So you’ve got the perfect idea for a restaurant — it’s creative, it’s modern, and the food will be amazing! With all that going for it, there’s no way it can fail, right?
Wrong.
Restaurants fail all the time, even those with great ideas. Fewer than 60% of food service establishments that opened in 2015 were still open by March 2020, even before the pandemic hit the United States. Restaurants are a big risk, but you can minimize your risk of failure by carefully planning out each aspect of your food business.
One of the most important things that so many aspiring restaurateurs forget about in their plans is choosing the right restaurant location. You can’t just pick the closest open property and expect your restaurant to be successful; you’ll need to consider every aspect of the location you pick before you purchase or rent it.
The location of your restaurant will determine the clientele you reach, how many customers you can serve at a time, how easy it is for people to find your restaurant and even what competition you’ll be dealing with. All of these factors will affect your bottom line, so you have to choose your restaurant location carefully.
Here are the important factors to consider when choosing a location for your restaurant.
Visibility
When you’re opening a new restaurant, you have to make sure that people know it’s there. If your location is tucked away down a backroad, nobody’s going to notice it. Nobody can eat in your restaurant if they don’t know it exists.
Your best bet is to pick a location in a high-traffic area, whether that’s in a downtown square where hundreds of people walk, or just off a busy road. This will let people know your restaurant is there and make them eager to come try your amazing food.
You can try to overcome a location with bad visibility through some heavy marketing — billboards, TV or radio ads, or maybe some conveniently-placed posters — but this comes with a cost. Choosing a location with good visibility in the first place will make things a lot easier.
Accessibility
Accessibility goes hand-in-hand with visibility — it simply measures how easy it is for customers to actually get to your restaurant. People value convenience, so making your location as easy to access as possible is a must.
If customers have to drive around 5 other buildings just to get to your restaurant, it might not be worth the trouble for them, leading you to lose potential business.
Parking
Unless your restaurant is going to be in a downtown area with heavy foot traffic, you’ll need to make sure your location provides ample parking. It’s important to consider that your employees will take up spaces as well, so maximizing available parking is important.
It may be cheaper to rent out a location that shares its parking lot with other businesses, but consider the traffic that neighboring businesses receive when you look into these options.
If you’re neighboring a business that sees hundreds of customers every hour, your customers might not be able to find parking in the lot. A lack of available parking can drastically reduce your accessibility factor, driving customers away.
Customer Base
This is one of the biggest factors you should consider when selecting the location of your restaurant. Your location will determine the type of clientele you’re able to reach, and the amount of potential customers in your area.
If you’re planning on opening an upscale seafood restaurant with $40 entrees, you have to make sure the population around your location can actually afford that price point. Nobody wants to break the bank in one evening just by eating dinner.
The same principle applies in the opposite direction. If you’re opening in an area full of people who are used to swanky and expensive food, a lowbrow and cheap burger joint may not be all that appealing to them. Get to know the areas around your potential locations to determine which one will work best for your restaurant concept.
Population
The actual, numerical population around your location is also a crucial factor to consider.
Opening a restaurant with 200 seats doesn’t make much sense in a town with a total population of 1,000, unless you’re set up on a busy highway that gets a whole lot of out-of-town traffic.
No matter how appealing your restaurant is, you can’t appeal to a population that doesn’t exist. Again, familiarizing yourself with the area around your possible locations will help you avoid this problem.
Affordability
This is the factor that most restaurateurs tend to actually consider, but that doesn’t make it any less important. You need to choose your restaurant location based on what you can afford. Restaurant opening costs are almost invariably high, and especially in expensive areas, rent can be one of the most daunting costs.
Obviously, you’ll have a budget so you have a rough idea of how much you can afford. But you should also weigh your rent or mortgage costs compared to your expected sales. Generally, your rent should stay at or below 6% of your total sales.
Also keep in mind that different cities and states have different criteria and requirements for restaurants. The costs to acquire required restaurant licenses and permits can vary drastically depending on your locality, so be aware of those additional costs when making your decision.
If you’re trying to open a restaurant with no money, affordability is probably your number one consideration in choosing the location of your restaurant. That’s okay, but make sure not to overlook the other criteria on this list.
Size
The physical size of your location is going to determine how many customers you can serve at once, thus determining your potential profits. An average restaurant size is about 4,000 square feet, though you should determine your space needs based on your floor plan and how many customers you plan to serve.
The type of restaurant you’re creating should also be a factor in determining your space needs. High-end restaurants typically give customers more space between tables, creating a more private atmosphere. Lower-end restaurants pack customers a little closer together to maximize seating availability.
When scoping out your potential locations, make sure the size of the location works well for your plans.
Competition
One of the final factors to consider in choosing your restaurant location should be the competition that’s surrounding you. Make sure to take into account not only how much competition is around, but also how well your restaurant can perform against it.
Opening up a new quick-service burger joint in between the local McDonald’s and Wendy’s locations will almost inevitably be a death sentence for your restaurant, unless you somehow manage to make your burgers way better or way cheaper than the chains. Even if your burgers are better, it can still be difficult to convince customers to come out of their comfort zone and try your offerings.
A good bet to ensure your restaurant’s survival is to make it unique from other restaurants in the area. Opening a trendy fusion restaurant in an area that’s full of average fast food chains can give the locals something new to try, and make your restaurant stand out from the crowd.
Some Final Advice: Understand Your Commitment
Even after you’ve taken all of these variables into account, it’s important to understand that choosing the location of your restaurant is a huge commitment, and will play a large part in determining whether your restaurant succeeds or fails.
If you move all of your necessary equipment in and set up your operations, only to soon realize that your location doesn’t work, you’ll still be on the hook for numerous expenses.
Before you commit to any location, make sure you plan out each aspect of your business to ensure compatibility with the location. Even a seemingly great spot for a restaurant may not work if it doesn’t provide you the features that your restaurant concept needs to flourish.
