be). Convenient, or on-site parking is a big bonus.
Locations in the CBD of any city can be a mixed blessing. Rents resemble International telephone numbers, competition is fierce, the population is huge but dives at night, and parking can cost more than the meal. You have to be experienced to survive, or you have to be in the nightlife precinct and work long hours.
Strip shopping areas in the suburbs can be good locations, but they should be on main roads and visible to passing trade. The surrounding shops should reflect the market level that you wish to operate in or
peoples’ perception will be lowered by the surrounding shops physical presentation. Shopping centres are generally bad news as the landlord will end-up with the lion’s share of the profits.
The rent must be reasonable
Rent is always a vital factor. You have to sell a lot of meals to cover several thousand dollars per week, which is what you’ll pay in a high profile location almost anywhere. After all, the value of a site is established by it’s commercial value. Unless you are a particularly good negotiator, you’ll end up paying through the nose for a guaranteed trade. Then you’ll join all those other restaurateurs with full restaurants, who bullshit to each other at social functions while struggling to pay the bills.
Be very wary of taking over a restaurant site that has a history of failure. You may save some fit-out costs but this will be negated by the marketing costs involved in resurrecting the location in peoples’ minds. I call this the Chernobyl factor — some places are unfit for habitation for a hundred years.
Many of the business failures I’ve witnessed over the last few years are frustrating in that they were avoidable. I believe half of the victims would still be in business if they had researched their intending location more thoroughly, or sought professional help. You can’t turn hamburger into a fillet steak, no matter how gifted you are.
To learn more about the topics discussed in this article please consider the following courses,
For documentation to support the management systems discussed in this article, please visit our resources website.
If you are not sure where to start, contact us now to speak with a consultant.