This is the 4th in the series of posts on opening a restaurant. In this part, we cover how to determine a restaurant’s target market, the marketing plan, and location, location, location!
Who's Your Target Market
No single foodservice operation has universal appeal. Focus on the 5 or 10 percent of the market you can get, forget about the rest. The main market targets of foodservice business customers:
- Generation Y. Born between 1980 and 2000, A prime target for a food-service business, Generation Y goes for fast-food and quick-service items. About 25 percent of their restaurant visits are to burger franchises, follow by pizza restaurants at 12 percent.
- Generation X. Born between 1965 and 1977, they are concerned with value; they favor quick-service restaurants and midscale operations that offer all-you-can-eat salad bars and buffets. Offer a comfortable atmosphere focusing on value and ambience.
- Baby boomers. Born between 1946 and 1964, boomers make up the largest segment of the U.S. population. Many can afford to visit upscale restaurants and spend money freely. Many are becoming grandparents. Offer them a family-friendly atmosphere and/or provide an upscale, formal dining experience.
- Empty nesters. The early 50s to about age 64, typically have grown children who no longer live at home. They continue to increase as boomers grow older and their children leave home. With the most discretionary income and the highest per-capita income of all, they typically visit upscale restaurants. They focus on excellent service and outstanding food; they like elegant surroundings and a sophisticated ambiance.
- Age 65 and older, often on fixed incomes they tend to visit family-style restaurants that offer good service and reasonable prices. They typically appreciate restaurants that offer early-bird specials and senior menus with lower prices and smaller portions.
Marketing Plan – concentrate on local area
- Generally, lunch requires at least 10,000 potential customers within a radius of 1 mile
- Dinner requires at least 60000 potential customers within a radius of 3 miles
- Identify competitors
- Loyalty programs with significant rewards
- Direct mail
- Churches (ads in directory)
- Schools (fundraisers – PTO/PTA)
- National Restaurant Association (NRA) for additional information see website
- Door hangers
- Inserts in local papers
- Co-op marketing with non-competing businesses
- Personal contacts with hotel concierges, car dealerships, large employers
- Grand opening campaign / specials
Location, Location, Location
The better the location, the fewer marketing funds you have to spend. Your restaurant should be highly visible and located in an area with a large number of customers you’re trying to attract – don’t forget to include the availability of easy parking. Don’t make the mistake of leasing a location before you’ve got a solid business model. Don’t sign a lease until the concept and business plan is complete and you’ve reviewed it with a SCORE counselor and an attorney.
Note that not every foodservice operation needs to be in a retail location, but for those that do depend on retail traffic, here are some factors to consider when deciding on a location:
- Anticipated sales volume. How will the location and seasonality contribute to your sales volume?
- Visibility, Signage, Accessibility to potential customers. How easy it will be for customers to find you, to get into your business. If you are relying on strong pedestrian traffic, will nearby businesses will generate foot traffic for you?
- The rent-paying capacity of your business. Do a sales-and-profit projection for your first year of operation? Use that information to decide how much rent you can afford to pay.
- Zoning, Restrictive ordinances. You may encounter unusually restrictive ordinances that make an otherwise strong site less than ideal, such as limitations on the hours of the day that trucks can legally load or unload.
- Traffic density. Carefully exam of foot traffic. Two factors are especially important in this analysis: total pedestrian traffic during business hours and the percentage of it that is likely to patronize your food service business. Estimate sales potential based on pedestrians passing a given location.
- Customer parking facilities. The site should provide convenient, adequate parking and lighting as well as easy access for customers.
- Proximity to other businesses. Neighboring businesses may influence your store’s volume, and their presence can work for you or against you.
- History of the site. Find out the recent history of each site under consideration before you make a final selection. Who were the previous tenants, and why are they no longer there?
- Terms of the lease. Be sure you understand all the details of the lease, because it’s possible that an excellent site may have unacceptable leasing terms. Be sure to negotiate a tenant improvement allowance for build out costs. Caveat CAM (common area maintenance costs).
- Future development. Check with the local planning board to see if anything is planned for the future that could affect your business, such as additional buildings nearby or road construction.
If you are thinking of opening a restaurant, we’ve got mentors who have been there and done that! Click here to schedule a free mentoring session at a Phoenix location near you!
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.