Thousands of people dream of starting and owning a successful restaurant. The key word, of course, is "successful." (Check out my interview with Tyson Cole for more on starting a great restaurant.) In almost every case the path to entrepreneurial success starts with choosing the right location for their new restaurant.
Clearly that's not easy, though, since every year thousands of restaurants fail.
Prior to opening a restaurant, Samir ran a successful pedorthics practice (pedorthics is the design, manufacture, modification fit of footwear and prosthetics.) When changes in the healthcare industry affected his business he decided to go in a completely different direction.
"In college," Samir says, "I had worked as a bartender, line cook, and server, and I enjoy food, craft beer, wine... so when my now-wife took me to a Tilted Kilt in Chicago, and the owner told me how much he loves what he does... I decided I wanted in that space."
Even so, it took him almost three years to find the perfect location.
Here's Samir's advice for finding the right location for your new restaurant.
1. Think past demographics and dig deeply into psychographics.
Demographics are certainly important. Factors like the average age, income, family size, etc. in a certain radius definitely matter. But that information is based on census data, some of which is often old and out of date.
Plus, if you focus solely on demographics you may exclude people that don't fit your demographic criteria but might still turn out to be customers.
The Tilted Kilt demographic, for example, is predominately male, making it a major focus of marketing efforts, but a significant number of women visit during Happy Hours.
"That's where psychographics come in," Samir says. "You need to know how the customers thinks. Demographics tell you things about your target buyer; psychographics gives you the "'why.'"
"For example," he continues, "women come to our restaurant because we have very good food. While people may at first come for the ambience, they come back for the food."
Make sure you look past your target demographic. Who will your guests be? Talk to people in the community. Find out what people think of your brand or your concept.
You'll never get that information from a census.
2. Don't just go with a standard radius.
The normal way to establish a base trade area is to draw a circle around a location based on assumptions about various behavioral factors. In Samir's case, he settled on using a 20-minute drive time radius.
"I don't think people will drive farther," Samir says. "Some people will go out of their way to visit a Tilted Kilt, but not the majority. People come to us because we're near their job or their house. Convenience matters a lot."
That doesn't mean people outside that radius won't go to his restaurant; it does mean, though, that they will visit less frequently than those who live nearby. (And don't overestimate that frequency: in general terms, "much less often than you think" is a good guideline to follow.)
And also make sure you know the habits of people in the area. Samir's location is in East Boca; while West Boca is only 15 to 20 away, West Boca residents are unlikely to be regulars. The same is the case where I live in Virginia Beach; people who live on the "shore side" tend not to travel to the "bay side" even though the two areas are less than 10 minutes apart.
3. Don't take shortcuts -- see "perfect location" as your goal.
Samir spent almost three years finding the right location. Ultimately he settled on a location on the grounds of a private airport . Just outside the airport is the largest movie theater in the area; they sell approximately 1.6 million tickets per year. The result is built-in traffic.
His location is also parallel to Interstate 95, with exposure to the interstate, which means driers can see his sign --and approximately 240,000 cars pass by every weekday. And the exit is only a minute away.
The airport itself also generates traffic because a significant number of high-end clients use the airport. Tilted Kilt targets men with 6-figure incomes, making the airport another source of built-in traffic -- plus pilots, airport staff, etc.
On the other side of the airport is Florida Atlantic University, a college with a total enrollment of over 30,000 students. Not only are the students potential customers, the school is also a great source for employees.
Of course a great location comes at a price. "It was expensive," Samir says, "but you get what you pay for. 'Cheap' never works out. When real estate is cheap, there's a reason. I did lots of projections and due diligence and decided that over the long run the expense was worth it.
"If you can afford it, do it," he continues. "Don't assume you'll somehow create a destination restaurant that people will go out of their way to visit. That rarely makes good business sense. You have to spend more on advertising, you have to spend more on building your clientele... and ultimately you dig a deeper hole that is tough to crawl out of."
4. Focus on accessibility and visibility.
Some people won't go to a restaurant simply because they have to make a U-turn at a traffic light. Others won't go to a restaurant if they have to cross traffic; they only want to visit places along their direction of travel.
Businesses like Dunkin Donuts use that premise in their location searches; they determine the "a.m." and "p.m." side of the road and ensure their locations are on the morning drive time side.
Go into it assuming most people are unwilling to accept inconvenience or pain. Look for a location accessible to major arteries, with easy entry and exit... and plenty parking.
Also consider visibility. "You can have the best accessibility in the world," Samir says, "but without visibility, you won't draw customers. You need good visibility, easily visible signage... a natural way for your location to expose your brand."
5. Think hard about buying versus leasing.
Samir leases his property; he didn't have the option to purchase it because his restaurant is on the airport's property.
Even so, "It is better to buy the property if you can afford it, and if you're in it for the long term," Samir says. "If you're thinking short term, you're better off leasing."
When you lease you can deduct all the costs associated with leasing. Leases typically only require a small security deposit, often just one month's rent. That makes the cash outlay lower.
Buying requires a sizable down payment for a commercial mortgage, and since property is a capital asset so you don't get the same tax deductions. Still, real estate tends to appreciate, so if you decide to sell you restaurant you can not only sell the business but also the property.
And in case you're wondering which way to go, consider what McDonald's does. McDonald's sells food but it's also in the real estate business: it buys the property for a new location, builds the restaurant, and then leases it to the franchisee.
6. Don't forget about construction and layout.
Tilted Kilt is a franchise. That means they want the customer experience to be the same from restaurant to restaurant, so they handle design.
Even so, every site is different, especially if you'll put your restaurant in an existing building -- that means you don't get the benefits (and headaches) of a ground-up build.
"Experienced architects will work closely with you to design a build that is appealing but also very efficient," Samir says. "For example, a good bar design means the bartenders don't have to turn their backs to the customers. The same is true in the kitchen: a good design fosters great productivity. In the dining room, you don't want guests to think they've entered a maze and can't find the bar or the restrooms."
Samir also learned that bigger is not always better. He has an 8,500 square foot building with big windows and an indoor/outdoor bar and patio -- in South Florida -- which means his electric bill is "ridiculous."
Plus, "I do great numbers with a large restaurant," Samir says, "but my seats aren't always occupied. A place that is almost always full and on wait gives the customer a perception of exclusivity." (After all, a rock band would rather sell out a 5,000-seat theater than sell 5,500 tickets in a 12,000-seat arena.)
"After looking at my first year's numbers," he continues, "I decided to take out about 15 tables and put billiards tables in their place. That keeps guests in our restaurant longer, shrunk the dining area without shrinking the restaurant... it's worked out extremely well."
And one last thing about construction -- and leasing. "Get a good attorney for lease negotiations and contractor negotiations," Samir says. "If you don't -- and you don't really know what you're doing -- a landlord will eat you up."
For more on restaurants, check out some of my posts with Eric Ripert of Le Bernardin (and Top Chef, and Avec Eric, and...)