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How to decide on a concept

What is going to be you’re (USP) Unique Sales Position? Is there a niche in the market? I spent a lot of time in the US and I loved the seafood restaurants there. Great Crab houses etc. Would a seafood chain work in the UK? Remember niche concept work best in bigger markets.

Avoid gimmicks and theme restaurants. Analysts say that most people often only visit theme restaurants once and don’t come back. They have a kind of being there done that attitude to these establishments.

See what’s hot in other markets for inspiration. Be first to market. Check out our BLOG to keep up with what’s hot or explore these two great resources for a little bit of inspiration:

Always compete on great service. Service doesn’t really have a cost. And the smaller owner run business can always out service the big chains.

Also look at what the big chain restaurants do, particularly because they spend a fortune on expensive market research and then implement it.

If you are just at the idea stage why not take a grand tour, this is the fun part. If you are thinking about opening up a BBQ Restaurant, take a trip to the southern states of America. Rent a car and drive around, see the best and get ideas, collect sample menus and memorabilia and take lots of photos. Maybe even twin your new restaurant with one that you meet on your travels.

How do you decide on a location?

Location, location, location, it can make or break a restaurant. Finding the perfect location is a time‐consuming and tedious process, but it’s essential that you give it all the attention it deserves. Do not rush this decision. It is the most important one that you will make. Wait until you have several prospective properties and then weigh your options carefully. Remember, once you sign the lease and opened your restaurant, the one thing that is almost impossible to change, is your location.

You need to consider the following factors when choosing a location:

  • Visibility and passing traffic (Foot and car)
  • Parking
  • Demographics
  • Potential for outdoor seating
  • Zoning
  • Refurbishment required
  • Freehold or leasehold
  • Competition
  • Complementary businesses located close by

Don’t just get stats from the yellow pages or the last census. Pound the pavement, check pricing, service, style, when are busy, when are they not? Are there enough potential customers in the specific segment you are targeting to ensure you get your own share?

Finally don’t be afraid to open right next door to your competitors. In most businesses, it is best to stay as far away from your competitors as possible. But in the restaurant business, it is often best to stay as close as possible to your competitors, as your potential customers may have already decided that they are coming to this part of town to eat.

Should I buy or lease a location?

A key decision is whether to buy or rent property. For the new restaurant owner, the investment necessary to buy a property may be the deciding factor in this question.

Buying a location is a major and typically a long-term commitment usually reserved for someone who has significant available capital.

The advantage to leasing is that it provides you with an opportunity to launch on a smaller budget. It may also offer an easier exit strategy if things don’t work out.

The major advantage to owning a location is that you will not have to worry about a rent hike. In addition, as an owner you do not have to work within the parameters as set up by a landlord, giving you more freedom to do as you like with your property.

The final consideration when buying any real estate is the projected value of the property. Will the price of the property appreciate or depreciate in the coming years? While the goal of most restaurant owners is to build a successful eatery, in the past the acquisition of prime real estate made ownership very rewarding.

Never think that the cash in your register is yours. It isn’t, it belongs to your suppliers, your employees, the government etc. Always pay yourself last. In many instances the owner is the first person to take cash out of the till and at the end of the month there is no money to pay anyone else.

Practicalities of renting premises

Before renting a location it is critical that you consult the property experts. A chartered surveyor will be able to advise you on the best sort of deal to suit your business needs and a solicitor will be able to advise you on legal points arising from the lease, the legal agreement between you and the landlord.

Think carefully before signing any agreement. Do not sign anything unless you completely understand it and agree with it.

Here are some of the things you will need to think about:

The rent ‐ Not only what it will be when the lease begins, but how much it could go up by.

The length of the lease ‐ How long you want to commit yourself to renting the premises. Remember that unless your landlord agrees that you can give up your lease or transfer it to someone else, you will have to pay rent for the whole period of the lease, even if your income dries up. Leases typically have agreements of between one and 25 years. Don’t lock yourself into a long lease, at least not the first few years that you are in business. If your restaurant fails you don’t want to be locked into four more years of rent that you cannot pay.

Quitting ‐ How easily could you give up renting if you no longer need your premises or run into financial difficulties? Will you be able to transfer the premises to someone else? Will the landlord allow you to give up? Do you have the opportunity to ‘break’ (end the lease) at certain intervals – this would allow you to choose whether or not to continue renting the property;

Insurance ‐ The landlord may expect you to ensure the premises yourself, or to pay for the insurance if the landlord takes it out.

Repairs ‐ Are building repairs included in the rent. If you make significant repairs to the plumbing or heating, then ask if they can be deducted from your regular rent. Most landlords would rather give free or reduced rent one month than shell out cash to make repairs.

Service charges ‐ On top of the rent, the landlord may charge more for services such as cleaning, heating and lighting. These may be more expensive than providing them yourself.

Guarantees ‐ The landlord may ask you for a financial guarantee, or may ask you to provide a guarantee or anyone who takes over your lease. If things go wrong, a personal guarantee could bankrupt you and make you homeless.

Protection when the lease ends ‐ Will you have the right to renew the lease when it comes to an end?

Restrictions ‐ Imposed by the local authority that may affect your business e.g. delivery or loading times rubbish disposal, parking, noise, lighting, litter. Also does the premises have an existing licence to sell alcohol?

The landlord ‐ Is he or she someone you want to have a working relationship with?

The History of the property ‐ Find out the history of the property and whether any other businesses have failed there and why. Was the property a restaurant before? Ask neighbouring tenants for their input.

Will the space work for a restaurant. – Is there suitable ventilation, services, power etc?

Finally before renting a property, make sure you can get planning permission to make any changes you need to the property.

Associated with startup costs are finding reliable suppliers. Try and negotiate credit terms so you are not always paying for your products up front.

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