How do you know if your concept has a chance to be the next hot spot or if it is going to be a money losing dud? Research!
Lots of aspiring restaurant owners skip this step because either they're already sure in their hearts they have a winner or else doing this part just sounds like too much work. Unfortunately, putting the wrong concept in the wrong location is a major reason restaurants fail and as sure as you may feel, feeling isn't knowing.
It turns out though that doing the research isn't that hard and will make your venture a lot less risky if you know ahead of time you have a ready market for your restaurant. We cover the topic extensively in our starting a restaurant book but here are some initial things to do to get your started:
Let's look at each of these in a little more detail.
First, look at how many restaurants there are in the area you want to open in and how big the market is they are serving. There may be room but on the other hand the density of restaurants to people may already be saturated. In a growing area there may be room to move in, but in a declining population area you will have any even harder time as the restaurants compete harder and harder for a diminishing group of customers.
Then, look at how many there are that are going to be similar to you in price, menu and location. If there are three thriving hamburger places and no fine French dining that doesn't mean you should open a fine French place- there may be no market for it. It also doesn't mean you shouldn't open a burger place but you will have to stand out from the other three in some important way that is going to resonate with the market. The best bet is to fill a gap that exists. The gap may not be for fine French food but it may be for pizza in a place with three burger joints.
Finally, size up the competition in terms of who is doing well and who isn't. What can you learn from the restaurants in your area that are doing well- are they on the right side of town, are they doing well because of heavy discounting, or are they doing well because they are the only place in town to get something people really want? Make sure you understand who you are up against so you can devise a plan to lure enough people over to your restaurant and keep them coming back once they've tried you one time.
This is information about the population in your area- where they live, how much they make, how often they eat out, and theur general tastes and preferences. A suburban family area is going to want something different than a downtown singles area. You also have to look at how much people make and how the economy is doing- are these people going to want value meals or high end dining? Is there a big enough group of people who are going to fit with what you want to serve? If your concept is for Caribbean food are there enough people in town interested in eating that on a regular basis?
You can find lots of good, free demographics info on these sites:
Once you know the location you want- or are considering- you can look at the traffic patterns and pedestrian activity in the area to help you judge how busy the location will be and what kind of visibility it has. Some concepts are more dependent on walk in traffic than others so this will effect your decision making. Also, be sure to account for seasonal variations- especially in tourist areas and where weather plays a big role in population shifts at different times of year. KNow how many people are going to be available to attract into your restaurant so you don't overestimate it's potential right from the start.
For awhile frozen yogurt was hot. Then it was out of favor. Then it was back. Now it seems to be over again, leaving hundreds of frozen yogurt shop owners wondering what happened. You want your concept to offer something unique and special but not so trendy or faddish that before long it has gone out of style and no one wants it any more. That said, there are some trends that seem to be around for the long term- healthy options, coffee drinks, ethnic foods, etc. If you want to capitalize on a trend that's fine as long as you are diversified enough to have long term potential and the trend you are working on has shown at least some staying power already or such phenomenal growth to date that you can get in and get out with plenty of profit even if it only lasts a few years.
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