Restaurant Portfolio Management: Keeping Tabs on your Leases
Last Updated on August 28, 2023 by Morgan Beard
Running a successful restaurant requires more than just great food and service – it also depends heavily on making smart real estate decisions as a tenant. Restaurant portfolio management is key to unlocking restaurant growth — from finding the right location to negotiating favorable lease terms, managing costs, maximizing ambiance, and planning for the future, restaurant operators need to take a strategic approach to their restaurant portfolio management task. This allows us to set up and sustain thriving innovative locations that delight consumers.
Let’s explore some key tips for restaurant tenants looking to build and operate a profitable, sustainable real estate portfolio with smooth foodservice operations and an amazing quest experience:
Understand Your Restaurant Portfolio
As a restaurant owner, you should start by fully understanding your concept’s real estate needs. This includes considering the optimal size, layout, and specific needs to deliver your cuisine efficiently. For example, what kitchen equipment do you need? Is there a footprint for that equipment? How much dining room capacity should you have? Is patio space important? You also need to factor in visibility, accessibility, parking, and zoning requirements for each potential location. The goal is finding physical locations that truly align with your brand and operating model.
Thoroughly analyzing your business plan and operational requirements prevents you from signing leases that don’t work for your concept. The business requirements for a fast casual compared to a franchisee and a sit down facilities may differ significantly. You may make the mistake of leasing a space with a beautiful storefront but undersized kitchen – it could create bottlenecks that lead to slow service and food quality issues. Now you should pay close attention to back-of-house space needs to avoid operational headaches down the road.
Assess Markets and Sites
In your experience, location is absolutely critical for restaurants. So you need to put significant legwork into analyzing neighborhood demographics and local demand for your cuisine before committing to a site. You should drive around potential markets to assess competitors in different locations under consideration. This ensures you find spaces matching your concept, price point, and target audience.
It’s worth the upfront effort – opening in the wrong location has sunk even experienced, talented restaurant operators. You should try to be realistic about whether a neighborhood can support your restaurant based on residential density, traffic counts, income levels, competition, and other factors. You may need to pass on some picture-perfect restaurant spaces because the market dynamics just aren’t right.
Negotiate Favorable Lease Terms
Once you’ve identified candidate locations, you need to focus intensely on negotiating favorable lease terms. You should scrutinize base rent, triple-net expenses, rent bumps, option periods, exclusivity clauses, and other legal language. Don’t hesitate to counteroffer – a few percentage points on rent can make a big bottom-line difference over a multi-year lease.
You also need to negotiate tenant improvement allowances to build out beautiful, functional spaces reflecting your brand identity. Hiring experienced brokers and lawyers helps you get the best deal possible as a tenant. It’s money well spent compared to being stuck in an expensive, restrictive lease. You may be able to negotiate concessions and allowances that enable you to open stunning restaurants you otherwise couldn’t afford.
Manage Ongoing Costs
Managing ongoing occupancy costs is a constant effort for restaurant tenants. You need to closely track utilities, property taxes, maintenance, and other variable expenses. Installing energy-efficient equipment and optimizing operating hours can help control costly utility bills. Staying on top of minor repairs and issues prevents them from escalating into major headaches down the road. Consider negotiating with your landlord on leasehold improvements that could reduce long-term operational expenses. For example, upgrading to a modern HVAC system could pay for itself over time in utility savings. Proactively managing costs improves your bottom line. You Finance team should have a strong grasp on cash flow per location as well as pofitability.
Maximize Customer Experience
Creating an incredible customer experience starts with the physical space in your restaurant. As a tenant, you want to design and decorate your dining room to align with your brand identity and cuisine. Invest in comfortable, durable furniture and fixtures. Pay attention to lighting, music, and other ambiance elements to delight guests. Maintain a spotless space through diligent cleaning and maintenance. Also consider technology investments like kiosks, online ordering, reservations systems, and loyalty programs to improve convenience and service. If you are offering mobile ordering, having a logical pick-up window in a convenient location is important. Small touches like providing charging stations or WiFi for customers can go a long way. Optimizing the environment inside your four walls ensures guests have a memorable, enjoyable visit that brings them back again and again.
Drive Revenue Growth
As a restaurant Chief Operating Officer, you need to continually find ways to drive top-line revenue growth and annual sales growth beyond just serving great food. Consider rolling out new menu items, specialty dishes, and seasonal offerings to give guests a reason to return. Host special events like wine dinners or craft beer tastings that allow you to showcase your products. Promote your restaurant through social media channels and local partnerships to bring in new guests. Setting up an e-club, loyalty program, or mobile app can help build customer loyalty and make it easy to issue promotions or discounts. Pursuing alcohol, catering, and food delivery provides added revenue streams. Taking a multi pronged approach to marketing and operations gives your restaurant the best chance of prospering, even in an increasingly competitive market.
How Occupier Empowers Restaurant Tenants
Occupier is a lease management software platform that aims to empower restaurant tenants by simplifying site selection, lease negotiation, financial rent forecasting and strategic real estate decision-making. Occupier provides data-driven tools to identify optimal locations based on demographics, competition, and your unique business needs.
Occupier helps you manage your real estate expenses, identify cost savings, and keep locations running smoothly. Their Lease Management Software centralizes your lease data, tracks operating expenses, critical dates, and provides restaurant tenants with critical insights and support needed to build thriving portfolios.
