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Understanding site selection variables for restaurant tenants

When you're looking for the right property for a pizzeria or QSR, having a checklist of desirable criteria can help you stay on track.

October 24, 2016

By Jeff Grandfield and Dale Willerton

When you're looking for the right property for your pizzeria or QSR, having a checklist of desirable criteria can help you stay on track. 

You need to weigh many demographic aspects when considering leasing a location in a certain area or territory. Simply locating a new property with space for lease doesn't mean the demographics will be the right fit. As a pizzeria/QSR tenant, the following points will be important during the search:

Age: The average age of people in a particular area is extremely important to business owners. For instance, you may sell more pizzas to students living within a few blocks of a local university than you would if you if you set up shop in a neighborhood populated by seniors.

Income: As mean income and the proportion of two-income households vary, so do the ability and desire to spend disposable income at your restaurant.

Ethnicity: Set up shop where your target customers already live, instead of making them come to you.

2 big questions to answer

How can you distinguish sites that make sense for your business? Begin by realizing the purchase and development of land does not necessarily mean it is prime real estate. Take into account the recent growth or decline in the area. Perhaps the area is overdeveloped; therefore another retail site isn't needed or justified.

Consider the following two questions before choosing a specific commercial site and signing a long-term lease agreement or a lease renewal:

• Are you planning to open a restaurant that people will travel miles to order from or dine at?
• Are you taking your restaurant where people already are (e.g. downtown, the suburbs, or a large shopping entertainment development)?

Once you have determined the best neighborhood, it is essential to consider visibility. Take into consideration which side of the street the desired site is located on. Pizzerias and QSRs do better on the side of the street where most people are driving home after work.

Lack of visibility for your storefront can cause people to drive right by it—especially if traffic is heavy. Be mindful of trees in parking lots that may block signage and restrict visibility for drivers passing by.

Further, landlords often overbuild pad sites near the road, in turn blocking the visibility of the retail plaza behind it. If you find a great property with space available for lease, look around. If there is a bare patch of ground between your desired unit for lease and the street front, consider that the landlord may build additional sites in the future.

One of the special aspects about restaurants is that the diversity in cuisine, size, and concept means each concept varies greatly. Often, one restaurant closes or goes out of business, and another opens in the same space within a year. Such restaurant locations (that close and re-open in the same space repeatedly) are called burned sites.

Why does this happen? Building out a restaurant can be expensive. Think of all the plumbing and wiring that needs to be done. Pizza ovens and extra power are usually added to the premises. When a former restaurant tenant closes down, he/she will often leave the infrastructure behind—making it easier and more cost-effective for a new restaurant tenant to simply move in. When evaluating a previously owned site, it is important to examine the previous tenant's failures.

Be aware of any, and all, competition within the area. Not only should you be acutely aware of your competitor, you should have someone "secret shop" their business, try their menu, and report back to you about the experience. One tactic is to enlist your secret shopper ask about your business (if you are already open) so as to discover what your competition is saying about you. Remember to also think in terms of future competitors. Check out which competing franchise systems are expanding within your city or planning to come to town

Dale Willerton and Jeff Grandfield, of The Lease Coach, are commercial lease consultants who work for tenants. They are also professional speakers and co-authors of "Negotiating Commercial Leases & Renewals FOR DUMMIES." (Wiley, 2013).