Part Two – Location
The old saying when buying any property is “location, location, location.” It may be trite, but these words are still true! The location of a restaurant, bar or club as a business opportunity should be a major consideration.
Jim Pate and his team will help you determine if the location of the business you’re interested in will contribute to its current success, future growth potential, and profitability. If your location is working against you, you could have an uphill battle on your hands!
The restaurant business can be challenging. But a good location goes a long way towards increasing the chances it will be successful. There are several key factors to consider when choosing the proper location:
- Built out market
- Stable demographics
- Growth potential
- Diversified clientele
- Strong visibility and easy access
- Heavy pedestrian and vehicular traffic
- Major market generators in the area
- Affordable rent
- Trade area draw
Built Out Market
A restaurant, bar or club with good potential is typically located in an area with a combination of commercial businesses and built out residential population. Buying in an open space could make you vulnerable to new direct competition.
Stable Demographics
A desirable location is one with a solid demographic of long-term, well-educated residents with a strong commercial base of business to tap into. For example, this could be an establishment located near several office buildings full of tenants.
Growth Potential
If the business is in a built-out area that is also maxed out, you could end struggling with growth potential. A location with ample space for additional residential buildings or new commercial businesses is ideal.
Diversified Clientele
A mix of residents, commercial and retail, offices, hospitals, schools and religious institutions is ideal when it comes to a finding good restaurant or bar buying opportunities.
Visibility and Access
If your business is tucked out of sight of major streets and there is no easy access, you could end up struggling to stay in business. An ideal location means easily seen from major streets and pedestrian pathways with simple street or sidewalk access.
Heavy Pedestrian and Vehicular Traffic
The more cars full of people and pedestrians passing by a business, the better the chances people will stop in.
Major Market Generators
Strong traffic generators include hospitals (lots of staff and visitors) theaters (dinner and a movie anyone?) colleges (lots of young bar and club goers) shopping centers and tourist attractions (shopping and sightseeing make people hungry!).
Is Your Rent Affordable?
Is the rent you will be paying for your business reasonable? This is another area where we can help you analyze potential future performance. It is not uncommon for restaurant, bar and club owners to be paying more rent than they should. It should not surprise you to hear that this is a major contributing factor to restaurants and bars going out of business.
Restaurant operators should know what percentage of their sales should be going to rent (hint: if it’s around 10% that is way too high). This percentage should factor in any additional costs paid to the landlord like real estate taxes, fire insurance, and common area maintenance costs (CAM). This number also includes security, gardening and common area utilities costs.
Jim Pate and his team will help to educate you about what percentage of sales should be going to rent. You’ll also want to consider what that expense covers. It is important to carefully analyze these numbers before you potentially close on a new business and end up with unexpected costs that could jeopardize your success.
What is Trade Area Draw?
This term “trade area draw” refers to the average distance a customer will travel to come to the restaurant, bar or club. Most neighborhood restaurants, for example, draw customers from a one-mile radius. In some cases, internationally known restaurants will draw people from hundreds of miles away or even from another country, but that is a rare exception, not the norm.
How a Restaurant Broker Can Help You
We can save you TIME & Money
Before you start the purchase process, please consider seeking out the assistance of a restaurant broker.
We have a history in the area and experienced brokers to help determine if the location of the restaurant, bar or club you have in mind is ideal for continued growth and prosperity.
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