Updated: May 5, 2019
Thinking about opening a restaurant or opening another location? For years we've heard location, location, location but have we been thinking about location in the wrong way? When deciding to open a restaurant the only thing that matters is if your menu prices are inline with your location and will your customers like what you're serving. If the answer to either one of these questions is "no", then your location won't matter at all!
So you're thinking about opening a new restaurant or expanding but you can't decide on a location. Your ideal location would be a high traffic area that reaps of high-end success and a big sign out front that says "I made it". Before you sign that high-end lease, let us just remind you that 70% of all restaurants will fail within a 3-5 year period and having a high end rent won't help at all.
"Location is important but not in the traditional sense that you might think!"
A few days after writing this blog I had the pleasure of listening to Jerry Murrell, co-founder of Five Guys Burgers. If you're not familiar with Five Guys, they're (sorta) a high-end burger joint that started in the late 80's. Anyway, Jerry was sharing his story about opening his first restaurant with his sons when they were just teenagers.
One day Jerry noticed a busy little neighborhood restaurant that sold one thing but that restaurant was consistently packed. Being the entrepreneur that Jerry is, it dawned on him that a restaurant's success didn't have to come from a high-end investment, just great food, so Jerry decided to open up his own neighborhood burger joint that focused on a handful of options. With very little investment, Jerry intentionally found a very inexpensive location that was a little difficult to find. His thinking was that if he can get people to actually look for his burgers, he was on the right track. Today there are 1500 Five Guys locations throughout the US.
When we work with restaurants that expand and grow, we'll often see the second or third location struggle. Why? Simple economics. Quit often, independent restaurant owners will abandon the model that they've proven will work. They'll go bigger and better (so they believe), they'll change the concept and even the demographics. For most restaurants, these type of changes are usually accompanied by increases in rent, labor cost, competition, menu prices and the restaurateur is forced to start over.
If your goal in opening your restaurant is financial, then I encourage you to look at how the major chains do it. Once they find a formula for success they simply repeat it which includes everything from the menu, rent prices, customer demographics and of course, location!
Think about it this way.... "if you can't make it in the neighborhood, you probably won't make it outside the neighborhood." So kill it in the neighborhood first and use that exact model to grow and expand.
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