OPENING A RESTAURANT: how to choose a location and a premise

In the series of materials on “Opening a restaurant” I am considering for you some situations based on my more than ten-year practical experience.

Owing to the article “How to choose a good name” you have an idea of the mechanics of this creative process as well as of how important the choice of Target Audience of your business is.

And now we are going to talk about a location, that’s about a place and a premise itself.

The truth that I follow in my career is: any premise can bring profit.

The evidence for that was the implementation of such, as may seem from the first view, insane projects as a fashionable night club with a Caucasian cuisine luxury restaurant behind a filling station on the way out of the city (“Zoloto” night club and “Bambarbia” restaurant).

Still there is one “but”. Not all premises are profitable and efficient in the Ho.Re.Ca. sphere. I am usually honest with my customers or investors telling it while conducting my business audit.

It happens that it’s better to tell at once that this place is more suitable for a car service or a pharmacy than a public catering venue. Thanks Goodness, my experience of cooperation with tangent businesses in B2C (Business to Client) sphere provides the opportunity of finding bearings in nuances like that.

While working with the location for your business two fundamentally different situations can occur:

  1. You already have a premise and you need to choose a concept and
  2. It is necessary to choose a premise for a conceived format.

The problems are different, but the main point is the same – you are supposed to work in this place. So what must be taken into account while choosing a location?

  1. The legislative possibility of running a Ho.Re.Ca business in this place. Check the constating documents to find out the end use of the premise. The phrases like “the premise for commercial use” do not always guarantee that sanitary control services won’t cause you any problem. There was a case in my practice when we rented a premise but we couldn’t obtain any permits for our activities from the epidemiological centre and the Town Council. According to the epidemiological centre’s order we reconstructed the premise into a “Public catering establishment”, made a more powerful ventilation system, zoned the production areas into shops with the help of walls and reconstructed the water supply system.You should be careful with premises located in dwelling houses. In this case you will have “to be friends” with the neighbours, and night time activities in dwelling houses are restricted by law. So even don’t think about parties and night catering. And if you don’t manage to make good and noiseless ventilation, you can say goodbye to half of your menu.
  1. Technical preparedness of the premise to Ho.Re.Ca. business.
    Analyze all the 1000 small details:

water supply and draining system (sewer pipes with the diameter not less than 8cm, head of water not less than 2 m/s, the condition of pipes (freeze resistant plastic, cast iron, crimp);

– power supply system (in addition to the condition of wires in a premise there are some more important factors such as permissible power limits and monthly limits of electricity consumption. Mainly these problems occur in old office buildings and dwelling houses. Just imagine a situation when you want to bake pizza, make coffee, switch on a conditioner, and there are no 3 leads in your premise or a permissible power is 10 kW… but only those 3 devices will take about 15 kW at peak moments);

ventilation and ventilation tubing ( ventilation and ventilation tubing (even if you will have to make the system of supply and exhaust ventilation on your own, think of the ventilation tubing you are going to use for that. It is forbidden to use domestic tubing or tubing which contiguous with other premises of the building, so it may happen that you will have to make some tubing up to the roof. And if you do it on the facade, you may have certain problems with the Town Council Architecture Department, as it can spoil the building’s external appearance)

 heating (this is going to be your considerable item of expense in the cold season as well as air conditioning during hot days. Involve a specialist for expenses calculating, and also, if there is such a possibility, make а heat auditing of the premises with the help of a thermal imager. Your walls and windows can be not as reliable as they seemed at first sight)

  1. Facade attractiveness (a good visibility of your premise and a grand sign board will be a big advantage, but even if it is not expected to be made, you should provide a good navigation for your Guest with the help of boards or pointers how to get to your restaurant)

фасад Дядя Pizza

  1. Is a premise under mortgage? Quite often it turns out that a premise is forfeited or is carrying some other obligations (mortgage, temporary arrest and so on). In this case it is necessary to involve a lawyer and study risks, because you can lose all your newly made redecoration.
  2. Rent or property? And here it is important how quickly you want to return your investment. If you consider your business as an investment for the sake of the premise payback and a long term investment that monthly brings up to 3-4% from the investment and you are sure about your future, then you should buy. In average Ho.Re.Ca. can cope with these figures. By investment I mean the premise cost and the investment into your business.Meanwhile I have been working in rented premises. The planned monthly investment profitability ranges between 7-10% from the investment. This is a provincial calculation which is typical for cities with less than 1 million inhabitants.

The advantages of an own premise are, of course, the following 3 factors: 

  • reliability (nobody can force you out of there);
  • less expenses (there is no “Rent” column);
  • capitalization (an estate property is always an estate property in all corners of the world making Africa not an exception).

From the other side rented premises possess 2 global advantages: mobility (if your business doesn’t work in this place, you can always move or simply close the project that has had its day and move easily, while you will have to take pains over yours forever), as well as investments minimization (investments are returned faster in a rented premise and there is no need to spend money on buying).

What rent is acceptable? If you expect the profitability of 20-25% from the turnover having 30-40% food cost, the item “Rent” must be from 5 to 7% of the planned gross turnover. For instance, if you are planning to turn over 100000 conventional units and have 20000 in your hand after all expenses, 5000-7000 rent will be suitable for you.

  1. Pеople flow (because we work for our Guests! If you are not familiar with this district or area of the city and you have no idea how public this place is, you can evaluate the people flow using an old method. Definitely there is a café or a supermarket near your future venue. Spend some evenings watching (it’s better to compare week days and days off) and count the number of visitors. If you are planning to open a café in a shopping mall, ask about your neighbours, choose locations near the most frequently attended establishments (cinemas, skating rinks, rollerdromes, world clothing and shoes brands).
  2. Surrounding infrastructure (your premise has to be easily accessible and convenient for your Guests. Some important things are: a parking, the absence of any access restrictions (traffic signs), the availability of public transport stops nearby, the possibility of a summer area arranging, a bicycle parking area, a playing area for kids. All these things will contribute to your karma as well as your profit).

In each of the items considered I just partly described some positions from my check list for “Business auditing” that I provide as a service from khorzov.com

Contact me and I hope that the presented information has helped you a bit.

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