Ask the Expert
Q: What are some of the ducks I should have in a row before I start looking for my restaurant site?
A: Before engaging a commercial real estate agent or beginning the search for a great location, you need to do your homework. When it comes time for you to hire an agent, be sure he or she has extensive experience in restaurants specifically, not just commercial real estate. Restaurants come with their own unique problems and requirements that need to be carefully negotiated.
Start with a comprehensive business plan. Although business plans tend to be fluid and will change based on the location you select, it will help in defining your search and what you can afford. It will also be the information you’ll need when you start looking for financing, so you might as well start with a well-thought-out and researched document.
Some of the info to include:
Who your customer is;
Average household income. This can be narrowed down based on your menu prices;
Age range of targeted customers. For instance, I have a current client whose business caters to millennials and so we mapped out the population of millennials living in the Twin Cities area and are focusing our search on the areas where there is the most density.
Distance from which you will be drawing customers. If your typical customer will be traveling a long way to get to your restaurant, you may want to be centrally located and near a highway for customer ease in getting there. Adequate parking—and ease of parking—should be near the top of your list when you finally get around to looking at sites.
When looking for sites, you need to know:
What your construction budget will be. If you are on a shoestring then you may need to only focus on second-generation locations;
What do you think you annual sales will be? Your occupancy costs should be 6 to 8 percent of sales;
What is the ideal square footage? Does your concept call for a cozy atmosphere or do you need space for people to stand around a busy bar? While you may think big is better, remember if your space is too big and you aren’t hitting your sales number, it is not like labor costs where you can just cut staff to save money. Better to have the problem of undersize than oversize. Also nothing is more off-putting than a restaurant that looks big and empty and doesn’t have any energy.
Make sure you understand the demographics within a one-, three- and five-mile radius of your location. Obtain density, traffic and pedestrian traffic counts.
Know well in advance who will guarantee the lease. Many restaurateurs have people willing to invest, but to not guarantee a lease. This is significant because if a landlord is going to give you a significant tenant improvement allowance, they want to know what their risk level is. Have this nailed down before you start to make the rounds.
Meet with investors and bankers and share your business plan. Although you won’t get final approval until you have the site selected, you can get some initial feedback on the investors’ interest and whether the bank thinks they can finance. It is also good to have other experts—such as an accountant, attorney or restaurant consultant—look over your plan and give input. They may have ideas on things that didn’t occur to you.
These are just some of the things you need to think about before you go out into the market. Keep in mind time is your friend and don’t be in a such a rush–you may make a rash decision. If you pick the wrong location, you’re stuck trying to find a way to fix it and make it work. Tenant construction costs are too expensive for you to move on easily.
Rarely do you get the perfect location, but the more boxes you can check the more likely you are to be successful.
Andrea Christenson is a senior director, brokerage services, for Cushman & Wakefield real estate services, working out of their offices in the IDS Center, Minneapolis. She is an experienced retail specialist with an emphasis on restaurants. A master networker, Andrea serves on the Hennepin Theater Trust board and is part of The List, a by-invitation networking group for professionals. She can be reached at 612-347-9395 or firstname.lastname@example.org