Finding the right location for your retail or restaurant business is one of the most important processes you will be engaged in for your business. Like the old adage goes: location, location, location. Many factors go into site selection for your business.
Space and Location Considerations:
- Have you researched your market to determine if the location will be successful?
- Size of space needed. If you are a restaurant, will the space accommodate the number guests you anticipate seating at any given time? Is there enough room for your kitchen and all your necessary equipment?
- Do you need an end cap or are you willing to go in-line? Or do you need a freestanding location? What about a drive-thru?
- Construction budget
- Anticipated sales projections…rent is always a function of sales, and most businesses want its rents to be between 6%-8% of their total costs to run the business
- Rent/NNN budget…make sure that you are realistic about what can be achieved in the market(s) that you are looking in, and how that compares to your budget
- Do you need referrals for a general contractor/architect/etc.? Do you have a prototype for your layout?
- Which kind of other businesses/tenants do you want to be around (or stay away from)?
Interior of the Space:
- What size HVAC do you need?
- Do you need the space to come with equipment left behind by the previous tenant? 2nd gen restaurant space, for example, could save a restauranteur a lot of capital. Or could you do new construction or a plain jane retail space? If you’re considering a non-2nd gen restaurant space, for example, how much would it cost to retrofit a space?
- Do you have to have natural gas?
- What size electrical service do you need?
- Do you need a grease trap or a vent-a-hood?
- Does your space need to be sprinklered?
Selling Yourself to Landlords:
- What kind of credit will be going on the lease?
- Are you willing to personally guarantee the lease?
- Where is your source of funding coming from to do this new location?
- Resume…have you worked for a competitor in the past or do you have existing stores? If so, how long have you been in business? If not, do you have a resume showing your operations prowess?
A broker who specializes in retail/restaurant real estate can be a huge resource navigating through all of these puzzle pieces. And the landlords usually pay their fees, making this service free of charge to the business owner. When hiring such a broker, still engage in a meaty interview process.
Here are some key things to consider when deciding who to hire:
- Can they provide references from past clients?
- How many similar-type deals have they closed in the past week, 30 days, 60 days, YTD?
- If they work in other commercial real estate verticals, such as office, industrial, land (not related to retail), farms & ranch, medical or investment sales, for example, how much time does that agent spend working in those verticals versus retail/restaurant?
I highly recommend a broker who specializes in the retail/restaurant field. That broker will more likely have the expertise, knowledge and relationships in the market to get you the best space for your business.
–David Simmonds, President & Founder
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