To select good locations, one needs to be aware of the following:

KNOW YOUR CONCEPT AND OPERATION 

A food operator cannot successfully expand unless he or she knows their operation.  Knowing one’s food service operation means fully understanding food and labor costs, controllable and uncontrollable expenses, and profitability.  If that is not under control, and the unit is not profitable, expansion is probably not the solution.

KNOW YOUR CUSTOMER

Who is your customer?  Do you know?  Most restaurateurs think that they do, but often they are wrong.  It is extremely important to understand, not only who is the customer, but more importantly, who is the most frequent customer? Knowing who that frequent customer is will help to identify other areas that my have demographics with similar characteristics.

DETERMINE A TRADE AREA

What area do you intend to serve?  Trade areas come in all shapes and sizes.  They are not actually round, square, or rectangular.  Instead, they usually reflect an irregular-shaped pattern, corresponding to the road or street pattern, altered by competition, physical and psychological barriers, and the demographics of the residents and employees of the area. What is a realistic area from which your proposed restaurant can attract customers? 

RECOGNIZE THE STRUCTURE OF THE MARKET

Every city and neighborhoods has a structure. The structure is determined by physical and psychological barriers, socio-economic characteristics, street and highway patterns, commercial and industrial concentrations, types of employment, income, age, topography, and other factors. By identifying the most important benefits of the structure, a restaurant operator can substantially improve the opportunity for success. 

ANALYZE FACTUAL DEMOGRAPHIC DATA 

When looking at locations, population numbers are usually thrown around by the leasing agent or real estate broker. You may also be given computer-generated data listing the population, households, age, and income levels within a given area.  How accurate is it?  Most are fairly accurate.  However, just because the data came from a computer does not make it flawless. As a supplement, drive the neighborhoods, look at the value of the houses and cars, check the kids at lunch time, talk to the mailman, talk to the retailers and foodservice operators in the area, ask residents in the area where are the good places to eat and why.  Develop your own feel for the market. Also, consider how much population growth is expected.  Additional competition in the area is usually a given. 

The most important population element is not how many people reside within the area, but rather who are the people; what are their ages and income levels? How do the characteristics of the area match the characteristics of your most frequent customer?

ADEQUATE ACCESSIBILITY 

Access occurs at three levels.  First, one must have access to an area. The next is access to a particular site. Lastly, ingress and egress are necessary via adequate curb cuts, traffic signals, or others. Poor access rarely can be overcome by reputation or promotion, especially when competition is plentiful.

MEASURE EMPLOYMENT DYNAMICS

Breakfast and lunch business is usually related to employment in the area. Thus, it is necessary to recognize the size, type, location, and number of employees.  Also, the time permitted for lunch, commissaries in employment concentrations, food delivery offerings, and other means of servicing the luncheon market are important.  Is there sufficient employment in the area to support my lunch sales requirement?

IDENTIFY MAJOR AND MINOR ACTIVITY AREAS

Activity is people and people are potential customers.  Why do you suppose that there are so many food operators located on major streets leading to shopping centers or employment concentrations? Activity!  Activity generators include: commercial areas, shopping centers, malls, office concentrations, downtowns, industrial areas, airports, hotels/motels, hospitals, recreation complexes, amusement parks, major highway interchanges, and others. 

STUDY LOCAL HABITS AND PATTERNS

People are habitual; we tend to follow certain patterns daily. Some patterns are interrupted by traveling, and others are interrupted by unusual circumstances.  Nonetheless, if  observed over several weeks, it would be very easy to predict the patterns. One of the tricks in the food business is to locate your units within the existing travel patterns of a majority of people in an area.  This will permit you to intercept consumers without requiring them to change their patterns.  People resist change, so it pays to capitalize upon it.  Get into the pattern! 

EVALUATE COMPETITION

Most restaurant operators think that they are unique, and some are.  However, the majority are not. Therefore, competition is a significant factor. One must determine competition and measure its importance.  You should know the competitors’ sales, seating, pricing, menu, service-level, items most often purchased, differences by daypart (breakfast, lunch, and dinner), and other elements important to individual operators. If you do not know answers to the above, how can you determine your own success? 

UNDERSTAND VISIBILITY AND EXPOSURE

Visibility is a location’s ability to be seen; exposure is being seen and recognized over a long period of time.  Visibility can create opportunities for impulse eating, while exposure influences patterns and decision making over time.  Visibility is critical to the fast food industry, while it is important to restaurants.

REALISTICALLY ESTIMATE YOUR POTENTIAL SALES

Historically, sales of a prospective restaurant have been estimated on the back of an envelop or on a napkin.  Estimating sales is a difficult process. Conversely, it can be simplified to provide guideline to maximize opportunity and avoid mistakes. A little money and an upfront effort can avoid a major loss of thousands or even hundreds of thousands of dollars. It pays to make the effort.

EVALUATE LOCATIONAL ECONOMICS 

Please notice that this is the last principle. Unless all of the other principles are adequately met, the cost of a location is not relevant.  A good deal on a location may be a bad  deal in the long run.  Remember, we most often get only what we pay for.  Select good locations and negotiate hard for a fair price.

Evaluating the market and selecting the right location is as important as creating the menu or designing the restaurant.  A bad location rarely is overcome with good food.