How to choose the right location for your restaurant franchise

The location of a restaurant matters just as much as, if not more than, the food they serve so it is vital that franchise partners do their due diligence and don’t make snap decisions they may later regret

Whether you’re opening your first, second or your 50th restaurant, it’s important to understand what to look out for when choosing a new site for your franchise restaurant. Location influences the success or failure of a restaurant in a number of ways, from attracting enough initial customer interest to being convenient to visit, but there are other factors that will influence and contribute to profitability.

Many restaurants, unfortunately, fail within three years and a lack of planning is a major contributing factor to this. The location of a restaurant matters just as much as, if not more than, the food they serve so it is vital that franchise partners do their due diligence and don’t make snap decisions they may later regret. 

Sanjeev Sanghera, Döner Shack’s co-founder and managing director, shares his advice on the different elements that need to be considered when sourcing a new site for a restaurant franchise and how the key to success is to be in the right place at the right time. 

Understanding your target market
First and foremost, you need to understand who your target market is in order to find the right location for your restaurant. Once you have established who it is, then you can analyse the demographics of your desired location, such as age, gender, ethnicity, religion, education and income level to name a few. For example, students and young professionals want restaurants in busy city centres and families would prefer an out-of-town shopping centre that is easily accessible with ample parking. Not everyone likes the same foods or restaurant concepts, so by undertaking an analysis, you will determine what appeals to your target demographic. 

When we source sites for our fast-casual restaurants, we know that 50 per cent of our customers are in their 20s and 30s, living in city centres, either studying or in the early stages of their career. By recognising our target market, we can see how demographics can impact our restaurant growth. We know that we can’t change the habits of a demographic of the population, but we can find the right people for our concept and cuisine. Having researched and acquired the knowledge of the local demographics in our current locations of Leeds, Manchester and Glasgow, we are confident about the purchasing behaviour and dining habits of our customers, helping us to make an informed choice about whether our Döner Shack restaurants are in the right area when launching new locations.

Visibility
Visibility is critical for new restaurants. Poorly placed signs, narrow storefronts, or adjacent buildings that limit visibility make it harder for restaurants to succeed. The best locations are those that are easily seen by passers-by as they walk or drive by, creating a sense of anticipation and curiosity that prompts a visit. Before you commit to signing a lease, make sure you visit the area at different times of the day or night, week or weekend, to ensure it has a good level of foot or vehicle traffic.

Space and size
The size of your restaurant affects the size of your kitchen and dining area, the amount you pay for the lease and utility expenses, amongst other costs. The concept, store design and location will obviously determine what your requirements are, whether it be drive-thru, full-service restaurant or at a transport hub. As a general rule, back and front of house space can be up to a 50/50 split, but this is very concept dependent. You can never underestimate how much back of house space is needed, but you need to make sure the space is adequate for your requirements otherwise a poorly planned space can lead to poor service standards.

Being a fast-casual restaurant franchise, it’s critical that we source our sites in mainstream locations, such as new-build major shopping centres where we know there is a captive audience to whom we can provide a whole dining experience. Our property director, who is well connected in the property industry, helps our franchise partners to source and negotiate locations across the UK. As part of our franchise package, we advise our franchisees on areas such as insurance and fire suppression requirements.

Affordability
Cost is always a bottom-line consideration for any business and can affect your choice of location. Ensure you stay within budget. A simple consideration would be that for fast-casual restaurants your property leasehold costs should generally be around 15 per cent of your turnover. It’s also important to note the length of the lease. You want to guard against dramatic increases in rent when it comes to contract renewals. 

Competition
Whilst you don’t want to be the only restaurant in an area, if your concept is too similar to the competition, it could struggle to convert customers who are loyal to existing outlets. It’s important that you do your research on the surrounding restaurants to see if they’re busy and what their cuisine is. A popular area for restaurants isn’t necessarily a negative though. Executing a solid business launch and delivering consistently great quality food paired with excellent service will certainly differentiate your new restaurant. 

When choosing the perfect location for a new restaurant, franchise partners must make sure they’re making the decision with their eyes wide open - how can the location affect both your costs and profits? Location is as crucial to success as food and service, so make sure you do your due diligence before committing to a restaurant franchise concept, writing your business plan or signing a lease. And more importantly, you need to get the local community on board to support your business to ensure the location has the necessary population and demographic profile for success.

The author
Sanjeev Sanghera is the co-founder and managing director of Döner Haus and Döner Shack. With over 25 years of experience, Sanjeev is a leading restaurant entrepreneur with a business that is growing internationally, including North America, Europe and The Middle East.