| Issue 70 June 2002 | PDF version | Index of Issues | CCED Home |
Evaluating Downtown Restaurant Opportunities
by Bill Ryan*
Restaurants are an essential component of a vibrant, mixed-use business district. They serve a variety of market segments including nearby residents, shoppers, office workers and tourists. Market data on your area can suggest what types of restaurants might make sense for your downtown. This article provides information on collecting and analyzing data to identify possible restaurant concepts.
Downtown Location Analysis
Location is a critical factor in restaurant planning. Traffic visibility and accessibility provide important indicators of the level of exposure a new restaurant would receive at a downtown location.
Similarly, "demand generators" in the community need to be identified as they contribute to restaurant utilization levels. Company offices and manufacturing firms, hospitals, colleges and retail stores typically generate a significant amount of restaurant business, often from nonresidents coming into the community.
Finally, market demand for a downtown restaurant may be positively impacted by future increases in downtown employment, expansion or new construction of commercial buildings, new residential housing, and street and transit improvements.
Restaurant Demand
Residents of the primary trade area are an important market segment for existing and future dining operations in the downtown area. While daytime workers and tourists are important sectors, the resident population usually represents a sizable market whose dining expenditures can be fairly accurately estimated.
Demographics data can be used to compare your trade area with other communities and the state. Comparisons can be made in the following categories:
- Household Income - Per capita expenditures on food away from home rise dramatically for households with income of $30,000 or more.
- Age - Households headed by persons between the ages of 45 and 54 spend the most per capita on food away from home.
- Household Composition - One and two-person households have the highest per-capita spending on food away from home. The addition of young children reduces per capita spending.
- Occupation - Persons employed in managerial and professional occupations have the highest per-capita spending on food away from home.
Estimates of consumer spending for food away from home is available
from the U.S. Bureau of Labor Statistics, Consumer Expenditure Survey.
This data can be merged with demographic data to estimate dining-
out expenditures for each household income category in your primary
trade area. Consumer expenditure data is also available from private
data sources.
Lifestyle segmentations systems such as ACORN™ consumer classification data from CACI™ Marketing systems can be used to learn about dining-out activity among household groups in the primary trade area. These systems can provide information on the frequency of dining-out and types of operations frequented. Lifestyle data of day-workers, tourists and other non-residents can also be analyzed based on their place of origin.
The National Restaurant Association has identified five major groups of frequent diners. Using demographic information and lifestyle segmentation data, you can estimate what portion of your market may fall within these five, potentially important groups:
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Busy parents of children - often involved in after-school activities and sports and use drive-thru and carry-out restaurants.
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Older adults and empty nesters (down-scale) - eat on-premise at inexpensive sit-down restaurants, buffets and fast food eateries.
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People who are convenience driven and dislike cooking (with no young children) - use a variety of carry-out sources including restaurants and grocery stores.
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Young, urban professionals with no kids - dine at higher-priced restaurants.
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Educated adults driven by taste and craving - eat at mid-priced sit-down restaurants and use delivery.
Survey and focus group research can help assess dining demand specific to your particular community. Questions useful in your evaluation of restaurant demand from these market segments include:
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How often do you dine out by meal period?
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How often do you dine out by type of restaurant?
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How often do you come downtown for dining or entertainment?
- What types of cuisine would you like downtown?
Restaurant Supply
All restaurants in the downtown area and major competitors elsewhere
in the primary trade area should identified and analyzed to assess what
types of operations exist and how busy they are. While you are particularly
interested in the downtown mix of restaurants, it is important to include
other prominent establishments that are popular in the community but
exist elsewhere in the primary trade area.
Information about these establishments should be collected including business name, address, concept, customer volume by period (slow, moderate, busy and very busy) and their success factors. A thorough analysis of existing competition is essential in identifying viable concepts that might be missing in the downtown area.
Possible Restaurant Concepts for Downtown
A concept is a combination of ideas that forms the foundation for a particular type of restaurant operation. A concept can include theme, menu, service style, hours of operation, price, entertainment and atmosphere.
Using information collected (on the downtown location, demand and supply); the next step involves identifying potential restaurant concepts that fit the marketplace. Certain dining concepts may emerge as more suited to the area that others. For example, the presence of downtown office workers may suggest opportunity for a deli-style sandwich shop focusing on weekday business. The presence of a theater may suggest opportunity for fine dining operations or espresso coffeehouse.
Sample Restaurant Concepts
| Banquet Rooms Barbecue Beer Gardens Bistro Brew Pub Cafes Cajun Caribbean Chinese Coffee Shops Continental Deli Deli-Bakery Delicatessens Espresso Coffee House Family Restaurant |
Fast Food - Chicken Fast Food - Fish Fast Food - Hamburgers Foods-Carry Out French Greek Indian Irish Italian Japanese Kids Entertainment Korean Kosher Mexican Micro Breweries Middle Eastern |
Oriental Pancakes Pastry Shops Pizza Pubs and Taverns Seafood Soul Food Spanish Steakhouses Sub Sandwiches Swiss Thai Vegetarian Vietnamese |
The demand for each concept should be critically evaluated. Is demand greater than the supply of restaurant seats now available? Do the types of restaurants concepts considered for downtown have the capability to attract customers away from existing competition? Do the types of restaurants concepts considered for downtown have the capability to encourage consumers in the primary trade area to dine out more frequently?
Based on your evaluation, you can draw initial conclusions regarding
the viability of various concepts. However, because of the complexity
of a restaurant business, this analysis is not intended to be a complete
feasibility analysis. Each restaurant concept identified in this analysis
should undergo more detailed study that addresses covers served, pricing
and financial pro forma development.
| More detailed guidance in completing this analysis is available in the Downtown and Business District Market Analysis web-based toolbox, a collaborative effort between the University of Wisconsin - Extension and the Wisconsin Main Street Program of the Wisconsin Department of Commerce. The toolbox is available at: http://www.uwex.edu/ces/cced/dma/ |
Conducting a Feasibility Study for a New Restaurant, National Restaurant Association, 1998. Ebbin, Robert, What Households Spend on Food Away from Home, Restaurants USA, August 2000. The Frequent Dinner Customer, National Restaurant Association, 1997.
* Ryan is a business development specialist with the
UWEX Center for Community Economic Development. Newsletter production
by Alice Justice, program assistant with UWEX/CCED
|
Center For Community Economic Development, University
of Wisconsin-Extension |
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