The Most Expensive Mistake in Opening a Restaurant Happens Before You Sign the Lease

The Most Expensive Mistake in Opening a Restaurant Happens Before You Sign the Lease

Over the years, I’ve met plenty of people who have fallen in love with a restaurant property before they’ve established whether they can actually afford it or make any money from it.

They can already picture the restaurant, the interiors, the menu and the customers. What they haven’t necessarily considered is whether the building can accommodate the kitchen they need, how much the fit-out will cost or how many customers they’ll need through the door just to break even. And by the time they discover the answers, they may already have signed the lease.

A Good Location Doesn’t Guarantee a Good Business

Location is undoubtedly important, but a busy high street, high footfall or attractive building doesn’t automatically make for a viable restaurant. One of the first things we consider when assessing a potential property is whether the proposed concept can generate sufficient revenue to support the costs of operating from that location.

Some of the questions we ask are: How many customers can realistically be accommodated? What will they spend? How frequently will those seats turn over? And, perhaps most importantly, what level of sales will be required simply to cover the operating costs? These questions need answering before committing to a lease, not afterwards.

I have written previously about why restaurant financial projections are so important, and this is precisely where they become invaluable.

The Building Itself Can Be an Expensive Surprise

We regularly assess properties that initially appear perfectly suitable for a restaurant, only to discover potential complications with extraction, electrical capacity, drainage, listed building consent or fire safety. None of these issues necessarily makes a property unsuitable, but resolving them can add considerable expense to an already substantial investment.

A landlord offering a rent-free period might appear generous, but that benefit can quickly disappear if significant alterations are required before the restaurant can open. Understanding the likely capital expenditure, including a sensible contingency, is every bit as important as negotiating the rent.

Make the Numbers Work Before Making the Commitment

I am certainly not suggesting that people shouldn’t pursue their dreams and ambitions. Quite the opposite. Opening a restaurant can be enormously rewarding, and I have spent much of my career helping people do exactly that. However, enthusiasm needs to be supported by sound commercial judgement.

A proper feasibility assessment should establish whether the concept suits the location, whether the building can accommodate the operation and whether the anticipated financial returns justify the investment.

Sometimes the conclusion is that a particular property simply doesn’t work. Disappointing perhaps, but considerably better than discovering the same thing after spending several hundred thousand pounds.

Our earlier article on how to open a restaurant explores some of the wider considerations involved.

At Harris Restaurant Consultants, we help clients assess potential sites, develop financial projections and plan new restaurant openings. Just reach out to us on the Contact Us page

My advice is straightforward: before you sign the lease, make sure you’re investing in a viable business, not simply an attractive property.