Choosing the right site — one that is optimal for your concept, the right location for your customer base and at the right time for the place — is paramount to your success.
Site selection is about more than just the viability of the unit you intend to locate. It dictates the future, value and net worth of your brand. Getting and optimizing your site can make the difference between an acceptable average unit volume (AUV) and an outstanding AUV that lets you attract more capital, grow faster and increase your net worth exponentially.
Consulting with growing restaurant companies for decades gives me access to a bounty of success stories and war stories on site selection. I have seen many choices that worked perfectly — and some that worked out tragically.
One operator had the foresight to align their site with a retailer who is the hub of their community. As that community has grown, their restaurant has experienced continual growth and is the undisputed leader in their segment — even after 30 years. Another operator made a naïve location decision. While we worked together to adjust their concept to the real estate, resulting in a 30 percent revenue increase, they had forever lost the chance to have a home run by matching the first unit of their concept to their site in a superior way.
Every restaurant concept wants to grow. Most would grow faster if finding sites was easier. The challenge is allowing yourself to be selective in a world without a great selection. These four tips can help you make choices that support your mission, continue your successful growth and build wealth.
1. Enlist the locals.
In my home market of Dallas, one developer has bragged that all of the restaurants in his center came from out of town. Unfortunately, I know why — no local would touch the space.
Traffic patterns and psychological barriers are best understood by the people who live with them. Make fast local friends and listen to their voice. Get out in the community or make contacts on LinkedIn or your college alumni association. Gather information through the local restaurant association chapter or my colleagues around the country in consulting.
People make the choice to go to your restaurants, cross the threshold and try them for the first time. People can still help you choose the right site, especially local people. Meet some. Ask questions.
2. Analyze the other guys’ sites.
While the locals can give you a sense and soft data about potential spaces, making the most informed decision also requires hard data and analytics. Recently, a client and I sat in a first local unit of a restaurant group based in another part of the country. The interior package looked good and the food tasted great — but the dining room was empty. We knew there was no data to support success at that site. We wondered how they’d left that step out.
If you are reading this, there is a good chance that you have already mapped your sites and created a model using both demographics and psychographics. You know what the characteristics of your best sites are. You have overlaid those criteria on sites you are looking at to see how to duplicate the formula for success.
Here is the next step: Overlay your ideal site characteristics on your competition’s sites that are already up and running. Also, get data on the most successful operators in the trade areas you are considering as well as operations in the market you are entering that have similar characteristics to yours — even if you do not consider them direct competition.
3. Know who you are: destination or neighborhood fixture.
Many operators have formulas for their sites. One needs a college and a medical center nearby. Another sidesteps the glamorous and trendy markets and has been very successful taking their restaurant “to the people.” Others study freeway access to support the data they have about their guests who make longer-than-average trips in pursuit of the uniqueness their dining rooms have to offer.
Is your restaurant a destination or neighborhood fixture? Typically, destination restaurants offer something not easily found, have fewer units in a market, have higher-than-average volumes and rely on great access. Neighborhood fixtures offer things other people also do — but with a unique aspect and the ability to drop down in the multitudes wherever there is density.
In the end, the guest decides which you are, but you have a lot of say in the matter. If you design a concept from scratch with today’s market in mind, go with neighborhood appeal — the competition for the destination sites is going to be too intense. Neighborhood appeal offers you more options to grow.
If your concept is so unique that it raises itself to the level of destination, rejoice — but sober up after that celebration and be prepared to present a cogent argument and presentation to landlords. They are going to need to be convinced about choosing you over the endless other options they have. Without that, your growth is going to be stunted. But if you can make a compelling case, you will be golden.
4. Learn the political landscape and local infrastructure.
Every day, we hear about the ticking regulatory time bombs that may go off any time — not only in healthcare, but also in water usage, energy consumption, packaging and, of course, minimum wage. Here is a prediction: The time bombs are not going to go off in a way that will kill your business. People are still going to eat three times a day, and the restaurant industry will figure out how to survive and thrive.
Having said that, operational changes are coming, so when you consider entering a community, know what you’re up against. Make contact with the local government and office holders and understand what may be coming in the future. Your local real estate team and the local restaurant association chapter — the one that helped you find locals to explain the subtleties of your site — can also help you reach an understanding of the landscape and introduce you to public officials.
You will also want to know about plans for future infrastructure. Many of the most desirable restaurant development areas are growing fast, and that means growing infrastructure is coming their way. And, while infrastructure will eventually help people find and get to your restaurant, the process of building that infrastructure — with its detours and delays — could kill your business.
What are the plans for street widening, freeway improvements, detours, light rail and other issues that could cause your volume to plummet? Though many of these projects eventually create value for landlords and their tenants alike, how long will your business interruption last? Years? In the meantime, as the area around your restaurant starts to look more and more like a war zone, you will be tied to your lease.
Manage risk professionally. When all factors point in the same positive direction, sign the LOI. Whether you are an expanding small group of restaurants or a chain looking for an angle, these four strategies will increase the likelihood that you make the right choice. When you use them, you will increase your success, push up your AUVs and operating profit percentages, and build wealth and opportunity for your team.