Setting Your Sights on the Right Site

Over the past 25 years, the biggest mistake I've seen is operators who take a very simplistic approach to choosing a location. For example, making decisions based on limited data such as population density of the trade area or neighborhood. However, these are the operators who often fail because they did not put in the required due diligence. Here are a few pointers to make your next site selection process more successful:

Understand the product.The first step of site selection is to understand what it is that a business does and what is being sold. While this may have nothing to do with real estate, it has everything to do with market choice and positioning.

Identify the audience. Ask yourself who your ideal consumer is. Then, research various markets where the psychographic and demographic variables match this type of consumer. Understanding who you're after—whether it's married couples with children or young, single males—will help to define and refine the search.

Determine long-term goals. Once operators have learned to reconcile what it is that they do and what they sell with whom they're customer is, the next step is to consider the store prototype as well as the number of units the operator desires to open. For example, if an operator plans to open 25 units over a select period of time the search will be much broader than if an operator plans to open a single location, requiring a much more focused investigation.

Consider your options. Operators must establish how much capital they're willing to put in and how much they expect the landlord to contribute. In today's environment, there are tremendous opportunities available—mutually beneficial to the landlord as well as the tenant—to take over space where others have failed. These allow for a much lower cost of entry and a more favorable lease.

Begin the search. Depending on the concept and audience, this will help determine whether a traditional mall, big-box development or stand-alone pad will be best. Furthermore, this information will help with physical positioning of a restaurant and what types of users should be nearby. For example, movie theaters often love restaurants because they feed off each other and it's beneficial for both businesses.

Overall, the site selection process in the restaurant industry can be time-consuming and involved. While there is no sure-fire method to eliminate the risk of failure, following the necessary steps and avoiding general assumptions will help operators to reduce this risk. The old adage, "location, location, location" is very true, but remember there are several pieces to the puzzle.

Anand Gala is the president and CEO of Los Alamitos, CA-based Gala Corp., a privately-owned hospitality and food services companies. For more information, contact Anand at 800-653-3517 or via e-mail at agala@galacorp.com.