What Makes a Good Restaurant Location?

What makes a good restaurant location?

A good restaurant location is one that scores well across ten measurable criteria, not one that simply feels right when an owner walks through it.

What matters is not how much the rent costs but how much traffic the location generates relative to that rent. A space with low rent and low traffic is not a bargain. It is a liability dressed up as a deal. The way to avoid that mistake is to evaluate every candidate location against the same fixed set of criteria before getting emotionally attached to it.

That means scoring trade area population, household income, traffic count, visibility, accessibility, co-tenancy, competition, rent-to-revenue ratio, buildout cost, and lease terms, each on the same scale, and adding them up before any decision gets made.

How much should rent cost relative to revenue?

Rent should sit at or below 8% of projected revenue, because anything higher starts eating into margin before a single customer has been served.

Rent-to-revenue is one of the ten criteria on the scorecard, and it is the one most owners skip because they fall in love with a space first and run the numbers second. Household income has to match the price point too. A $25 average check does not work in a trade area with a $35K median income. That is a mismatch no amount of marketing will fix.

Why does traffic count matter more than rent price?

Cheap rent is usually a sign of low traffic, and low traffic cannot be manufactured with marketing after the lease is signed.

Co-tenancy matters for the same reason. An anchor tenant in a shopping center drives foot traffic to every other store in that center. An empty anchor space means declining traffic for everyone around it, including a new restaurant that just signed a lease believing the rent was a good deal. Competition cuts both ways too. Some competition in a trade area validates that demand exists. Too much of it saturates the market and splits that demand too many ways.

This is the piece most owners underweight. They negotiate hard on rent and barely look at who else is in the center or what the road in front of it actually carries.

Results are not typical and will vary with your business, your market, your team and how much of the work you actually do. Client figures on this site come from recorded interviews and are dated. Nothing here is a guarantee of revenue, profit or growth.

What is the Lunch Test and why does it matter?

The Lunch Test means eating at a few restaurants within a mile of the candidate location to see who actually eats there, which tells an owner more about the trade area than any demographic report.

• How busy those restaurants are at noon on a Wednesday
• What their price point is compared to the new concept
• Who the customers are and whether that matches the target customer
• Whether the crowd is dine-in heavy or takeout heavy

Demographic reports describe who lives in an area. The Lunch Test shows who eats in it, at what price, and how often. Skipping it is one of the most common mistakes owners make when they are excited about a space and want to move fast.

Which location type fits a restaurant concept?

Inline, endcap, standalone, and food hall spaces each trade visibility and control for rent and flexibility, and the right choice depends on the concept.

Swipe sideways for all 4 columns →

Buildout condition adds another layer to this decision. A turnkey space that was a restaurant before can save $100K-$300K compared to building out a shell from scratch. That gap can make a slightly more expensive lease the cheaper total decision once construction costs are factored in.

How should an owner score a location before signing a lease?

A location should be scored against all ten criteria on a fixed scale, and any space that totals below 60 should be eliminated outright.

The scorecard exists to force a decision based on math instead of enthusiasm. Trade area population, household income, traffic count, visibility, accessibility, co-tenancy, competition, rent-to-revenue, buildout cost, and lease terms each get scored, and the total decides whether a space is worth pursuing. Below 60, walk away, no matter how good the space looks in person.

This is the same structured approach covered in more depth for owners building a restaurant that runs without them, where location decisions are one piece of a larger system rather than a one-off judgment call.

Where does this fit for an owner planning the next unit?

It fits before any lease negotiation starts, since the scorecard and the Lunch Test are both meant to run on the shortlist of candidate spaces, not after a favorite has already been picked.

An owner weighing a second or third location benefits from running every serious candidate through the same ten criteria and eating lunch at a few nearby restaurants before a letter of intent goes out. The owners who skip this step and negotiate rent first, criteria second, are the ones who end up explaining years later why a location never worked despite a good concept and a good team.

For a closer look at how site selection connects to the rest of an expansion plan, see how to find a restaurant location. Owners further along in growth, including those comparing a second lease after a strong opening, can see how it played out for one brand in the Sunny's All Day Brunch and Bar case study.

Owners who want the full scorecard, the Lunch Test framework, and coaching on applying both to a specific target market can look at the Founders Board or apply directly.