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Searching for a Restuarant location?

Written by: Garrett Krueger

Article Overview: This is a must read for anyone considering opening a restaurant.

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Searching for a Restuarant location?

Searching for a Restaurant Location?
Top 10 things to consider before you being your search.

1. Location, Location, Location: A boring real estate adage, but with restaurant space it couldn’t be more true. Walk in traffic is crucial for a recently launched restaurant and locating your new venture off the beaten track might save you a few rent dollars, but will hurt when it comes to attracting diners. Make sure you make a careful decision because a bad location is the #1 reason that a restaurant fails.

2. Restaurant Improvements: I’ve heard many people say that searching for a restaurant with the needed equipment and kitchen build out is worse than searching for a needle in a haystack. One way to search is to look for businesses that are currently for sale. Otherwise, you should beging mentally budgeting to build out kitchen improvements on your own. Have a contractor in mind so you can get quick estimates.

3. Permitting: As you start to locate potential locations and tour with owners and real estate agents, make sure you ask about permitting and current zoning. Venting and stove equipment can be outlawed in certain buildings and you need to discuss potential restrictions with the owners, brokers, and city employees as soon as possible.

4. Neighborhood: As you walk the neighborhood, try to notice who your competitors might be and the level of foot traffic. If your past space was occupied by a restaurant, ask the neighboring stores about the former restaurant and why it moved. Ask neighboring restaurant owners for advice and referrals to potential suppliers.

5. Building Expenses: Staffing and food expenses mount up quickly, but most retail buildings also add in NNN expenses. These expenses include property taxes, insurance, and common area maintenance. Make sure you ask the owner for the last few years of building expenses at each potential locations. Keep a spreadsheet of all relevant building related expenses so you can get a true comparison because some locations have drastically different expenses.

6. Lease Negotiation: Many retail building owners will attempt to get a percentage of your revenue or even a percentage of the sales price when you sell the business. Make sure to have a qualified attorney help you review the lease language and go through the customary terms so you don’t agree to anything that you were unaware of. A lease is a binding document and should be carefully reviewed before signing anything!

7. Free Rent: Building out your restaurant can take up to six months and you don’t want to be paying rent for this entire period. It is reasonable and customary for some if not all of this construction process to be rent free.

8. Common Improvement Problems: Bathrooms, venting, and American with Disabilities Act (ADA) issues are the most common issues with restaurant spaces. Many times restaurants will need to address one of these issues and the costs should be closely monitored.

9. Personal Guarantees: If you are first time restauranteur, many building owners will ask you to personally guarantee the entire lease value. This is a risky proposition but at times cannot be avoided. Try to phase the lease guarantee out over the course of the lease. For example, you guarantee the first year of the lease but nothing past that or maybe the first 18 months but nothing after that period.

10. Brokers: Hiring a local real estate expert to help in the search process and negotiation can be helpful. Make sure to ask them about their experience helping restaurants and their experience in the specific neighborhood of your choosing.

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Article Tags: adage, beaten track, careful decision, diners, estimates, food expenses, foot traffic, insurance, kitchen improvements, location location location, needle in a haystack, neighborhood, property taxes, real estate agents, referrals, restaurant location, restaurant space, retail buildings, spreadsheet, true comparison

About the Author: Garrett Krueger
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