Michael Carro is passionate about restaurant real estate. Besides being a full time CRE broker, he is actively engaged in the field as the founder of the Restaurant Realty Network, hosting The Restaurant Realty Radio Show, and writing a restaurant column. With extensive experience in QSR investment and the acquisition of 150 restaurants, Michael is a dedicated thought leader in restaurant real estate space.
We asked Michael about some of the mistakes made by restaurant owners. Take note.
1. “Cheaping Out”
The old adage, location location location is a timeless truth, in my opinion. One thing I have seen QSR owners do in a rush to expand is go for the inexpensive spot that may lack visibility. There are good deals out there in good locations, it just requires patience and understanding to secure them. The way I see it, is that you’re going to spend money trying to get customers to come into your restaurant regardless… What isn’t spent on rent will be spent on marketing.
2. Blind to Future Development
External factors that aren’t related to the actual real estate site can also pose challenges, whether it’s road construction, a shift in travel, or installing medians, etc. It’s critical to be aware of these things. For example, if the DOT comes in and puts in a median after you’ve signed a lease, that can impact accessibility and sales as a result. When you make a decision according to one set of circumstances and then they change, that can be very problematic. It’s important to go in with your eyes wide open and gain as much insight on the surroundings as possible beforehand.
3. Roadside Location
You’ve got to consider the location. Being on a hard corner, while it can often sound really good, can be a detriment. It always looks great until you analyze a particular area and realize that other factors, such as traffic congestion and cars queuing in front of your driveway, can impact your ability to draw the customer into your space. Likewise, if there’s a high speed limit on the road in front of your location, that may lower the amount of customers coming to your restaurant.
QSR is obviously very convenience driven, so ingress/egress plays a critical role. Say you are primarily a breakfast restaurant, serving eggs and bacon in the morning hours of the day. Are you on the breakfast side of the road? Same with the lunch or dinner restaurants. If customers can’t make a left in/left out, that will reduce sales. The last thing you want is customers who avoid your location altogether simply because driving in and out of that particular location is not convenient.
5. Hidden Costs
You’ve got to first look at the cost of getting the building to a condition that you can operate your restaurant in, outside of the lease cost. It’s important to have a broker that helps the QSR client understand the nature and size of the extra expenses. Installations for equipment like a hood system or a grease trap, for example, are expenses that have to be considered.
6. Parking Caps
Parking is a major obstacle that is sometimes underestimated. Restaurant owners might go into an area with insufficient parking space, and then limit their success by capping the number of customers that they can accommodate. There are enough external challenges to running a business out there that you don’t need to be personally handicapping yourself.