Guest blog post from Glen Wright, Senior Retail Specialist at The Wright Retail Brokers of SVN
5 Things to Look for When Opening a Restaurant
Opening a restaurant, whether it is your first location, or expanding in to your second or more location, can be a daunting task. For many restaurateurs, your entire livelihood is attached to this venture, so knowing how to succeed is paramount. As a commercial real estate broker specializing in retail, I have worked with and advised several restaurateurs from world renowned Chefs, to local Mom and Pop operators, and most of the advice I give is the same for both.
- Have a clear plan. Benjamin Franklin once said “by failing to prepare, you are preparing to fail”. These are some very wise words. So, let’s prepare with a clear and measurable business plan with a menu. I put menu in bold on purpose, here’s why. All businesses need a business plan to show what makes them different from all of the other businesses and needed by the community they are looking to serve. I have asked operators for a business plan in the past, and received just that. Ok, great, that makes you a business, but not a restaurant. It takes a menu to make it a restaurant. I don’t need recipes, not in here at least, but a clear menu of what kind of foods you will be serving. Keep it simple, yet complete. You don’t want too much to choose from, nor too little. Do your research here and know your competition and concept.
- Location, Location, Location! That business plan needs to address the location. What are the demographics of the State, City, Submarket, and Neighborhood you are looking to open in? Will you be in a stand-alone building or inline space? Would you do well in a place like “Restaurant Row” on the Jefferson exit of Interstate 25 where you have great visibility and a great traffic count (as you can add the traffic count of Interstate 25), but you are still a destination. Meaning people will be coming there to eat at their favorite restaurant, there is little “cross shopping” happening. Cross shopping is more likely to happen at a shopping center such as a traditional shopping center like Far North (farnorthshoppingcenter.com) with a Grocery Store, Dollar Store, and inline shops. Or at an entertainment venue like the new build to suit Snow Heights Promenade (www.snowheightspromenade.com) being built in Albuquerque’s Northeast Heights submarket with a live stage for PPV events, movies under the stars, music and family events, as well as neighboring tenants like Altitude Trampoline Park and Boxing Bear Brewery Taproom.
- Restaurant financing is different form all other businesses, and what I call “the 3 P’s” will help here. Patience and Persistence will help you Persevere. Once you have your business plan with your menu and your location put together, it’s time to put together your financing. Whether you get investors, partners, and/or bank financing, this part can take weeks to months depending on how complex it is, be prepared for this. Whether you are buying a building or leasing a location, be prepared with not only those numbers, but what it will take to build it into the restaurant concept you have with all of the equipment you need and the staff needed to run it (nobody can afford to work for free, even friends and family). Don’t forget about sustainability. It will take time to build your clientele for this location, so make sure you plan enough funds for this period as well. I normally recommend planning to have 6 months operating costs.
- Know your competition. What other restaurants are in the area you are looking at? Whether they are the same kind of restaurant or not, you should know who is around you. What other restaurants of your “type” are in the city? Even if it’s not an exact match (I know some restaurants that say there is nothing out there like they do), if it’s a Mediterranean type, Italian, American, etc. know where it is, how it performs, and what its affect, if any, will have on your restaurant opening.
Consult with experts! I can’t emphasize this enough, CPA’s and bankers will have your finance numbers, Commercial Real Estate Brokers will have your demographic information, know your competition, and know the market rates on the buildings and areas you are looking at.