Restaurant Location Analysis

There are many factors to consider when starting a restaurant, and location is one of the most important. Location analysis requires you to investigate potential markets, identifying which market fits your needs. When executed correctly, it can position your restaurant for success. In this article, we’ll investigate what location analysis is, why it matters, and the different factors that can influence where you choose to put your restaurant.

What Is Location Analysis?

Location analysis is a decision-making process that helps find the most suitable location for a business. With it, you'll analyze details about a specific market including customer demographics, local regulations, and growth opportunities. Location analysis also impacts business decisions, influencing everything from where you purchase ingredients to how you market your restaurant. You can perform location analysis on your own or hire a marketing firm to do it for you. Whether you are a prospective restaurant owner or have managed one for years, location analysis is an essential process.

Why Is Location Important for a Restaurant?

Industry experts view location as the most important factor in a restaurant's success. It plays a significant role in the clients you serve and the businesses you compete with. Choosing a good location can set you up for success, but choosing a bad location will significantly limit your ability to compete. Even if you have an excellent concept, hire a skilled staff, and create a great menu, a poor location may be too much to overcome.

Restaurant Location Strategy

When it comes to formulating a restaurant location strategy, there are several factors to consider before you make a decision. Continue reading to learn about these factors and what sets them apart.

1. Restaurant Demographics

A restaurant’s demographic is the segment of the population that it serves. Identifying the right demographic can help to inform marketing decisions and various business strategies. You can discover your target demographic by conducting customer interviews, administering surveys, and analyzing census data. Alternatively, you can hire a marketing firm to research for you. The U.S. Small Business Administration also offers access to free government-provided demographic data.

Below, we’ve included details to focus on as you perform market research and related questions to ask yourself:

• Age: What age group would you most expect to frequent your restaurant?
• Gender: Is there a particular gender that would be more likely to dine at your restaurant?
• Relationship status: Are you more likely to serve single people, couples, or families with children?
• Average income: How much money does your target demographic bring in? Keep in mind that income typically rises with age.
• Spending habits: How much disposable income does your target demographic have and what are they willing to spend it on?

2. Visibility and Accessibility

The location of your restaurant, its layout, and the surrounding area play a vital role in the public's ability to find and access it. Some factors that are out of your control, like winter weather, can also play a pivotal role. To improve customer experience and create a restaurant that caters to all people, keep the following details in mind:

• Parking: A lack of parking options severely limits potential customers. If your property has space for a parking lot, provide ample parking spaces and a convenient layout. If you live in an urban area where parking is scarce, consider listing nearby parking options on your website.
• ADA compliance: To be ADA compliant, your restaurant must abide by the rules and regulations of the Americans with Disabilities Act and ensure that every customer has access to the same service and experience. Verify that your parking lot, entrance, doors, facility layout, seating areas, and bathrooms accommodate disabled customers.
• Visibility: Make sure that your restaurant is easy for guests to identify, both in-person and online. In-person, choose a location that is visible to drive-by and foot traffic without being impeded by heavy traffic or congestion. Digitally, consider making a website for your restaurant and listing your business on Google, Yelp, and various delivery apps.
• Walkability: In cities or high-density neighborhoods where parking is scarce, walkability is essential. To improve walkability, choose a central location or one that is near public transit.
• Traffic patterns: Poor traffic patterns can make it difficult for customers to arrive at your restaurant. Road work and roadside construction can also play a role, with road closures or detours rerouting customers to different streets.

3. Labor Costs and Regulations

Labor costs and regulations can vary depending on the state you live in. In some cases, they can even change depending on your city. As you choose a location, it’s essential to research restaurant labor laws to make sure your business complies. Some aspects of your business that these laws can impact include the following:

• Wages: Certain states set their minimum wage at a higher point than the federal minimum wage. Local tip pooling laws and overtime regulations can also impact your total labor cost.
• Tax rates: Your local and state tax rates can vary depending on location.
• Employment of minors: Different states have varying restrictions on the age that minors can begin working, the jobs they are allowed to work, and the hours they can be scheduled for.

4. Supply Chain

Shipping costs and delivery fees can be expensive, and sometimes they can be higher than the cost of the original supplies. When you choose a location, consider choosing one that is near your suppliers. Alternatively, consider changing suppliers to decrease shipping costs. We’ve listed ways that location can impact your supply chain below:

• Distance: The closer you are to your suppliers, the easier it will be to receive inventory. Depending on your supplier, you may even be able to pick up supplies yourself if you are close enough.
• Loading area: If you plan on receiving large shipments, you’ll need to choose a location that has a convenient loading area. Ensure you have enough space to accept and store supplies and verify that incoming deliveries will not impede your customers in the parking lot.

5. Competition

There will always be competing restaurants in your area. Though it represents a threat, having competition isn’t always a bad thing. In many cases, you can learn from what your competitors are doing to improve your own business. As you analyze competitors in your location, keep the following factors in mind:

• Proximity: Try to place your restaurant away from restaurants with a similar concept. For example, if you want to open a Mexican restaurant, avoid placing it directly next to another. Restaurants with a similar concept can split your demographic and limit how many customers you serve. In high-density areas where there is significant competition, choose a location where your restaurant concept will be unique.
• Pricing: Pay close attention to the other restaurants in the area and how they price their menus. Setting competitive prices helps to attract guests and establish your restaurant in your location.
• Marketing: Whether your restaurant is new or established, effective marketing strategies can help you compete. Consider printing flyers, renting a billboard, or utilizing television and radio commercials to raise awareness for your restaurant. You can also embrace social media marketing to engage with customers directly.

6. Growth

Choose a location that fits your short-term needs while allowing you the opportunity to grow. As you establish your business, growth opportunities will present themselves, and identifying locations that allow growth enables you to seize these opportunities. Below, we’ve listed some key details to keep in mind as you plan for future growth at your location:

• Seating: If you plan to expand, verify that your dining room has enough space to fit additional seats. If it does not, you may need to make renovations or expand.
• Parking: Confirm that your parking lot has enough space to accommodate guests now and in the future.
• Equipment: As you grow, your restaurant will require more equipment. Select a kitchen space that fits your current needs while providing room for upgraded equipment in the future. It's also essential to choose a kitchen space that is up to code so that you can use equipment safely and efficiently.
• Food storage: Choose a location that gives you ample space to store ingredients safely, both now and as you grow. You should also have enough space to keep your storage room organized as you grow and prevent cross-contamination.

7. Health, Safety, and Zoning Regulations

Each city has health, zoning, and safety regulations. Depending on which location you choose, you may have to spend extra money to meet these regulations. Staying informed on local laws and regulations and making sure you have the right permits can limit confusion and reduce the risk of conflict with the local government. Key regulations that can impact your business include the following:

• Commercial zoning: Each city designates zones for specific uses. Be sure to choose a location approved for commercial use.
• Local health regulations: Check with your local health department to verify your restaurant complies with all local regulations. These regulations can change from city to city and can be checked via inspection.
• Local safety regulations: Safety regulations can vary by location and are essential for maintaining the well-being of your customers and employees.
• Crime rates: Remember to recognize and address the issues of safety and crime rates as you choose a restaurant location. Depending on where your restaurant is, you may have to invest in security equipment or pay higher premiums for insurance.

There are many factors to consider as you perform location analysis. Accessibility, zoning, crime rates, and local demographics are just a few of the factors that can impact your restaurant. With effective location analysis, you can identify the best location for your business and position yourself for success in a competitive industry.