Opening a restaurant is one of the most exciting (and risky) business ventures you can undertake.
Every restaurant owner dreams of bustling dining rooms, rave reviews, and a thriving business. But let’s face it…
Location makes or breaks your restaurant before you even welcome your first customer.
With 55% of diners choosing a restaurant based on location, picking the right spot isn’t just important, it’s absolutely critical to your success.
So how do you choose the perfect location for your restaurant?
Table of Contents
What you’ll discover:
- Why Location Matters More Than Anything Else
- The Demographics Deep Dive Method
- Traffic Patterns That Actually Matter
- Competition Analysis That Works
- Cost Calculations You Can’t Ignore
Why Location Matters More Than Anything Else
Want to know a secret?
You can have the best chef in the world, Instagram-worthy decor, and a menu that makes Gordon Ramsay cry tears of joy. But if your restaurant is in the wrong location, none of that matters.
Restaurant statistics paint a brutal picture. Over 72,000 restaurants shut their doors in the US in 2024 alone, and poor location choice is one of the most common reasons for failure.
Here’s what makes location so powerful:
- Visibility drives discovery – people can’t visit what they can’t see
- Accessibility determines repeat customers – hard to reach equals zero loyalty
- Demographics shape demand – wrong audience equals empty tables
- Foot traffic creates opportunity – more people walking by means more potential customers
When starting a restaurant, most entrepreneurs obsess over the food first. That’s backwards thinking. Successful restaurant owners choose their location first, then build their concept around the local market.
The Demographics Deep Dive Method
Here’s where most restaurant owners go wrong…
They choose a location based on gut feeling or cheap rent. Big mistake.
Your restaurant’s success will depend on truly understanding exactly who lives, works, and plays near your potential location. The demographics of your area will influence everything from your menu prices to your operating hours.
Start by considering these key factors in local demographics:
- Age ranges – Are you targeting young professionals, families, or retirees? Different age groups have different dining preferences and spending habits.
- Income levels – Income determines price points. Fine dining won’t fly in a budget-minded neighborhood.
- Lifestyle patterns – Do people eat lunch at their desks or dine out? Are they health-conscious or comfort-food lovers?
- Work schedules – Office districts are dead on weekends, residential areas might be slow for lunch.
Spend a week just observing your potential location at different times and days of the week. Count the people. Try to gauge their ages. Watch their behavior.
Pro tip: If you’re starting a restaurant that relies on fresh ingredients, look for proximity to quality suppliers too. Partnering with a reliable fruit and veg wholesalers can have a big impact on your food costs and quality, especially if you’re opening a restaurant in a competitive market where fresh ingredients can really set you apart.
Traffic Patterns That Actually Matter
Here’s a little-known secret…
Pure foot traffic numbers don’t tell the whole story. It’s the right kind of traffic for your restaurant concept that matters.
A busy street full of people hurrying to catch buses may have great foot traffic but terrible conversion rates for a sit-down restaurant. A residential street with slower foot traffic may be perfect for a family-friendly spot.
Traffic pattern factors that matter include:
- Pedestrian vs. vehicle traffic – Fast casual places need walkers. Family-friendly restaurants need parking.
- Speed of movement – Are people strolling or sprinting? Commuters on the move rarely stop for casual dining.
- Time patterns – When do the crowds show up? Morning coffee rush? Lunch crowd? Dinner rush? Late night crowd?
- Purpose of travel – Shopping, commuting, entertainment, or just passing through?
- Seasonal variations – Tourist areas boom in summer, die in winter. Business districts are opposite.
Competition Analysis That Works
Most restaurant owners see competition as an enemy to avoid. That’s a backwards approach.
In reality, competition can be your best ally when choosing a location. Here’s why…
Successful restaurants create dining districts. When multiple good restaurants cluster together, they generate more total foot traffic than any one restaurant could by itself.
Look at competition the smart way:
- Look for gaps, not battles – Don’t try to out-pizza the pizza place. Find what’s missing and fill that gap.
- Study their busy times – If all the competition is packed at lunch and dead at dinner that tells you something about the local market.
- Check their price points – Are all the restaurants expensive? All cheap? Maybe there’s room for a mid-priced option.
- Examine their target customers – Age, income, party size, occasion. Look for underserved niches.
- Note their weaknesses – Poor service, limited hours, bad parking, outdated decor. All opportunities for you.
Cost Calculations You Can’t Ignore
Time for a hard truth…
Location cost goes far beyond monthly rent. Total cost of your location often determines whether you’re profitable or joining the 17% of restaurants that fail in their first year.
Location cost factors to consider:
- Base rent – Obviously, but remember this is just the starting point.
- Triple net costs – Insurance, taxes, maintenance fees landlords love to tack on.
- Utility capacity – Restaurants use massive electricity and gas. Old buildings may need pricey upgrades.
- Renovation costs – Bringing a space up to restaurant standards can cost $100-$300 per sq ft.
- Parking expenses – Need to lease extra spots? Pay for valet services?
- Signage restrictions – Strict rules that limit your visibility?
A good rule of thumb: Total occupancy costs should never exceed 6-10% of projected gross revenue. If numbers don’t work, walk away.
The Final Location Decision Framework
Ok, here’s how to make the decision when you’ve found a few promising locations:
Score each potential location on these factors (1-10 scale):
- Demographics match (target customer presence)
- Visibility and accessibility (can people find and reach you?)
- Competition balance (enough activity but not oversaturated)
- Traffic patterns (right type at right times)
- Total cost feasibility (fits budget model)
- Growth potential (area improving or declining?)
Any location scoring below a 6 in any category should be crossed out immediately.
The restaurant industry is projected to reach $1.5 trillion in sales in 2025, so massive opportunity exists for well-positioned restaurants.
Putting It All Together
Finding the perfect location for your restaurant is not about finding the cheapest rent or the busiest street. It’s about finding the intersection where your restaurant concept, target customers, and budget all perfectly align.
Remember: Only about 51% of restaurants make it past five years, but your choice of location is one factor you can control.
Take your time with this decision. Visit possible locations at different times and days of week. Talk to other local business owners. Study your competition. Run the numbers several times.
Location will influence every aspect of your restaurant business, from menu design to marketing to long-term profitability. Get this decision right and you’re setting yourself up for success.
The perfect location is out there. You just need the tools to find it.
