By Luke Williams, Contributor
Some of us only dream of opening our own restaurant. A brave few make their dream come true. Even fewer survive the first few years.
With this in mind, finding the right property is essential, whether it’s a furnished space for sale or a leased space that will require a major build-out.
While you may assume that price is your main consideration, there are other equally important factors, such as researching your potential customers and neighborhoods. What works for one restaurant may not work for the other. Finding the right location and right property is a must.
We’ll shed some light on four essential tips that you’ll need to right the perfect spot for your new restaurant.
Tip #1: Identify Your Target Guests
This may be the most important task of all because if you get this wrong, nothing else will work in your favor.
Ask yourself: Which diners will be happy with your menu, ambiance, and location? Doing this is part of what’s called a feasibility study, which is highly recommended for future restaurant owners.
One way to research is to visit one or more restaurants with similar food, price points, and decor as what you’re planning. During your visit, answer as many of the following questions as possible.
What are the diners’ ages? Are you seeing mostly Generation Xers, Millennials, or Boomers?
Are they singles, couples, families, or a mixture?
What do they order the most?
What sort of foot traffic passes the restaurant’s entrance?
Perhaps most important of all: will your proposed pricing be in line with other, similar restaurants? No matter how attractive your restaurant may be, prospects will rarely visit if they can’t afford you.
Once you’ve located one or more similar businesses similar to your own business plan, it’s time to look at the area, especially the nearby retailers.
This is especially important in urban areas where parking is difficult and/or expensive. Urban consumers often combine a shopping trip with a restaurant visit.
This is all part of creating a “buyer persona”, or customer/guest persona in the restaurant industry. This process creates a template for the “ideal guest” for your restaurant, so you know who to market to and how to market to them. When looking for a location for your restaurant, you can use this persona in comparison with local demographic info of the neighborhoods you’re considering opening shop.
You can take your research a step further by visiting websites with advanced research capabilities, such as Claritas or the US Census Business Builder site.
Tip #2: Research All Opening Costs
Researching the costs involved in opening a restaurant will be time-consuming, but it’s essential for success. One of the first to consider: your lease budget.
Almost all commercial property pricing is quoted by the square foot. You may have noticed that pricing varies greatly depending on your search parameters. This is due to several factors, with perhaps the most important one being location.
If you check out restaurant properties available for lease in any town or city, you’ll notice that properties near busy commercial areas or with easy access from a major thoroughfare often carry the highest price tags. So do properties that offer plenty of parking.
Another factor: your location’s neighbors. The right ones, such as a popular hotel, vacation spot, or shopping area, will encourage foot traffic. Others — like an established restaurant serving similar cuisine to your own — could be a source of unwelcome competition.
In addition to calculating your maximum lease budget, you’ll need to look at operating costs. These often change as your business builds momentum, so it’s best to slightly overestimate this.
Remember, although most new restaurants need up to 24 months to become established, this is impossible to predict. Some restaurants fail, not because of a poor location or even popularity, but because the owner underestimated the time required for the business to turn a dependable profit.
Therefore, discussing this at length with fellow investors or backers is best.
There are several downloadable business plans online designed especially for budding restaurateurs.
Tip #3: Research Your Restaurant’s Lease Specifics
Any commercial lease is more complex than the typical residential apartment lease, and restaurant leases are no different. However, this doesn’t mean that your costs won’t be negotiable.
When viewing a potential property, it’s best not to begin discussing your planned changes or to let your enthusiasm for a particular site show. This will make negotiations easier.
When you find a property that checks all the boxes — location, price, foot traffic, and neighbors — it’s time to complete a lease application. After you complete the application, get ready to negotiate.
Lease variables like square footage price, deposit, and term are things that can be negotiated. You’ll also want to look into things like liquidated damages, liquor license contingency, exclusive use rights, lease assignment/sublease, percentage rent exclusions, etc.
Tip #4: Work with a Restaurant Specialist Broker
Don’t assume that a commercial real estate broker who specializes in restaurant space will only help you with your contract. The right broker can:
Analyze potential neighborhoods and zip codes to help you choose the best site. (If you’re having trouble identifying your future diners, the right broker can assist.)
Share their existing relationships with vendors and consultants, so you’ll have the help you need when you need it.
Negotiate a better lease or sale, depending on your business budget.
Better yet, a few brokers are former restaurant owners, too. They’ve been through everything you’ll encounter during your first year in business.
Take Your Time, Do Your Research, & Work with a Team
If you’re determined and prepared, you can create a popular destination for guests who appreciate your culinary and hosting skills.
Be prepared to do much more groundwork than you may have originally expected. You can’t overdo this.
One last quick tip: If you’re nervous about leasing restaurant space, consider setting up your own food truck. You can try out potential menu items and locations for a fraction of the price of a restaurant lease or purchase.
Good luck and bon appetit!
