Monday, January 22, 2007

Restaurant Failer Rates is 66% by Second year

There is no substitution for a good location; nor is their usually any way to resurrect a poor location.
from Shopping Center Business, May 2006
"The restaurant business has an initial year failure rate of over 7% and a second year failure rate of approximately 66%.
1. Knowing the food service operation means fully understanding food and labor costs, controllable and uncontrollable expenses, along with profit.
2. Ascertain the customer profile, and who the most frequent customer is.
3. Understand the trends that are taking place, likely to take place, and evaluate the patterns of people within an area.
4. Delineate the shape and size of the trading area, which usually will correspond to the road or street pattern, altered by competition and demographics.
5. Gather factual market data. Market resources can be quantified to determine the share of market that a planned restaurant or quick- service food operation can anticipate.
6. Accept only adequate accessibility. Access occurs on 3 levels:
a) One must have access to an area.
b) Access to a particular site is essential.
c) Good access to the unit is a must.
7. Identify generative areas. Activity is people and people are potential customers.
8. Evaluate competition. Very few people in t6he restaurant business truly analyze competition. Know the competitor's sales, seating, pricing, menu, services, take out vs. eat in, items most often purchases, differences by daypart (lunch, dinner and late evening).
9. Recognize the importance of visibility and exposure. Visibility is the ability to be seen continuously from one or more directions.
Exposure is being seen and recognize over a long period of time.
10. Identify appropriate locations. Examples of acceptable locational criteria include: types of locations, compatible demographics, ethnic characteristics, traffic arteries, trade area size, speed limits, number of moving lanes, adjacent uses, traffic flow, traffic counts, ingress, egress, visibility, competition, employment, topography.
11. Estimate sales and determine parking needs. Estimating sales is properly accomplished by evaluating all the factors that affect a restaurant's potential. Parking is critical for most restaurants.
Evaluate the parking and make sure that enough parking will be available. Zoning requirements specify the number of parking spaces required to meet the code.
12. Evaluate site economics and physical characteristics. Site economics represent the ability of a restaurant's sales at a given location to support the cost of land, building and equipment or rent, while providing an acceptable profit and return on investment. There are two directions for approaching this topic:
a) A careful estimate of the sales potential can be used to
determine an acceptable cost of land and building.
b) The economics in the marketplace, such as land and
construction costs or rent, indicate the level of sales
necessary to support a specific food facility.
Unfortunately, food operators often consider application of the principles to be cumbersome, time-consuming and costly." We have represented many sucessful restaurants at Houston Realty Advisors, Inc. Find out why at www.houstonrealtyadvisors.net