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5 variables to consider when selecting your next restaurant site

When you’re looking for the right property for your restaurant, having a checklist of desirable criteria can help you stay on track.

September 9, 2016

By Jeff Grandfield and Dale Willerton — The Lease Coach

When you’re looking for the right property for your restaurant, having a checklist of desirable criteria can help you stay on track.

You should weigh many demographic aspects when considering leasing a location in a certain area or territory. Just because you’ve found a new property with space for lease doesn’t mean the demographics will fit your ideal criteria. As restaurant tenant, the following points will be specifically important to you when searching:

Age: The average age of people living in a particular area is extremely important to many business owners. You may sell more pizzas to students living within a few blocks of a local University than you would if you if you set up shop in a neighborhood populated by seniors.

Income: As mean income and the proportion of two-income households vary, so do the ability and desire to spend disposable income at your restaurant.

Ethnicity: Set up shop where your target customers already live if possible, rather than trying to make them come to you.

Convenience: If you don’t think it matters which side of the street you’re located on, think again! Pizzerias and quick-service restaurants do better on the side of the street where most people are driving home after work. Most people don’t pick up a pizza on their way to work.

Lack of visibility for your store front can cause people to drive right by it — especially if traffic is heavy. Trees in a parking lot can block signage and restrict visibility for drivers passing by. Some landlords have been known to overbuild their pad sites near the road, therefore blocking the visibility of the retail plaza behind it.

If you find a great property with space available for lease, look around. If there is a bare patch of ground between your desired unit for lease, assume that someday, the landlord will lease that pad site or construct a building there that blocks visibility to both your signage and storefront.

Competition: Be aware of any, and all, competition within the area. Not only should you be acutely aware of your competitor, you should have someone “secret shop” their business, try their menu, and report back to you about the entire experience. You could also have your secret shopper ask them about your business (if you are already open) so as to discover what your competition is saying about you. Remember to also think in terms of future competitors. Check out which competing franchise systems are expanding within your city or planning to come to town.

How can you distinguish sites that make sense for your business? Begin by understanding that just because a developer bought some land and put up a building doesn’t mean that the site is automatically a winner. Perhaps it was a great neighborhood 30 years ago, but it’s gone downhill? Perhaps the area is overdeveloped, meaning that another retail site isn’t needed or justified? Consider the following two questions before choosing a specific commercial site for your restaurant and signing a long-term lease agreement or a lease renewal:

1. Are you planning to open a restaurant business that people will travel for miles to order from or dine at?

2. Are you taking your restaurant business to where people already are (e.g. downtown, the suburbs, or a large shopping entertainment development)?

One of the special aspects about restaurants is that the diversity in cuisine, size, and concept means that they vary greatly. Every imaginable site has been leased for one of the half million restaurant operations in North America. And when one restaurant closes or goes out of business, another restaurant often opens in exactly the same space within a year. Such restaurant locations (that close and re-open in the same space repeatedly) are often called burned sites.

Why does this happen? There is a logical reason. Building out a restaurant can be expensive. Think of all the plumbing and wiring that needs to be done. Pizza ovens and extra power are usually added to the premises. When a former restaurant tenant closes down, he/she will often leave the infrastructure behind — seemingly making it easier and more cost-effective for a new restaurant tenant to simply move in. But consider that if a previous restaurant failed to succeed in a specific location, this may well be a red flag for you. Burned sites can be traps or opportunities – you decide.