Returning to that highly talented, but unfortunate French couple who bought that successful doughnut and coffee shop… Unlike some business ventures, the reason they failed was not their lack of capital investment, customer service skills or culinary talent for that matter. The reason they closed their doors was simply the because they didn’t do their homework in choosing a restaurant location.
Some of you may say… Well, that doesn’t make sense? There was a successful business in that space for 20 years and the new owners did everything correctly so based on those aspects alone, they should have had some chance of success. In many respects I would agree with this thought process, but for this example of failure specifically, I would not be looking at what the new owners did wrong in choosing a restaurant location, but I would be looking at what the former owners did right.
In this instance, their choosing a restaurant location for the doughnut was on corner where thousands of people walked by every morning on their way to work. They offered some good quality products that were served quickly by a pleasant staff so it was no surprise that hundreds of people stopped in on their way to work everyday for a coffee and doughnut.
This property was however lightly traveled by lunch time since it was located close to a train station and most likely the morning commuters were having lunch somewhere close to their place of business. Conversely on the way home from work, this fantastic amount of traffic was once again visible for their commute home from the office… This is the traffic the French couple was hoping to grab every day. What turned out was that yes, there was a tremendous about of traffic towards the end of the day, but that traffic was moving in high-speed to simply get home to family and loved ones. The restaurant location, offering a convenient stop in the morning for a cup of coffee and a doughnut would not provide this same quick service for people on their way home that would have required them to sit for some time while they had their French Bistro experience. Even though many of those daily travelers would have loved the food, it was that convenience factor present in the morning that was missing, which ultimately leads to the demise of the business.
The lesson here is that it is not just the process of choosing a restaurant location that creates the determination of volume for business traffic, but the type of experience the concept offers at that location that determines who patronize the establishment and how often.
We’ve helped develop dozens of business plans with clients over the years, and know how daunting of a task it can be when you are starting from scratch. We always recommend using a software platform to make things easier after you’ve completed your food cost analysis, using our Free Food Cost Calculator. Palo Alto Software has several programs to help entrepreneurs develop their business, sales and marketing plans. We encourage all of our clients to use since it makes life so much easier, theirs and ours! We’ve placed some links below to their software that you can view by clicking the banner.