How do you choose a location for a business?

How do you choose the right location for your business?

It’s easy to choose the right location for your business if it’s online. All you need is a good website, email, and a phone number and you can be up and running, but when your business is brick and mortar, it’s much more complicated.

I recently was in a community Facebook group for my neighborhood and saw this very question pop up, and it made me think about how much should go into the decision. Years ago, I worked for the corporate office of a franchise and was lucky enough to learn a lot about choosing locations for brick and mortar businesses. It’s hard to get it right, and that’s one of the reasons we see some businesses that seem like they should thrive struggle to survive.

how to choose a location for your business

What matters most when choosing a location?

You need foot traffic to sustain most small businesses. You may have a following or have customers who will drive further to see you, but in most cases, your customers will be within 5 miles of your business. Maybe 10 miles at most. Most people aren’t going to drive far out of their way to go to a specific store regularly. They may do it once in a while, but if you want to build customer loyalty and shopping/visit frequency (trust me, you want this), then you need to be convenient. You need to be close to work, close to home, or somewhere in between the two.

When deciding where to open a business, you want to think about who your Ideal Customer is (see how everything comes back to your Ideal Customer? 🤣 but really, it does all come back to them).

Questions to consider:

  • Where do they live and where do they work?
  • Do they have a flexible lunch hour, or are they on a very strict schedule?
  • Do they even get out of the office much or do they have back to back meetings all day?
  • Are they going to want to go out to dinner in the evenings or on the weekends or do they prefer to cook at home?
  • How many times a week do they eat out?

Let’s pretend our Ideal Customer likes to go out for both lunch and dinner a few times a week because it makes for a more interesting discussion than if they bring their pb&j to work every day. We’ll call our Ideal Customer Bob, and he’s an engineer who has a 45-minute commute to work each day. He likes to get out for lunch but needs it to be quick and easy and close to work because he’s short-staffed and wants the mental break of leaving the office but doesn’t want to fall further behind by being out too long. Long lunches are not his thing. He’s more likely to call in a take out order and run out to pick it up. However, after work or on the weekends, he loves to go out to dinner with his family and have a more leisurely time. He might even have a drink or two at dinner on the weekend.

At lunchtime, Bob wants something super close to work. He wants to drive less than 10 minutes each way because that’s already probably 30 minutes round trip to go pick up food. In the evening, he likes to meet his wife on the way home or go home, change, and then go out to dinner close to home. On the weekends, they’ll venture further and try new places or return to old favorites but all total, they only want to drive about 20 minutes max, unless it’s a special occasion.

How do we take that information and use it to decide where to open our business?

Based on the example in the group, the restaurant wants to open for lunch and dinner both, and likely operate 11-9. Since we’re looking to open a restaurant that will be open for lunch and dinner both then we need to have traffic during both meals, which means we need to be adjacent to both businesses and residences.

If we open too close to a corporate center where there aren’t many homes, we will do well at lunch but struggle at dinner because people don’t want to go back after they leave. It’s possible they could build up a great take-out business for dinner, but the dining room will likely be quiet.

If they open too close to the residential areas, then they may do a great business at night and on the weekends but be open and very quiet at lunch.

See the challenge here? Where do you open your restaurant?

How do you figure this out?

The easiest way is to use your customer data if you have any available. If you have a customer database, find out which ZIP codes your customers come from and start by looking for options in those ZIP codes. This will help you focus on your current customers, and having someone to serve from the beginning helps.

If you don’t have any customer data or are a brand new business then you can start by looking for potential areas in your community where you’d be interested in openings and research to see how many major employers are within a 5 mile radius (10 minute drive) and then see how many residences are within a 10 mile radius (20 minute drive). Pin the locations on your map and draw out the approximate radius and see what areas that includes.

From there, you might even want to drive around those areas on your own. Are there at least three or four large employers in the area? Are there some large housing developments nearby? What are other restaurant options in the area? Who’s going to be your competition? What’s the socio-economic breakdown of your target area? Your Ideal Customer needs to have enough disposable income to go out to eat, or they won’t be coming in your doors. Many businesses focus on households with a family income of $75,000 or more to allow for disposable income. You may not need to go that high for a restaurant, depending on your price point.

Where can you find demographic and sociographic information? You can search it online. The data is generally available by ZIP code. There are multiple sites available. I like the site since it’s hopefully, the most accurate source. 

What’s the best solution for this particular restaurant?

In this case, they would likely do best in a shopping center that’s near a Whole Foods, yoga studio, workout place, or other amenities that health-conscious consumers would frequent. They would also likely do well somewhere close to businesses but on the main route home. Being convenient is very important for most consumers.

When you’re choosing a location for your brick and mortar business, you almost can’t know too much about your Ideal Customer. Understanding them well will help. Take a look around your community and see what’s out there. Find a convenient spot, maybe even somewhere they go regularly. If you have questions about this, let me know.