Opportunity knocks in the outer suburbs
By Gerrick Numan
The inner suburbs, the ‘cool’ areas, have a lot of restaurants, cafes and bars. The demand is high but so is supply. That doesn’t mean another one won’t work, it just means there are opportunities elsewhere.
In some under-serviced outer suburbs, the demand is high and there’s no supply.
People are there, with money, looking to eat out but they have nowhere to go. If your concept is right, your chances of success are higher in the outer suburbs.
Just look at Peach’s Hot Chicken. We designed a venue for them in Panmure, Auckland, an area better known for pawn shops than dining, and they’ve had crazy queues out the door every single night.
Now they’re moving to a venue twice the size down the road. An excellent concept plus low competition has meant a much more profitable restaurant than if they had opened in the inner suburbs.
We’ve done the same for Sumthin Dumplin in Botany and many others.
Not only is competition lower in the suburbs, so are rents.
A shop that costs you $80k per year in rent in an inner suburb, can cost $25k in the outer suburbs. That’s $55k in your pocket, immediately. The old real estate saying that you ‘make your money when you buy’ applies to leasing a space for a hospitality business too.
In an industry where margins are slim, lower rents can make a huge difference.
If you do $15k in sales per week, the lower rent means a drop in your annual rent percentage from 10% to 3% – an additional 7% of profit.
There is less demand for retail spaces. So you will have increased negotiating power with landlords. This could mean a long rent free period or a significant capital contribution from landlords.
You will also be in a good place to negotiate a ‘sale friendly’ lease
I.e. a lease that will be attractive to future buyers of your venue (multiple rights of renewal, annual rental increases capped at CPI, no demolition clauses). Get in touch with me any time if you want me to explain these ideas.
There is potential in failed venues.
The financial and emotional impacts of a failed concept on operators are nothing to be taken lightly. But at some point these venues and their unused fit outs and equipment will need to be used again. This can be an excellent opportunity to open a venue, without the massive expense and risk that comes from setting up a kitchen from scratch.
Where to from here?
If you need any help in assessing a site, or tweaking your concept, get in touch with me anytime and let’s figure out a way to keep moving forward.