Need a great location for your restaurant? Lots of factors come into play. To start, you’ll want to be close to the action, the places where your guests spend a good bit of their time. You’ll want a place that’s accessible by foot or vehicular traffic. Likely, you’ll also want a place that’s visible and can attract some attention.
In this article, we’ll coach you through these factors and many others to help you find the perfect spot.
What do I need to consider?
Let’s start with the most important factors:
Think about your target customer base. Is that population growing or shrinking in your area? How many people within your market have enough disposable income to become frequent customers?
Try to determine which parts of your target neighborhood see the most foot and vehicular traffic. Look for pockets of activity, and try to stay focused on those areas as you search for vacant land or buildings.
Proximity to Popular Roadways or Points of Interest
Find the parts of your city in which your target customers tend to spend their time. Which hobbies or routine activities would they be doing that might compel them to stop by your restaurant? Would proximity to a hospital, office park, mall, or another site be beneficial?
Proximity to Competitors
Identify the restaurants in your target neighborhood that compete directly with your own. In which parts of your neighborhood are they located? Can that area support multiple similar businesses? Would close proximity would help or hurt your bottom line?
While you’re working through this exercise, try to determine which competitors are succeeding and why. Look into the kinds of buildings in which they operate, the businesses that neighbor them, and the traffic patterns around their site. Are there ideas you can borrow in finding your own site?
Proximity to Complementary Businesses
Think about the kinds of businesses your target customers might already be visiting that could entice them to stop by. For instance, would your coffee shop perform well near a gym? Would your fast-casual restaurant do well in a mid-range shopping plaza? Should your high-end restaurant be located near the best hotel in your city?
Map out the roadways and areas that a large percentage of your target customers use on a regular basis. Are properties available along that route? How much more do those properties cost than less visible locations? Do you believe that you can make up for the price premium by being in your customers’ line of sight? Or, could a lower sales volume at a less costly site put you in a better position for profit?
Building Capacity Requirements
Determine how much space you need to operate your restaurant. Will you require a large amount of space to house an oversized kitchen or dining tables? Do you need private rooms, offices, large freezers, or bar space? Keep a list of your specific requirements so a site can accommodate you.
Think about how customers tend to access restaurants like yours. Do many rely on foot traffic? If so, you may want to focus on buildings that are sited along commonly traveled sidewalks or paths. Will your restaurant depend on automotive traffic? Here, you’ll need to find locations that cars can easily enter and exit without working against traffic. Will you need a pass-through window or a drive-through bay? If so, you’ll need to look into freestanding buildings or end units of multi-unit complexes.
Determine how many parking spaces you’d like to have available for your customers. Can you find a site with a dedicated parking lot? Would your customers be willing to park in a nearby garage and walk to your site? Would a lack of parking turn your customers away?
Calculate how much you can afford to spend on your lease or commercial real estate loan each month. Be sure to factor in the out-of-pocket site improvement costs you’ll need to pay before determining how much you can afford.
Future Development Concerns
Contact your area’s land use office and ask questions about plans for commercial developments. Are any competing businesses breaking ground in the area? Are any new points of interest being constructed? And, are there plans to remove nuisance structures?
Find out which parts of your target area are zoned for your type of business. Your commercial real estate agent should help you identify properly zoned options and explain the local process for having other promising properties rezoned for commercial operations.
Talk to a commercial real estate professional about the turnover that storefronts in your area experience. Are there parts of your city that experience frequent vacancies? Can you determine whether those vacancies are related to a business’s concept or the location itself?
Determine if there are other qualities you hope to find in a building or parcel of land. For instance, is it important to you to find a site that needs minimal improvements, or are your design specifications so specific that you’ll need to invest significantly in any location you choose?
You’ll need to consider two other important factors, too:
Whether to lease, buy, or build your restaurant.
Depending on the real estate that’s available—and a host of other factors—you’ll need to decide whether to lease a storefront, buy a freestanding building, or acquire land and build your location from the ground up. Acquisition costs, construction costs, renovation costs, permit needs, tax considerations, and timelines are some of the many factors you’ll need to consider. Our guides, Lease or Buy: How to Make the Right Call for Your Small Business and How to Attain Financing for Your Small Business’s Construction or Renovation, can help you with this important decision.
Whether to operate from a stand-alone structure or a multi-unit facility.
Your restaurant may perform better in certain types of structures than in others. Think about whether you’d prefer to be located in a freestanding structure, a strip mall, or within another entity, such as a mall, airport, university, or hospital. The costs of these options can vary significantly, but careful assessment can help you determine which option will help you serve your customer base most effectively.
Does my lender get a say?
If you’re using bank financing to cover any portion of your startup costs, you should share your proposed location with your lending officer before making an offer. This is especially important if you plan to use their funds to buy land, acquire a building, or make renovations. Many banks want to ensure that the location you choose is favorable and likely to succeed. A great location gives them more reason to believe that you’ll see traffic and generate enough cash to make your loan payments and live up to the terms they provide.
Who else should I talk to before making a selection?
Numerous other people can offer valuable insight as you search for a restaurant location. These include:
Your real estate agent
Your real estate agent may know about properties soon to hit the market, and they may help you make sense of the turnover that’s taken place at any site you consider. Further, they can advise you on how to position an offer in light of local economic conditions.
Local real estate developers
Local real estate developers can be an invaluable source of information. Major developers in your area will know of commercial developments in the works that may fit your criteria, and they’ll be able to tell you about the availability they have in their existing developments.
Local zoning and planning boards
Your city’s zoning and planning boards may be able to help in two ways. First, they can share information on the sites of future and existing developments in your city, which may include sites that haven’t been on your radar. Second, they will be able to advise you on the process of having a property you’re interested in rezoned for commercial or retail use.
The local chamber of commerce
Your region’s chamber of commerce can help you connect with local government officials and business leaders who can serve as resources through your startup process. The chamber may also help you learn about area laws and regulations affecting businesses in various parts of your target area.
The city engineers may have a wealth of information on the projects that are taking place in your area. They can share insights on how new bridges, roads, or infrastructure projects may redirect traffic flows through the region. This information can help you discern which sites are valuable today and which may be valuable in the future.
The area’s transportation bureau
Your city or county transportation office may have statistics on traffic patterns, traffic counts, and pedestrian traffic near your preferred site. Depend on their expertise to pinpoint traffic concerns and areas of opportunity.
Other restaurant owners
Talk with other restaurant owners about their location searches. Ask why they chose their current site, what they learned, and what they’d do differently next time.
People who live or work nearby
Whether or not you live in your target area, you can benefit from talking with others who spend time in it. Ask about crime and traffic problems in the area, the kinds of restaurants they’re interested in seeing in the neighborhood, and their perspectives on why other businesses have failed or succeeded in the area.
The local police department
Your city’s police department will have valuable information on any site you consider. Ask about crime history, crime rate trends, or traffic concerns that could impact your restaurant’s success.
Your attorney may not help with site selection, but they can help you review the terms of any lease you consider and point out anything that’s out of the ordinary. They can also help you negotiate the price and terms of your lease agreement.
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I think I found a great restaurant location. What should I do?
First, spend a good deal of time at the site you’ve selected. Visit the location on multiple days of a week and during various hours of a day to gauge the traffic patterns, foot traffic, and frequency of customer visits to neighboring businesses.
If you’ll be leasing a site, ask the site’s owner about any restrictions that are in place for construction or modifications to the building. Landlords may have strict requirements about renovations, so it’s important to know whether you’ll be able to make the improvements you have in mind.
Then, obtain and review the property specs and lease agreement. Share this information with your attorney and ask for help reviewing the terms and negotiating the purchase price. You can also read our article, Your Go-to Guide to Commercial Leases, to learn about key terms, red flags, and opportunities for negotiation.
Next, you should attain the financing you need to begin construction or site renovation. Read our guide, Cover Your Small Business Construction or Renovation Costs, to review your options and proceed with the choice that’s right for your business.
Looking for help as you start your restaurant? Check out our restaurant guide. Then, log into your owner’s portal for expert advice, checklists, and articles that can help you start strong and ensure your restaurant’s long-term success.