Hey, everybody. Ryan Gromfin here - author, speaker, chef, restaurateur,
and the founder of TheRestaurantBoss.com,
as well as RestaurantProfitAndPerformance.com
Today, we're talking about the single biggest mistake that most people
make when opening up a restaurant. So, if you're an owner,
operator and you're looking to expand or if you've just ever dreamed of owning your own restaurant,
you're in the right place. Let me share with you the number one mistake
that most people make when opening up a restaurant. Well, that's location,
but it's also location and location. We all heard
you know a restaurant, a retail business is all about location, location, location.
So, I want to share with you actually three mistakes involved
in what I think is the single biggest mistake
when opening up a restaurant, which is made before the restaurant even gets
open and that is the location.
So, let's get right into this. The first mistake that people make when
choosing a location is why this location?
Well, what I mean by why this location is that
there are really two types of people who open up restaurants.
The first kind are people who have a concept
but need a location,
and then the second type are the people who have a location but need a concept.
And what I mean by this is, you know sometimes you've got it clear.
You know exactly what your restaurants going to be and you're just looking for the location to find
for that restaurant concept.
Well, then you're very specific on the bones of the building.
Will certain equipment fit in? How will the flow go?
What type of parking, lighting, location?
What type of foot traffic is coming by? Is it a destination location
or people going to your restaurant because they were already in
the area and doing something else? These are important things to note and then,
there's the type of people who have a location but need a concept for it.
Basically, just flip-flop that. If you see a great location,
a great price and you just know this is a good location at a good price,
then you want to develop the concept for that.
There's really two types of people in the restaurant business.
I can't say one's better than the other, all I can say is that decide
which you are before you even start looking at a location.
And here's how I do that.
Make a list of the items that are important in your location
and then put an asterisk next to the five most important
and this will take all the emotions of your decision.
So whatever is important to you,
if it's location first concept second, if it's concept first location second,
make that list, astrick those five, and this will take all the emotions out.
If it doesn't match or exceed all five of your asterisks
and a whole bunch of the other things on your list,
then don't even waste your time looking at it.
You know, I just recently interviewed two executives in the restaurant industry,
these two people together control about a billion dollars or about two billion,
I'm sorry in restaurants each about a billion in their companies,
and they both say that the biggest struggle they have right now is finding locations.
You know, they have a concept that they're trying to grow but they're very particular
about what they're looking for in a location because the wrong location
means instant failure before you even open.
You know, I've been looking for five years for the right location for a concept
that I have in mind and I still haven't found that right location.
It might take me ten more, it might take me tomorrow I might find it,
but I will not move until the five criteria that I've established are set,
are exceeded in that location.
I won't even bother wasting their time or my time looking at it.
The second mistake most people make when it comes to location
is the cost associated with the location. Let's keep in mind a few things here.
With a prime cost of 60 to 70% of your sales,
total occupancy can never exceed 10%
of your estimated pre-tax sales
and don't ever base this on best-case-scenario estimates,
always base this on what you really believe,
maybe even worst-case scenario, this location will do.
I went through that quickly. If you don't understand prime cost at the end of this video,
there's going to be a link for you to click on so you can get more information
on what prime cost means and what total occupancy means and all that great stuff.
But for now, I want to get through this. The third biggest mistake that people make
when determining location are the terms of the lease.
A couple of quick tips for you. 1) Read the entire lease.
If you don't understand anything in it, get help.
Speak to a real estate professional, speak to an attorney,
but there are some very complicated terms and some very small minute
clause that are buried into these huge 30-page leases that literally one-word…
the difference between and or
could literally mean the difference of your success or failure
based on something in that lease.
So read it all the way through. Don't just take someone's word on it,
don't just assume that it's a standard lease.
I am serious about this. I have turned down probably 20-plus
leases for locations that I love that were perfect,
but the landlords wouldn't budge on one
what seemed like stupid little things at the time, but who knows,
they could have been huge things. They were important to me.
The second thing is, don't ever just shake on it or say it'll work itself out.
You know, obviously we'll all sign a lease. We don't do leases on handshakes anymore,
but a lot of times, landlords will say, oh, that's not going to be an issue for you.
You don't need to worry about that, or we'll cross that bridge when we get there.
No, no, no. Get it all in writing ahead of time.
Make sure that it is the terms that you want that are agreeable to you
and get it in writing ahead of time.
And then the third mistake I see a lot of times is too short term of lease.
People get nervous.
They're going into their first restaurant; they don't want to sign this long term lease
because what if something happens. Well, on the flip side of that,
a lot of times they see restaurants doing really, really well and then five years in, they've spent all this money,
they've built up this business, they've invested in the location
and then five years in, their lease is up and they don't have an option
or any way to extend and then the rent
gets hiked and they get kicked out of there and now they're out of a job,
they're out of a business. It’s closing down.
So make sure there's some options
or a way for you to extend your lease. If you're not comfortable getting into a 10 or 20-year lease,
then look at a 5 with some options or a 3 with some options, but again,
please consult your real estate professional about this but don't
get into too short of a lease.
If you enjoyed what you saw here, you need some more information,
this is what the homepage of my website looks like. It's TheRestaurantBoss.com.
You can actually click here, but when you get there, you'll see this big green button.
Go ahead and click get it now, and I'm going to send you a 5 video series called the foundation
to a lifetime of restaurant success.
Also, if you have any questions or comments, please go ahead and post just below this video.
Assuming you're watching on YouTube or if you're watching it on my website already,
there's definitely a place for you to post your questions or comments.
Also, if you're not already, go ahead and subscribe to my YouTube channel.
Literally, you can just click on this button right here and subscribe.
Plus, here are those extra videos I promised. You can literally just click on any of these.
Here's a video about food cost formula, about that prime cost we were talking about.
Just click here and I'll take you right to it.
Here's a video about how to double your profits in your restaurant, just click on it right here,
or back to my website there, where I'll give you that
foundation for a lifetime of restaurant success.
Just click anywhere on these buttons literally
assuming you're watching on YouTube. If you're watching anywhere else, then head on over to YouTube,
but again, my name is Ryan Gromfin.
I hope you enjoyed this little quick tip training
on the biggest mistake people make when getting into a restaurant, which is location,
location, location.
And the three mistakes when it comes to choosing a location.
Remember, once you're locked in,
there's nothing that you can do. It's really difficult to renegotiate after you've signed
and opened up. So, unfortunately, a lot of the mistakes,
I have seen a lot of the challenges that I see with restaurants are
before they even open up.
It's in their lease. So, make sure you get a good lease. Make sure you get a good location,
make sure it's something you can afford and make sure it's on terms that are agreeable
to you and beneficial to you as well as the landlord, it's an important partnership.
My name is Ryan Gromfin. Please go ahead, subscribe,
click on any of these videos and shoot me an email if you got any questions.
Have a wonderful day.