Restaurant Site Selection

There is no disputing the importance of location for selecting a new enterprise site. Identical franchises or chains will vary up to 200% in sales volumes based on their locations. Of course there are other factors that cause this variation, such as marketing budgets, size, management, etc., but location is certainly one of the main reasons for the differences. Choosing a less than suitable location for your new enterprise can lead you to become a go-broke location which will eat away at your capital and potentially lead to even personal bankruptcy. Profitable locations on the other hand will generate sales, make money, and the new business will appreciate in value.

Dale Willerton and Jeff Grandfield are two commercial lease consultants who have reiterated that site selection is not rocket science, however it is an art form consisting of part research, part timing and part luck. They also warn that restaurant tenants should not lose sight of common sense along the process either. Willerton and Grandfield have put together five tips on how to best navigate the site selection process:

  • Allow enough time so that you’re not making decisions under pressure. Typically, for a new restaurant business, you should start the site selection process six months or more in advance of when you want to open. If you find a prime location, usually the landlord will hold it for you for a few months. However, if the process takes longer, you may need several months to finalize the Offer to Lease, review the formal lease documents and/or build out the premises.
  • Don’t let an agent show you space all over town. Restaurant tenants often fail to realize that real estate agents/brokers typically work for landlords who pay them a commission on lease deals signed and closed. When one agent shows you another agent’s listings, this will effectively create commission-splitting between the property’s listing agent and the leasing agent. This will also undermine your negotiating power since the real estate agent will know how you feel about every location.
  • Make your leasing inquiry by calling the “For Lease” number on the property sign. This way, you will meet and negotiate with the listing agent directly.
  • Don’t telegraph your intentions by giving buying signals. Ask the listing agent to e-mail you preliminary information before you agree to view the space. When viewing, stifle the urge to think out loud; subtle comments to a partner/spouse and overheard by the leasing representative can work against you.
  • Negotiating on multiple locations: When it comes to site selection, it’s critical to pick multiple locations during the process and negotiate on them simultaneously.
  • Scrutinizing “burned” locations: In the restaurant industry, it’s very common for one restaurant to open where another has failed – mainly to utilize the existing infrastructure (e.g. mechanical,, electrical, washrooms, kitchen, hood, etc.). If you are the third restaurant taking over the location, however, there may be more wrong with it than you can see.

To read more about the site selection process and for more expert advice, click here

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