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restaurant development + design: Real Estate Modeling and Site Selection

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No matter how good the concept, no restaurant can succeed without selecting the right site. Finding the right area with the right demographic and the right infrastructure has always been equal parts science and art. And given the mature nature of the restaurant industry, accomplishing this all-important task continues to become more challenging.
In this hour-long webcast our expert panel explored the steps restaurant operators should take during site selection to find locations that support their mission and that allow their concepts to flourish.

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restaurant development + design: Real Estate Modeling and Site Selection

  1. 1. Real Estate Modeling and Site Selection for Restaurants These slides are part of a free webcast from restaurant development + design magazine. Go to Slide 6 for a link to the webcast, if it’s still available on demand.
  2. 2. Today’s Objectives Outline the steps operators should take before hitting the streets to look at sites. Explore the steps restaurant operators should take during site selection. Discuss the relationship between the business plan and site selection. Describe what operators should look for in a location and the surrounding area. Answer your questions!
  3. 3. Meet Our Panelists Jeffrey Yarborough Big Ink Real Estate Greg Goddard Penn Station Matthew Mabel Surrender Inc.
  4. 4. trimarkusa.com
  5. 5. Today’s Restaurant Real Estate Market The times they are a complicated… Base rents are high More restaurants than restaurant space on the market Big question: What rent can you live with in a down economy?
  6. 6. About this webcast For more information on his webcast visit: http://www.rddmag.com/realestate
  7. 7. Restaurant Site Selection: Where to Start? The process begins before you pound the pavement.  All starts with the business plan, which includes a financial proforma.  Know what you want out of your restaurant and this location.  Understand the factors that make your business successful.  Conversely, identify those factors that can hurt your business.
  8. 8. Restaurant Site Selection: Where to Start? After developing a plan and identifying a target market, the next steps include:  Leave the real estate business to the brokers.  Have broker research the facts, including:  Traffic counts  Neighborhood crime rate  What other tenants say about the landlord
  9. 9. One Concept’s Approach to Real Estate  Look at your model and understand where your concept can take you.  Penn Station’s sales split evenly between lunch and dinner so location has to capitalize on both dayparts. Takeout business is important, too.  Adjusting the unit size allows for entry into better places without compromising dayparts.
  10. 10. Using an Analytics-Based Approach  Combine POS data with other data to form a better picture.  Work with a vendor to project how demographics will evolve.  Net result is a smaller pipeline with higher opening values.  Next step is to launch a loyalty app which will provide more data.
  11. 11. Exploring Site Modeling  Lots of data available to restaurants of all sizes, not just chains or the big ones.  Can include information on the competition, area demographics, projected revenue and more!  Data alone is not enough. You need to live in the area and verify the model.
  12. 12. Data’s Impact on Site Selection Penn Station’s approach:  Leverage data from the other locations in the system  Replicate the high- performing locations  Use analytics to provide as much clarity as possible  Know where you want to start and finish in each market
  13. 13. Managing Site Selection Factors to consider when looking at specific locations:  How much can you vary from your target square footage without impacting financials?  Will you have to adjust your operating model to make the location work?  Go back to visit the site more than once.  Understand the competition’s impact on your site selection.
  14. 14. Land Matters: Leasing vs. Owning Questions to ask when deciding whether to lease or buy the land:  How well do you know real estate?  What’s your overall goal?  Is this your first unit? Prove your concept first before you buy.  Buying real estate ties up cash. Can your business plan withstand this?
  15. 15. Good Restaurant Locations  What makes a location good varies by concept.  Good restaurant locations relate well to your target audience and how they want to patronize the restaurant.  For new and emerging concepts finding the right first location can often make or break the business.  How you approach your research will depend on whether it is your home market or some place new to you.
  16. 16. Making Informed Decisions  Do your demographics.  Spend time in the areas where you want to put your business.  Do the people in the area reflect your target audience?  All these factors help find the right location.
  17. 17. Key Ingredients for the Right Location Factors in Penn Station’s approach:  Daily needs that generate traffic are important  People who live in that market have to support your store  Understand the demographics of the businesses around you and how they impact performance
  18. 18. Financial Health What landlords want to see:  Your financials and/or business plan  What your business will look like  Their portfolio of tenants work well and blend together  You be successful because it helps shape their success
  19. 19. Budgeting for Rent  Budget for occupancy costs, not just rent.  Develop a successful rent to sales ratio.  Mind the details, such as: Tenant improvement money Personal guarantee Assignments How the landlord communicates with you
  20. 20. Diving into the Details Key points to ponder:  Explore the surrounding neighborhood  Know your neighbors and how they can impact your business  Will your concept mesh with the surrounding area
  21. 21. Getting a Fair Deal  Hire a good broker AND a good real estate attorney  Make sure you hire people that have your best interests in mind  Keep in mind you have to live with the lease for its duration
  22. 22. How Penn Station Gets the Deal Done Try to mitigate risk by:  Work with tenant reps to find the right sites  Know what does and does not work for your concept  Examine the practical aspects of a site  Review demographics
  23. 23. Is the Site Right?  Remember a seat does not equal revenue. A guest does. Will this location attract the right number and type of guests?  Budget for three levels of success: break even, intermediate and superior.  Ask if your budget expectations are realistic.
  24. 24. Franchisee Effect Four keys to working with franchisees during the site selection process: 1. The more clarity, the better. 2. Manage expectations and guide them. 3. Be as transparent as possible. 4. Implement realistic timelines.
  25. 25. Questions from the Audience
  26. 26. Closing Thoughts from Our Panelists Jeffrey Yarborough Big Ink Real Estate Greg Goddard Penn Station Matthew Mabel Surrender Inc.
  27. 27. Greg’s Lessons Learned  Make sure your market plan outlines the success factors.  Know your risk factors.  Good sites have lots of parameters but the perfect site does not exist.
  28. 28. Matthew’s Common Sob Stories to Avoid  I never read the lease or I used the attorney the broker suggested and never read the lease.  I never talked to the city about core infrastructure improvements.  I did not get an exclusive on my core menu item.  My concept is so strong it can overcome a different demographic.  My restaurant has to be this big or I can’t make money.
  29. 29. Jeffrey’s List of Mistakes to Avoid  Don’t have 10 brokers looking for the same team.  Don’t be lured by a landlord that loves your restaurant but will not meet your needs.  Don’t lock into too tight of a geographic area.
  30. 30. Thanks to Our Sponsor
  31. 31. trimarkusa.com
  32. 32. Future Webcast Ideas We are listening, too! Send your ideas for future webcasts to: Joe Carbonara joe@zoombagroup.com You may download the slides from the toolbar below. A link to the CEU quiz will be sent when the webcast archive goes live.
  33. 33. Thanks for Listening Visit Us Online at: www.rddmag.com Follow Us on Twitter: @RDDmag

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