Restaurant Site Selection: Key Considerations to Avoid Costly Mistakes

 

Choosing the right location is one of the most crucial decisions for a restaurant’s success according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®. While a low rent deal may seem attractive, failing to conduct a thorough evaluation of the site can lead to financial disaster. Here, we’ll explore key restaurant industry facts, questions to ask about previously occupied restaurant spaces, and seven critical factors to watch out for to ensure your venture thrives.

Industry Insights: Why Location Matters

According to the National Restaurant Association, nearly 60% of new restaurants fail within the first year, and a significant factor contributing to this is poor location choice. A successful restaurant needs visibility, accessibility, and the right customer demographic. Rent is just one piece of the puzzle—choosing a site without considering foot traffic, competition, and infrastructure can lead to failure.

Questions to Ask About a Previously Occupied Restaurant Space

If the location you’re considering previously housed a restaurant, digging into its history can help avoid costly pitfalls. Here are key questions to ask:

1.       Why did the previous restaurant close? Was it due to poor management, bad location, or something else?

2.       How long was the previous restaurant in operation? Short-lived ventures could indicate underlying issues.

3.       What was the restaurant’s reputation? Bad customer perception can linger.

4.       Did the previous owner have issues with permits or zoning? Ensure there are no legal restrictions.

5.       What equipment and infrastructure are left behind? Verify if they meet your needs and comply with health codes.

6.       What were the lease terms and rent history? Understanding past financial struggles can help assess viability.

7.       Are there lingering debts or liens? You don’t want to inherit financial liabilities.

7 Red Flags That Can Turn a Good Rent Deal into a Financial Nightmare

1. Poor Visibility and Foot Traffic

A low-rent location may not be a bargain if it's hidden from main roads or lacks sufficient pedestrian traffic. Ensure the area gets enough exposure to attract potential customers.

2. Lack of Parking and Accessibility

Insufficient parking or difficulty accessing the restaurant can deter customers. Check for adequate parking, easy ingress/egress, and ADA compliance.

3. Demographic Mismatch

Analyze whether the local population matches your target market. A fine-dining concept won’t thrive in a low-income neighborhood, and a trendy cafe may struggle in an area with little foot traffic from young professionals.

4. High Competition or Market Saturation

If the area is oversaturated with similar restaurants, standing out will be challenging. Research your competition and evaluate whether the market can support another similar business.

5. Hidden Maintenance Costs and Code Violations

Older buildings may come with costly plumbing, electrical, or HVAC issues. Have a professional inspect the space for necessary repairs and ensure it complies with health and safety codes.

6. Unfavorable Lease Terms

Look beyond rent and analyze clauses related to rent increases, exclusivity rights, and exit options. A landlord’s demand for excessive personal guarantees or long-term commitments can pose financial risks.

7. Limited Growth Potential

Consider whether the space allows for future expansion, outdoor seating, or operational improvements. A site that restricts your ability to scale or adapt could hinder long-term success.

Think About This

Finding the right restaurant location requires thorough research beyond a good rent deal. By asking the right questions about previous tenants and watching for red flags, you can avoid common pitfalls and set your business up for long-term success. Always conduct a market analysis, inspect the property, and negotiate a lease that protects your interests before signing on the dotted line.

Let’s Build a Partnership for Growth

Looking for the right partner to drive sales and amplify your marketing impact? Success leaves clues—and we may have the exact insight you need to propel your business forward.

Explore innovative food marketing and business development strategies with Foodservice Solutions®.

📩 Contact us at Steve@FoodserviceSolutions.us
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