If you build it, they will come??? Really…

(06 /11 /2014)

“If you build it, they will come”…isn’t that how the old saying goes? But is this really true, particularly in the hospitality industry? These days, it seems that everywhere you look, there is construction going on – new shopping centres, offices, housing – with many of the developments incorporating new eateries, restaurants and cafes. Now, we already know the importance of “location, location” and it’s no doubt these new developments are occurring in the “right” places but are the “right” businesses opening their doors?

Imagine this…across the road from a major shopping complex – think “Westfield Shopping Town” – that is already brimming with eateries, a new small shopping centre is developed. Now over at the big complex which is brimming with customers, there are several sushi outlets to cater for the large numbers of patrons. The new small centre which has more specialised stores has much less foot traffic, yet someone in centre management decided that the complex was in need of a sushi train restaurant. Now let’s think about the numbers – rent expense is about $60,000 a year, add in the cost of fit out of an empty space plus the operation costs and how many plates of sushi would such a business need to sell in the hour, every hour to be viable?

In this scenario, it’s not hard to see that there is very little chance that this particular sushi outlet would survive. And yet, we see it every day – new cafes, eateries, even cordon bleu restaurants open one minute and seemingly shut down the next. So why does it happen? While it is great to take advantage of the “eat street” concept and locate with like businesses, business owners must do their homework before jumping in. Make sure that your business is just that little bit different to the others around it, whether that is through the food offered, ambience or service style. Definitely consider potential patronage, both the amount of foot traffic and type of customer – are they big spenders or do they just want a cheap eat? Look at what rent, fit out and ongoing costs you’ll have – this will help determine how much product you need to sell and at what price, to stay viable. Also consider how many and what hours your business needs to be operational – there’s no point being open at 6am if foot traffic doesn’t ramp up until 9am; conversely, if the businesses around you are all late-night operators, then perhaps you won’t be able to close your doors until midnight. These issues are only the tip of the ice-berg when it comes to starting up a hospitality business; there is much to think about!

Everyone who starts a business regardless of whether it’s in hospitality or not, believes their idea is the best, so they build and hope the people come. Unfortunately though, this is not always the case. So, do your homework, ask a thousand questions and save the tears, and you’re more likely to be one of the success stories.

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