Choosing the Right Location for Your Restaurant

The location of your restaurant can be the most important decision you make in the scope of creating your business model.  It can be a product of finances, opportunity or personal philosophy.  It can also be a product of luck.  No matter how much forethought and effort you put into your business, location can be the most important factor in determining your success or failure.

A friend once opened a restaurant at the heart of a prime tourist location, ensuring that hundreds of thousands of out-of-towners would walk, drive or bus past the front of his business every year.  This restaurant thrived for years.  It subsequently fell into the hands of a new owner, who knew nothing about the business.  From the beginning, new ownership ran it as poorly as possible, putting out inconsistent food and service, demonstrating no inclination toward hospitality and no pride in the building’s appearance.  Regardless, buses continued to drop off tourists and the lobby remained full during the long summer and fall tourist season.  In spite of themselves, they succeeded at nearly the same margin as the previous owners, and the reason was location.

In most cases, start-up capital plays the biggest role in determining the location of your restaurant.  However, location should also be a product of your business philosophy.  It should fit in broadly with your business concept. For example, a lunch diner should be located somewhere near corporate businesses.  On the other hand, a fine-dining concept often finds more success near night clubs, movie theaters, and other commercial destinations. 

It is always a good idea to learn the character of the neighborhood into which you are moving your restaurant.  Research the success or failure of other businesses in the immediate neighborhood and success rate of restaurants in the surrounding community. If your concept is new, or is attempting to establish a different niche within the community, gauge the receptiveness of citizens to novelty businesses.  Also determine if enough of the type of clientele you covet lives and dines in the community on a regular basis.  It may sound basic, but too many restaurants that cater to corporate clientele open in communities where there are not enough corporate residents.

The current trend in shopping clusters is the development of open-air, urbanization projects that combine residential and commercial units, sometimes literally on top of each other.  Many of these offer restaurant-ready units available in a tight commercial real estate market, yielding low-rent deals and reasonable mortgages in some cases.  It would be difficult to avoid such an opportunity, given the lower price and guaranteed foot traffic shopping clusters can yield. 

However, there is definitely a window for the success of these locations.  Unfortunately, it can be difficult to tell when the window for restaurant success has opened or closed until long after the fact.  When establishing a new restaurant concept and niche within a community, there is a certain if-you-build-it-they-will-come optimism.  This enthusiasm and pioneering spirit can be the key to opening the window of success, or a foolish disaster.  On the other hand, placing the fourth pizza joint in a shopping mall can be shrewd opportunism or overkill.  Is the window still open or did it shut just before you opened your doors?

The route with the lowest risk tends to be in the middle, and market research on restaurant locations should be directed this way.  Developing communities with increasing corporate enterprises can be a great venue for any restaurant concept.  When these communities aren’t oversaturated by concepts similar to yours, the window is more likely to still be open.  This is a fine line, and requires effort and analysis from multiple sources. 

In the end, choosing the right location can be more about luck than anything else.  But some research, market analysis, and work to fit your concept with the community can reduce the risks involved.