Restaurant Feasibility Studies
Most restaurants require a minimum investment of at least $100,000, but this can easily exceed $1,000,000 in a major city or a large venue. Given that the failure rate for restaurants is roughly 30% within the first year and 60% within the first 3 years, it is advisable to have a feasibility study done by an independent third party. Ideally, the feasibility study should be completed after initial concept development and preliminary site selection, but before finalizing the formal business plan. The feasibility study should include:
- Definition of the areas from which you expect to draw customers (primary, secondary and tertiary trade areas)
- Demographic analysis --- age, income, wealth, education, employment rate, etc.
- Analysis of local population attributes such as lifestyle, culture, employment diversity and stability, etc.
- A tour of the selected site(s) and the local area. This should include an analysis of
- Views (is that a junk yard across the street just down the block?)
- Smells (is that a paper mill nearby?)
- Noise (too close to a rowdy biker bar?)
- Pollution (half a block away from a cement factory?)
- Analysis of other restaurants in the target areas to uncover potential missed opportunities or threats
- Identification and analysis of direct and indirect competitors
- Analysis of local traffic volume, traffic patterns, and parking capacity. The analysis should cover both opportunities and threats (eg. major construction down the street?)
- Definition and analysis of ideal and likely customer profile(s)
- Local restaurant sales performance compared to regional or national averages
- High level pro-forma financial analysis (buildout, lease, equipment, staffing, taxes, liquor license, marketing expenses, revenues)
Ground Floor Partners can usually complete a thorough restaurant feasibility study in about 3 weeks. Contact us today to discuss your situation.