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Where should you open your new restaurant? Use data analysis for efficient restaurant business investments. 📍🏢
Wondering about the key factors for success when opening a restaurant? In this article, we explore a fundamental strategy you can use to identify the ideal location for your culinary business.
The restaurant industry is intricate; according to the National Restaurant Association of the United States, only 20% of new restaurants succeed. In other words, 1 in 5 manages to thrive in its early years, while the rest close before reaching the 5-year mark. If you’re considering investing in this sector, this statistic can be discouraging. The reasons for failure are varied, ranging from high costs and poor service to fierce competition, especially in terms of location.
In this article, we focus on how to avoid one of the biggest risks when opening a restaurant: choosing the right location. As Ray Kroc, the CEO of McDonald’s, once said, “location, location, location” is the most crucial aspect of a business. We explore a data-backed strategy that will exponentially increase your chances of success in the digital age.
Business strategy through data use: Identifying Hot Zones/Cold Zones
In any city, it’s possible to identify hot and cold zones for restaurants by calculating the restaurant index per square meter or per street meter. This will help you find the ideal spot for your establishment, but the strategy to follow will depend on your type of business.
Choosing a Hot Zone:
This strategy involves selecting an area with existing demand for food services and high foot traffic. While facing strong competition, this approach ensures a secure investment.
Notable example: KFC or Shake Shack, placing their establishments in established areas like Reforma sector in Mexico City with an index of 233.3 restaurants per square kilometer.
Choosing a Cold Zone:
This strategy involves becoming the dominant competitor in areas with few or no restaurants, always considering the mentioned index. Also, calculate the potential number of customers in the area.
Notable example: Restaurant Central in Lima, Peru, considered the best in the world. Although located in an area with a low restaurant index of 21.6 restaurants per square kilometer, its exceptional service makes it a category leader.
Choosing a data-backed location is crucial. Calculating the restaurant index per square meter (or linear) ensures you make the right decision for your investment, reducing risk and providing certainty in one of your business’s critical factors. It’s essential to remember that criteria are unique to each investor and market. With solid data, you’ll avoid significant losses and maximize your profits when investing.
Interested in more strategies or other useful metrics for investments? Get in touch!
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