Wild Ride, Part II: Location, location, location

We all know the 3 rules for success in the restaurant business (location³). How does the aspiring restaurateur go about finding this elusive "great location"?

Before I go further, let me acknowledge that there is no single definition for a "great location." The restaurant's location has to be married to its concept. They depend on one another, like a burger and a bun. Using San Francisco as an example, you wouldn't want to open your quaint English tea house on Bayshore Avenue, an industrial section, because there's no "foot traffic" from shoppers walking by. If you're opening a fast food franchise, on the other hand, Bayshore may be a great location, because you would have visibility from the highway (and, despite years of protest, Home Depot is on its way).

In San Francisco, there are 2 principle ways to get your hands on a restaurant space. First, you can lease or buy a space that is not currently a restaurant and then install a kitchen and all the other fixin's necessary to open for business. Second, you can buy an existing restaurant business, remodel the space as much as you feel is necessary and can afford, and then open your doors. (Although specifics vary with each deal, when you purchase a restaurant business, you are buying the lease, including any time remaining and any options to renew, the furniture, fixtures, equipment, inventory, and, if desired, the previous restaurant's name and concept).

For the past year or so, I focused on the second choice, buying a business. Within this category, there are basically 2 ways to find a business for sale. You can act like a vulture and make an offer to struggling restaurants or you can peruse ads (most are online) and contact the sellers or their brokers. I spent most of my efforts on the latter method (although I've gradually learned that the best locations seem to go via the vulture method).

What is my experience of using online ads to hunt for a restaurant business to buy?

Imagine yourself blindfolded and standing in the middle of an airport hangar. Along one wall is the picture of a donkey upon whose derriere you wish to pin a tail. You spin around 5 times and go. Good luck.

Imagine you are looking for an apartment (or a house for that matter) and all the ads read "apartment in San Francisco, $1,500 - 2,000 per month" with no other details, not the number of bedrooms, not the address, not even the neighborhood. Get the idea?

Below is a picture I took last September of all of the San Francisco restaurant ads I had to choose from, spread across my floor. There were so many I couldn't fit them on my dining room table.

In defense of the sellers, restaurant ads need to remain vague for economic reasons. No restaurant owner wants to alert her employees or customers that she has placed her business on the market. Therefore, she and her broker keep the ad mysterious, sometimes to the point of the absurdity of my second example. Brokers typically require you to sign a Confidentiality Agreement before you can get the name and location of the restaurant for sale.

Ad writers often leave a few juicy details in an attempt to lure the aspiring restaurant owner. We get excited when we see phrases like "corner location," "full liquor license," and "excellent foot traffic." They are as titillating as "crispy," "tender," and "chocolate" are to diners reading a menu.

If you are like me and you like a good mystery, it's fun to turn the confoundingly frustrating process into a game where the goal is to try to guess which restaurant the ad is talking about. Try your hand with this impressive sounding place (I honestly don't know the answer, but I am curious).

Where do you find the ads? Theoretically, everything is online. The sources I search in San Francisco include the following:

• San Francisco Chronicle Classified Ads on SFGate (link goes to "Business to Business," then click "Restaurants/Bars")
• S.F. Bay Area Craigslist (link goes to page for "City of San Francisco," "Office & Commercial," then type "restaurant" in search field)
• BizBen.com (check boxes for "Restaurant/Food Service Related" and "San Francisco County" and press "submit" at bottom of page)
• Restaurants for Sale Online (link goes to search results for "California - San Francisco Bay Area Restaurants for Sale")
• Multiple Listing Service (under "Property Type" check "Business Op," under "Districts - Subdists" pop-up menu check all 10 "SF District" boxes, then press "submit")
• Restaurant Realty (click "View All of Our Current Listings")

There is some overlap amongst these services. For example, Restaurant Realty's ads are also listed on BizBen. For convenience, the Chronicle, BizBen, and Restaurants for Sale Online offer a service enabling you to sign up for email alerts whenever a new restaurant is listed. Restaurant owners who don't use brokers tend to list on Craigslist or in the Chronicle, so it's important to check these regularly.

Remember, above I added the qualifier "theoretically." Not every broker lists all of the restaurants he (they all seem to be male) is selling. Also, many brokers do not update their web-based ads, so restaurants that sold months ago are often still listed (many of the ads in the above picture turned out to be defunct). They prefer that you call them and establish a relationship.

Unlike buying a home, there is no such animal as a Buyer's Broker. It's important to understand that, despite what they may tell you, brokers really only represent their sellers (this becomes even more important when you make an offer). Each broker only has the information on the restaurants of those sellers who have listed with his company. When you meet or speak with him, he will only guide you to his listings and knows nothing about any competing broker's listings. Therefore, if you don't want to miss good opportunities, as I often have, you need to have a relationship with every broker in town.

More on that next time in Part III: Meet the Brokers.

Read previous Wild Ride posts: Prequel, Intro, Part I

Food|and Drink|Restaurants|Opening Restaurant|San Francisco

Comments

[shuna fish lydon]

good god. I don't know if I can keep track already! sounds like a great project for the udercover reporter... complete with secret camera and recording device in the shoe.

Get Smart.

These are great. Thanks!!

[laura @ cucina testa rossa]

congratulations!!!!! hope to catch up with you next month when i'm there!