How to Rethink Restaurant Real Estate

How to Rethink Restaurant Real Estate
Are you in the market to open a new restaurant location? Here’s how you can rethink your restaurant real estate investment and create a higher profit potential.
by Square Apr 19, 2018 — 5 min read
How to Rethink Restaurant Real Estate

Your restaurant is flourishing. Your dining room is always full and your reputation is growing every day. Now you’re thinking about expanding and opening up a new location.

Once you’ve decided that you have the capital to support a new restaurant location, your first question should be: where? While it’s easy enough to see spaces that might work for your new location, the process of renting or buying a new space is anything but (especially if you are in a larger city like Chicago or Boston).

Restaurant real estate decisions are often complex and require substantial exploration. Since certain types of restaurants have specific space requirements, you need to balance the restaurant concept you think will be successful with the real estate that is actually available.

A good place to start when you’re trying to open a second (or third, or fourth, or fifth) restaurant is data.

Making data-driven decisions for your new location

First you need to decide on the type of restaurant and concept you want to focus on. It’s easy to replicate your current restaurant model, but that might not be the most profitable opportunity. For example, your sit-down restaurant might be making a killing, but will another one do just as well or would you be better off with a casual take on your more formal concept?

There are two types of data that can help you determine what type of restaurant your new location should be: broad industry data and your own business data.

Use your restaurant industry analysis

When you created your business plan — which is now tucked away in a filing cabinet — you may have included an extensive industry analysis. While a lot may have changed since you first opened a restaurant, you can easily refine some of your findings to help you decide what your new location will look like.

These specific components in your analysis can help you uncover opportunities for your next location:

Analyze your restaurant’s performance

There are various performance metrics you should monitor regularly when you manage a restaurant. These metrics can also be key indicators for new locations. Take a look at your business analytics and try to identify some of the following:

These two analytical approaches can help you solidify the need for a second location and what that second location should look like. It might even help identify completely new opportunities. If your research has you leaning in a different direction from your original concept, that’s okay. As long as your research and data point to a profitable opportunity — whether it’s a food truck, a super-niche QSR, or a fine-dining restaurant with a totally new cuisine — don’t be afraid to try something new (as long as you have the time and capital to support a second location).

How to find the best restaurant real estate

Now that you have a better idea of the space you’re looking for, it’s time to go out and find it. When analyzing spaces to lease or buy, you want to look at these variables:

Use real estate to test a restaurant concept

If you’re opening a second location that differs slightly from your original concept — or even if you’re thinking of opening the same restaurant in a new area — you might think about testing the concept before going all in. You can do this with a pop-up restaurant.

Pop-up restaurants are temporary and often take advantage of unusual locations. For example, you could test a pop-up in your existing restaurant or store. Or you could rent out a small space (one you wouldn’t want to use full time) just to test the concept.

Pop-ups aren’t permanent, so they also minimize risk and cost. This could be a good option if you are at all hesitant about investing in a second property. There are even companies, like Appear Here, that specialize in finding spaces for pop-ups.

The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.


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