Lesson 8: Brick & Mortar
More than one restaurant owner ended up muttering “What was I thinking?” when they started a brick-and-mortar eatery. We’ll walk you through the process to reduce the chance you’ll have a similar epiphany down the road.
Brick & Mortar Restaurant
Introduction
Things are starting to get serious. Moving into a restaurant is like going from Little League ball to the majors. It takes hard work, commitment, money, time and an understanding that when things get tough, you won’t just throw in the towel, especially when a day’s dishes are in the sink waiting to be cleaned and put away.
A restaurant is a major investment, no doubt about that. Let’s look at some things you want to consider before decision day arrives.
Doing you homework
As with any major decision, you want to do your homework. There is a ton of competition out there, and the overhead of a brick-and-mortar won’t allow you to keep the doors open forever if things go south.
According to the National Restaurant Association, about 60% of restaurants fail in their first year; 80% fail within the first five years. That means 20% make it past five years. While that may seem pretty depressing, it’s not much different than the success and failure rate of any small business in the U.S.
As you think about your concept, see what food businesses are around you that may be competition, not just restaurants but bakeries, pop-ups, bars with food service, breweries and food trucks.
A tool like Commerce’s SizeUp can save you some time, at least initially. There are some robust research tools there that let you see who your competition is, where your customers are, and how your own projections stack up locally, regionally and nationally. It’s easy to fall in love with a concept so much that you don’t do a deep dive into the numbers and the neighborhood. You need to divorce yourself from your sure-fire idea at this stage so you can make business decisions based on facts, not fantasies.
As you do your due diligence, make sure you do at least one round of research that is specific to the concept you want to start. While every food business could be considered a competitor because people need to eat, you want to ensure that the market isn’t saturated with the type of food you want to serve, or the experience.
For example, finding all the pizza joints in town doesn’t necessarily give you the data you need. Pizza covers a wide range of concepts, from national chains to Italian eateries that have pizza on their menus along with other selections. If your concept is high-end pizza or Chicago-style, how many other restaurants offer it? Just as important, is there a demand for the style you want to provide? There may be a reason there are no New York-style pizza places in town.
Which brings up another point. It’s also important to research restaurants that closed in the past few years. Find out what happened to them. Did they not find an audience? Was it quality or cost? Was it the location? Poor or non-existent marketing? Or did the owner retire and choose to close rather than sell?
Return to Main Office
Courses
Introduction
1. Cottage Food Basics
2. The Business Plan
3. Pricing
4. Marketing
5. Food Booths
6. Food Trucks
7. Pop-Ups
8. Brick & Mortar
9. Exit Strategy
Finding the ideal customer
If you’ve built your business through the various stages mentioned so far, you probably have a good idea of who your customers are. You might even have a local customer base who would follow you anywhere.
In the market research world, there is a thing called personas. These are profiles of your ideal customers: their income, education, likes, dislikes, buying tendencies, family size, etc. As you do your research, consider grouping your customers into these personas. This will help you identify similarities, differences and patterns that will be open to your brick-and-mortar concept.
You want more than one persona for your restaurant. While you may be able to describe a typical customer now, you want to ensure that you expand your customer base. Focusing too much on a single type of customer may not lead to a sustainable concept. You need to appeal to a broader audience, and you can even rank the personas by who you want to target first, second, third and so forth. This is particularly helpful in the beginning when your budget is a bit stretched and every marketing dollar counts.
At the bottom of your ranking are the people who are least likely to frequent your restaurant. For instance, if you’re going to establish a high-end restaurant in town with crystal and fine linens, a family with young children may not be your #1 priority. Down the road, however, you may want to create a special event outside normal dining hours where families are welcomed (an Alice and Wonderland tea time, for instance). Parents will feel comfortable bringing kids who would typically fidget and wrinkle their nose at your menu.
Choosing the right location
If you’re opening your restaurant in your hometown, don’t let that blind you. You may feel comfortable in the part of town you have your eye on, but will your customers feel safe, especially later at night when your restaurant is closing, and their car is several blocks away? The price to lease may be irresistible, but there may be a reason why it’s so affordable. Always think like your customers when choosing your location. Unlike a food booth or food truck, you can’t move a restaurant to a new location at a moment’s notice. While you’re thinking about location, consider access to parking, lighting, what businesses are next to you (more than one restauranteur discovered she made a critical mistake because the bar next door had nightly head-banger concerts) and any restrictions included in the lease.
On the flip side, you don’t want to paint yourself into a corner. Will you outgrow the space? If so, how quickly? Is expansion possible, such as the space next to yours or through an addition? What are the regulations for outdoor dining? Are there any covenants on the property that can limit its operations? Going back to the music, one popular restaurant in Seattle’s Greenwood neighborhood had to close because the residents living above it didn’t like the noise from fans rooting for the Seahawks on TV. Finally, be sure that the limitations on signage – either by the landlord or city ordinances, won’t make your business invisible on the street. Not allowing you to add a blinking neon sign you picked up for cheap from the Vegas Strip may be reasonable, but limiting your ability to have customers see you from every direction may reduce walk-in traffic.