Smart Up Business Selecting Restaurants location

Selecting Business
Location
By Sherif Hanna
Founder & Managing Partner of
Smart Up Business

Presentation Plan
01 02 03 04 05 06
Introduction Importance of
location for
restaurant &
retail business
Factors of good
business
location
Different
location for
each business
nature
Evaluation of
business
location
If I opened in
the wrong
location
• Types of business
location
• Location selection
mistake
• More clients
• Operation size
• Permits & license
• Affects operation
cost
• Sales channels
• Demographics
• Competition
• Visibility
• Accessibility
• Parking
• View
• Exterior
environment
• Renovation bills
• Staff convenience
• Can the same
location be good
for any business?
• Buy, Lease or Build
• Before looking for
your business
location
• Push & Pull
checklist
• Some ideas for
some issues
May-17 By Sherif Hanna - Smart Up Business 2

Introduction

IntroductionThere are a variety of possible locations for restaurants
including a freestanding unit, located in shopping mall outlet,
food court, or a multiple concept unit within an existing
facility designed for another business such as a gas station
and convenience store
There is no substitute for a good location.
Good food, superb promotion, fast service and
competitive pricing are extremely important, but
rarely will those factors overcome a poor
location.

Importance of
Location for
Restaurants &
Retail Business

Why is
location
important in
Restaurant
& Retail
business?

1.More Clients
Types of Consumer Buying Behaviors & Product Decisions
1. Impulse
Purchases
Consumer makes a purchase
with little to no thought or
planning involved.
In most instances this
happens with low-priced
items in retail.
Around 80% of QSR customers
make the decision to go to
restaurant after seeing the
signage
2. Routine
Purchases
Customers spend very
little time deciding
whether or not to
purchase these items
They don't typically
need to read reviews
or consult with
friends
3. Limited
Decision Making
Customers may seek
advice or a suggestion
from a friend.
Customers might also ask
for suggestions on which
store to go to and which
brand is the best.
The consumer may
research a few options.
4. Extensive
Decision Making
Consumers use extensive
decision making.
Consumers spend time
researching potential options
before buying.
They speak with trusted friends,
sales professionals, and read
reviews and ratings online
The decision making process
lasts longer.

1.More Clients
• VISIBILITY
1. Impulse
Purchases
• ACCESSIBILITY
2. Routine
Purchases
• VIEW
• CONVENIENCE
3. Limited
Decision Making

2.
Operatio
n Size
• Area of production defines the
restaurant capacity
• Warehousing area defines the
amount of stocks the restaurant
can keep – which means
purchasing more amounts, less
often
• Dining area defines the capability
of restaurant to generate sales

3. Permits & License
Depending on the zone & the area

4. Affects your
Cost of
Operation
• Cost of rent
• Cost of marketing
• Labor cost
• Supply Cost
• Utilities cost

5. Sales Channels
• Dine in
• Take away
• Drive thru
• Car service
• Home delivery

Factors of
Good Business
Location

What to
look for in
your
business
location?

1. Area Demographics and Market research
• What kind of neighborhood your proposed restaurant space is located within.
• Think about the kind of restaurant that would be well suited for the surrounding residents.

2. Competition and
other Businesses
A lot of competition is not
necessarily a bad thing since it
means that the market is healthy
and can support a whole lot of
restaurants.
Secondly, you should find out if
there are actually other
businesses nearby that could be
complementary to a restaurant,
like traffic generators

3. Visibility
Restaurant visibility & signage
Traffic direction

4. Accessibility
Inviting facade
Handicapped-friendly
Kids pleasant place
Ground floor
Direct Access
Traffic pattern

5. Parking
A great restaurant will ideally have its very
own parking lot.
Nearby public parking will also be
acceptable.
However, keep in mind that many people
will simply drive on to another restaurant
once they have nowhere to park their car.May-17 By Sherif Hanna - Smart Up Business 19

6. View
You might sacrifice some of the
factors of good location such as
visibility or accessibility for the
view that is an important part of
the customer’s experience

May-17
By Sherif Hanna - Smart Up Business
21
Environment
Take a good glance at the
sidewalks and other
buildings which might be
around the location. They
can sometimes affect a
prospective diner’s
impression of your
business. You will have a bit
of control over your
neighbors so you want to
choose a restaurant
location with surroundings
which are neat, tidy and
well maintained.

• Market research has
demonstrated that the "going-
home" side of the street is usually
preferable to the "going-to-work"
side. People are more likely to
stop at stores on the way home
than when they are in a hurry to
get to work on time. Also, the
sunny side of the street is
generally less desirable for retail
operations than the shady side,
especially in warm climates.
Research shows that rents are
higher on the shady side in high-
priced shopping areas.
May-17By Sherif Hanna - Smart Up Business 22
The side
of the
street

8.
Renovation
Bills
Different locations can have
different costs associated using
converting an available space
to a restaurant. One big factor
affecting the scale of
renovations is a building’s
previous use.

9. Staff
convenience
Able to find staff living nearby
or accessible by economical
transportation, especially for
restaurants working until late
hours at night

Different
Location for
Each Business
Nature

Can the
same
location be
good for
any
business?May-17 By Sherif Hanna - Smart Up Business 26

Business factors to choose your location
Product nature
Target customers
Sales channels
Cost projections
Competitors’ presence
Price range
Budget

The rent-advertising relationship. Your advertising budget is closely related to your choice of site and the
proposed rent. Your cash register will likely be ringing up sales the first day you open your doors, with no
advertising effort on your part. Of course, your rental expenses will be proportionately higher than those for an
independent location
ALTERNATIVE ADVANTAGES DISADVANTAGES
Buying Ownership, Operating flexibility, Quick occupancy,
Accessibility to traffic, Asset appreciation
Long-term commitment, Initial capital outlay
Adaptability, Initial facility condition, Maintenance
costs
Leasing Quick occupancy, Relatively low initial costs
Reduced commitments
Operating inflexibility, Changing lease terms, Initial
facility condition, Adaptability, Lease nonrenewal
Building Ownership, Operating flexibility, Facility condition
Asset appreciation, Location flexibility
Long-term commitment, Initial capital outlay
Construction time, Maintenance cost
Buying, Leasing or Building?

Before
looking for
your
business
location…

Concept
Value
proposition
Brand
Identity
Name
Logo
Sales
Channels
Food
Quality
Service
Pricing
Atmosphere
Menu
Know your
Concept &
Business

Determine Your Customer’s Characteristics
• Identifying the characteristics of your most frequent customers (heavy users) is essential
• Understand Attitudes, Trends, Habits and Patterns of Consumer attitudes influenced by variables as age, children,
income, lifestyle, profession, opportunities, household composition and size.

Identify Your Trading Area
• Numerous factors dictate the size of trade areas
including type of food facility, type of location,
income, topography, competition, traffic artery,
traffic counts, physical and psychological barriers,
market structure, activity generators, consumer
patterns, visibility (sometimes), socio-economic
characteristics, and perhaps, others.
• Historically, restaurants have focused on a five-mile
trading area, while quick service food facilities have
settled on a three-mile radius.
• In reality, trade areas are not rigidly round, square,
or rectangular. Instead, they are positively
influenced by the attraction of the restaurant (and
often its surrounding generators) and negatively
impacted by factors such as competition, and
physical barriers, limited access, parking (or the
lack of it)

Gather Factual
Market Data
• Market resources include population,
socioeconomic characteristics, age
structure, income, eating-out
expenditures, lifestyle and household size.
Through an orderly procedure, you can
determine the extent of the present and
future market.
• Market resources can be checked for
inventory and quantified to determine the
share of market that a planned restaurant
or quick service food operation can
anticipate. It is possible to calculate
demographics with a fair degree of
accuracy and to compare them to
customer characteristics. Also,
expenditures can be estimated to
determine eating-out potential. It is not
the number of people in the trading area,
but rather who they are and what they
spend that is of paramount importance.

Select Adequate
Accessibility
• When determining accessibility, it is necessary to consider
major and minor traffic arteries, number of lanes, speed
limits, turn signals, turning lanes, curb cuts, traffic backup,
congestion points.
• You should also evaluate automobile or pedestrian traffic
counts, traffic flow, traffic peaks.

• For most foodservice operators,
being near generative facilities
is a must. Such as major
concentrations of office, hotel,
industrial and other commercial
facilities.
• It is essential to identify and
explore the many varieties of
generative facilities in your area
because they increase the
frequency of visit into an area.
Understanding their
importance can represent the
difference between choosing a
poor location and a great sales
performer.
Identify Generative Areas

Evaluate
Competition
• Competition can usually be divided
into two types: direct and indirect.
Obviously, the more direct the
competition, the greater the
tendency toward saturation.
Conversely, the less direct the
competition, the greater the
opportunity for higher market
share.
• Do you know what your
competitors are doing? Find out!
What are their weekly or monthly
sales?

Understand
Visibility and
Exposure
• Visibility is the ability of a site,
building, or sign to be seen;
exposure is being seen over a long
period of time. Whereas visibility
creates opportunities for impulse
eating, exposure gradually
influences patterns and decision-
making. Visibility is extremely
important!

Estimate Sales
and Parking Needs
• Almost all food operators estimate
sales in one manner or another.
• Parking is critical for most
restaurants and quick service food
operations not located in a
downtown, airport, resort area, a
business district, a university
campus, hospital complex, or other
location that depends upon walk in
or take out business.

Evaluate Site
Economics and
Physical
Characteristics
• Site economics represent the
ability of a restaurant's sales and
operating costs at a given location
to support the cost of land,
building and equipment, (or rent),
while providing an acceptable
profit and ROI. Its sales potential
must match or exceed the site
economics.
May-17By Sherif Hanna - Smart Up Business 39

Evaluation of
Business
Location

How to
evaluate
business
location…

Push And Pull Factors
Factors that draw a business
away are “push” factors. These
include increasing costs, more
competition, a reduction in
demand or poor
communication and
transportation systems.
Conversely, those that “pull” a
business toward a location are
lower labor costs, a growing
consumer base, government
incentives, improved
transportation and
communication systems.
Create a checklist
Put the most
important
factors in it
Put the ideal of
each factor, if
applicable
Evaluate each
factor as a PUSH
or PULL factor
PUSH from -5 to 0
& Pull from 0 to
5
Preferably to be
made by more
than 1 person
separately & in
different times of
the day, weekday
& weekends
Include the
common factors
& the ones you
think are specially
important for
your concept
Ideal space, ideal
budget, parking
space
• Where 0 is
neutral & 5 is
the best
• Where 0 is
neutral & -5 is
the worst

Opening in the
Wrong
Location

Visibility
• Usage of flags
• Sky sign
• Surrounding billboards
• Surrounding street trash bins or
seats
• Umbrellas
• Lighting

Neighbor
s
problems
The good neighbor
program as
community activity

Labor inconvenience
• Offering labor
transportation
• Schedule adjustment
(longer shifts & longer
weekends)
• Lower operation hours

Parking
• Free valet parking
• Rent a nearby garage

Low Foot Traffic
• Tie in with traffic generators
• Special offers for different communities

Examples of Checklist Factors
HEADINGS DEFINITION
General Location
Location refers to a general area within a city. Physical characteristics and
area characteristics should be considered.
Position of Site
Site is a specific piece of property. Size, parking facilities, accessibility of
utility and public services, convenience, and visibility are factors related to
but not limited to the position of site.
Demographics
Information pertaining to consumers must be collected including data about
age, sex, occupation, income, food preferences and potential for future
growth and development.
Traffic Information
Traffic flow patterns are important for the analysis of the site. The factors
related to traffic information include traffic counts and patterns, and
frequency pattern of traffic flow.
Competition
A restaurant operation must consider its actual and potential competition:
Include but are not limited to location and operating results of competitor,
and proximity to competitor.
Cost Consideration
Costs associated with the development of the site need to be calculated
carefully. This includes both the cost of purchase and the cost of site
development, which covers factors such as building, landscaping, and the
provision of associated facilities such as car parking and access roads. The
cost of improvement – renovations and modifications - is also important
considerations.

Smart Up Business Selecting Restaurants location

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