The value of doing market research when you're getting ready to open a new restaurant can't be overstated. Understanding who your potential customers are and where they live will help you to tailor your restaurant concept to that demographic and increase your odds of success.
Finding the population base of an area can tell you the income range of your potential restaurant location. It will tell you whether there will be enough people nearby with sufficient expendable income to support your establishment, and it can provide guidance as to what they're most likely to spend their disposable money on.
Why Finding the Population Base Is Important
You might assume that you know enough about a particular location if you're opening in your own hometown or a local neighborhood. You might think that doing any further research is unnecessary. This can be a costly mistake.
Really digging into the numbers in your area, from housing values, average household income to average age, then contrasting this information with the number of competing restaurants in the area, will help you determine the best type of restaurant to open.
You might tailor your concept to millennial customers rather than a baby boomer population if the average age in the area is 27.
Conducting a Site Survey
A site survey is one way to figure out the population base of an area. Big chains and corporations routinely conduct some type of site survey before they begin building, but this isn't always an option for someone starting an independent restaurant because a site survey can cost many thousands of dollars.
Other Places to Look for Information
You have other options for figuring out the population of a particular area, and most of the information is free.
Take advantage of local government reports. Speak with a representative from the Small Business Administration (SBA), or visit the nearest economic growth council for information on local employment and population data.
The U.S. government publishes a population census every 10 years and it's available online. A census doesn't just tell you how many people live in a certain area. It also gives you a median age and household income as well.
These factors can influence your menu and restaurant style. For example, it would be a good idea to keep the menu prices on the inexpensive side if the median household income of an area is $40,000. By the same token, you can offer a slightly more upscale menu if the median household income is $200,000 a year.
Zip-Codes.com is another demographics-related site that can offer up some valuable data for a one-time fee. Esri offers a searchable database for this type of information as well.
Try to pinpoint what the people in the area are spending their disposable incomes on, and try to incorporate this information into your plan. This can be as simple as counting the number of movie theaters nearby. Moviegoers often stop for a bite to eat before or after the showings, so this could be a good omen and a trend you could cater to.
Likewise, an area that's chock full of kiddie-oriented retail stores and activities might not be your best bet unless all other factors are in line with your goals. Large families are less likely to dine out unless you take fast food and drive-thru restaurants into consideration.
Find out the appraisal values of local homes, or gather sales prices after they've sold. Prices are often published in local newspapers.
It can be an indicator that incomes are lower when houses are going cheap. Likewise, it's a good indication that incomes are high and people have extra money to dine out if most homes in the area are selling for $400,000 or more.
Institutions and Attractions
Find out if there any big businesses or attractions, either presently in the area or planning to come in, that will draw lots of people to the location. For example, a sports stadium or major medical facility will attract thousands of visitors from outside the local area, all of whom will want to eat at some point.
The Unemployment Rate
You can find unemployment rates for towns, counties, and states through local government websites. It can be important to have the most recent figures, but as a practical matter, these statistics stay relatively unchanged over short periods of time.
For example, the U.S. unemployment rate was 3.6% as of May 2019. This was just a .2% decline from the same month in the previous year.
You might want to think twice about locating your restaurant in an area where the unemployment rate is higher than the national figure.