From Food Trucks to Fine Dining: A How-To Guide for Finding the Right Location

Bay Area, Dining, San Francisco, Demographics, Neighborhood, Competition, Budget
KoJa Kitchen Food, Courtesy of KoJa Kitchen
Bay Area, Dining, San Francisco, Demographics, Neighborhood, Competition, Budget
Photo Courtesy of KoJa Kitchen

By Valerie Concello, Ronin Commercial Real Estate

Bay Area, Dining, San Francisco, Demographics, Neighborhood, Competition, Budget
Concello
[dropcap]E[dropcap]ating is a competitive sport in the Bay Area. We’re adventuresome, and we often go to Olympian efforts to find the most trendy, newest, or hippest place to eat. From food trucks to fine dining, no quest is too hard, no location too obscure in our holy grail–like search for the “experience,” for that perfect meal.

But we are also fickle. Once we find a great spot, do we go back? That’s where having the right location enters in. We might venture out once to that iffy neighborhood—armed with mace and a guard dog—but the key to a restaurant’s success is repeat business, and if the location isn’t great, we don’t return. There are just too many others to choose from.

Having worked with food trucks, food courts, and both fast-casual and fine-dining venues, I have found the following elements to be essential to finding the right location for your restaurant.

Demographics. Who are your customers? Restaurant owners must know who their restaurant is catering to, and how that compares with the demographics of the surrounding neighborhood. Do your homework and get good demographic information about the area, including income, age, and lifestyle. Know your client base and the trends they like.

Matching the neighborhood. Make certain that the image of the location is consistent with what you are trying to portray. A rundown neighborhood strip mall is probably not a great location for fine dining, but it could be for a pizza parlor that delivers. If you are urban, hip, and open from midnight to dawn, then consider the Tenderloin, not the middle of suburbia. Don’t locate in an area that clears out at night if you plan on doing a dinner business. If you plan to focus on young families with kids and serve pizza, hot dogs, and chicken nuggets, don’t locate in an area geared toward seniors. Pizza joints and sandwich shops should be within reach of business and working-class neighborhoods. While you don’t necessarily have to locate in a Greek neighborhood if you are serving Greek food, make certain there is a track record for similar concepts.

Foot traffic. All streets are not created equal. A business might succeed on University Avenue in Palo Alto, but fail three streets over due to lack of foot traffic. Make certain that the volume of traffic matches your needs. Look for big draws, such as a major shopping spot or an amenity that draws foot traffic to the site. Make note of the types of people walking past your location. Are they stopping to shop or just out jogging or walking the dog? Also, observe at different times of the day: does the area turn into a no-man’s-land at night?

The tech effect. Many tech companies provide an abundance of food to their employees in their quest for the eternal 24/7 employee. Free food usually trumps eating out, so be cautious of taking a location based on serving a group that might turn out not be your customers, or on an industry where a downturn could empty a building fast. If you are locating next to a high-tech company, consider developing a strong catering or delivery service. If they don’t come to you, then you must go to them.

Competition. There is a tipping point when you can have too much of a good thing. Maybe the retail shopping center can support two pizza parlors, but a third one won’t work. There is a reason why exclusivity clauses are heavily sought out and negotiated in a lease! That being said, there is a benefit to locating in a center with other restaurants. This is especially true of food trucks and food malls. A large concentration of trucks can often serve as tasting menus, where customers spread their lunch money among many trucks. Restaurant owners are also increasingly seeking locations near successful competitors. One of my clients looks for Chipotle and The Habit and wants to locate as near them as possible—he knows that chain restaurants spend a lot of money analyzing trends and demographics, so there is a reason behind their choice to locate in that area.

Parking. Except in Downtown SF or other urban areas—where most customers walk to a nearby restaurant for lunch or stay for dinner—parking is critical. If customers can’t park, they will go somewhere where they can. For fast-casual, a newer food trend defined by higher-quality food and no table service, parking needs to be easy so customers are in and out quickly.

Size. Think Goldilocks. Some are too small, some too big, and one of them will be juuuuust right. Don’t pay for more than you need. Here is where preplanning and design can save you a tremendous amount of time and money in evaluating a location. Know your design, know how many square feet you need, and most importantly, know what doesn’t work and which look isn’t right. And if you can expand your business outside, do it: curb dining is not factored into your square footage (and therefore not part of the cost of rent).

Previous failed tenants. Businesses fail for many reasons that have nothing to do with location. Bad food, bad service, maybe even bad feng shui. But some locations seem to house more than their share of failed restaurants. It’s not always clear why. People may associate the the location with failure, regardless of who occupies the space. Do your homework and find out why the past three businesses failed.

Budget. Estimate how much revenue you think you can generate and decide if you can afford a location. A simple calculation is: average ticket price x the number of meals served per day x the number of days open. Your rent shouldn’t exceed 10–12% of revenue. Many restaurants also fail because they underestimate the costs of a build-out or of wages, not factoring these into their budgets appropriately. Make sure you take a realistic and detailed look at what your costs and revenues will be before choosing the right location for your business.

Following these guidelines can be the difference between success and failure. Don’t forget to use a broker to successfully guide you through the process. Good luck!

Valerie Concello is a past president of CREW San Francisco and has been a commercial real estate broker for over 30 years. She has an MBA from UC Berkeley and a CCIM designation. Valerie is a realtor, LEED AP, with current retail restaurant experience. For over 15 years, Ronin Commercial Real Estate has represented tenants in all aspects of brokerage. Restaurant clients include Osha Thai, Coriander, Koja, Bobo Drinks, Baby Lobster, and Matcha Café Maiko. With the addition of Helen Duong as a principal, Ronin has been focusing on the Asian community, with a strong emphasis on businesses in Vietnam.

This article will also appear in The VIEW, the quarterly publication jointly curated by the three Bay Area chapters of Commercial Real Estate Women (CREW)—CREW San Francisco, CREW East Bay, and CREW Silicon Valley. CREW is a nationwide business networking organization dedicated to the advancement of women in commercial real estate. For chapter news, events, and membership information, visit the Bay Area member organization websites at crewsf.org, creweastbay.org, and crewsv.org.

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