FAQ - Culinary Black Holes

Question

I'm managing editor of Philadelphia Weekly, the region's largest alternative newsweekly. I'm writing a story for our Food Issue about why some restaurant locations seem to be the kiss of death, no matter what kind of restaurant inhabits the space. I've been trying to talk to different restaurant consultants about the importance of location, trying to find an answer to the mystery of these culinary black holes. I'm wondering if one of you might speak to this issue; I'd very much appreciate it. Also, if you could return an answer to my e-mail address as well as posting it, it would help me tremendously.
Thanks very much for your time,
Liz Spikol

Answer

Dear Ms. Spikol:
Restaurant site selection / analysis is a topic that many restaurateurs ignore.

There is a very basic concept that I follow. "Build it where they are"! This may seem a bit over simplified, but I have seen many instances of new restaurants opening up in locations that leave me shaking my head. In many respects the restaurant industry is overbuilt. You can still be successful, but you need the right concept in the proper location.
There are exceptions to the rule. We have all seen the successful restaurants located behind the barn, next to the tracks, under the bridge, and down the dirt road. But these are very rare.

In order to avoid creating another "black hole" I recommend using the following location criteria:

Geography – Geography is important because customers in different parts of the country display differences in eating and expenditure habits. One should begin by analyzing the sales performance of existing units based on their distribution into geographic areas. Are there differences? If so, why?

Sales and Trends – Sales size and performance trends are extremely important. Gather as much restaurant sales information in the area you are interested in building in and rank these units in descending order and study both ends of the range. What are the specific characteristics of the restaurants at the top of the list, and why are others at the bottom?

Market Area Size – The market (your target market) must be large enough to sustain you and your competitors.

Accessibility – Accessibility means two things: road capability and adequate ingress and egress. If people can’t get to you, they aren’t going to come.

Visibility – An essential element to fast food restaurants is visibility. If they can’t see you, they won’t stop.
Another problem I see is the parade of restaurants into an existing building only to see each and every one of them march out within a few months. This could have been avoided if the restaurant owner did their homework and asked a few poignant questions.

  • Why did these other restaurants fail in this location?
  • Am I doing anything different that will increase my odds of success?
  • Maybe this is just one of those "black holes" I’ve been hearing so much about and that is why the rent is so cheap!

My advice to all restaurateurs is to be prudent. Do your homework. Conducting a thorough site selection analysis is expensive and time consuming. But when you look at the failure rate of new restaurants, it is definitely well worth it.

Regards,
Ron Santibanez
President
Profit Line Consulting, Inc.