Many people dream of opening their own restaurant. But for most restaurateurs, dreams give way to harsh reality. Studies have found that 60 percent of restaurants don’t make it past the first year, with 80 out of business in five years.
While there are several factors that contribute to the success or failure of a restaurant business, many of them can be traced back to the commercial space owners have chosen to open their restaurant. Here are some tips for choosing the right restaurant space.
- Start With a Good Business Plan: The biggest mistake most first-time restaurateurs make is a lack of preparation. Unlike buying a home, which is often an emotional purchase for all involved, commercial real estate is driven by profits and return on investment. Because of this, you need to enter the leasing process with a very clear picture of your financial assets and liabilities, along with the market opportunity for your restaurant. This isn’t just for your benefit, either: remember, commercial landlords are investors. With a solid business plan and financial documents in hand, you’ll be able to sell yourself and your business more effectively.
- Know Your Customers: Choosing the right space for your restaurant isn’t just about knowing what you can afford: it’s also about going where your customers are. The clientele you’re targeting has a huge impact on everything from the location of your restaurant, to the facilities and layout you need to be successful. Does your concept cater to families? If so, you’ll want to target commercial spaces in family neighborhoods with a roomy, traditional floorplan. Are you targeting young professionals? A smaller, cafe-style space in the financial district is likely more suitable.
- Be Patient: Time is a factor for many residential buyers, who may be moving for a new job or closing on their existing home. But there’s no clock on starting a business. No matter how eager you are, it’s important to take your time and find a location that best suits your needs, rather than rushing into a commitment on the wrong space. Expect to spend 6-12 months to find and negotiate a lease on the right location for your business.
- Know Your Codes: Municipal building codes can be incredibly complicated, and vary widely from location to location. Neglect them, and they’ll come back to haunt you. First, make sure that any areas you’re considering are zoned for restaurant use. Next, be sure to contact your municipality and find out how much parking is required for restaurant use. This may differ depending on the kind of restaurant you’d like to open. For example, a take-out restaurant often requires less parking than a fast casual or fine dining restaurant.
- Hire a Broker: When it comes to commercial leasing, it’s strongly recommended that you hire a broker to help you, for several reasons. First, virtually every prospective landlord will be represented by a broker or attorney, and many of them prefer to negotiate with other professionals. By hiring a broker, you’ll be taken more seriously and put yourself in a better position to beat out other bidders. Second, working with a broker gives you access to the most up-to-date information on what’s available in the market. Finally, commercial leases can be incredibly complex, and there is no standard agreement. In order to negotiate the most favorable terms, it’s a good idea to hire someone who has plenty of experience navigating the process.