Geographical Limitation in Retail Business

Let's talk about making money. In the pursuit for happiness, money is one element we cannot ignore. Off course many will say money isn't everything...bla bla bla. But money for sure will get you something, isn't it?

Recently I have a chat with someone whom I have met online. This gentleman has had enough of his long hour job and is looking for a business opportunity to do. As usual, like most people he plans to start a cafe or restaurant as it seems like the easiest way to make money. Put in some money, open shop and wait for customers to walk in. No sales call required. And it's cash business. What a great combination, isn't it?

One set back in retail business that most people are aware off but doesn't take it too seriously is geographical limitation. Off course any retail business especially F&B must have good spot but that comes with high rent. So, a compromise between these 2 elements has to be considered. Furthermore, good location doesn't even guaranteed good sales and profit margin. Now, let's list down and digest each set back in retail business due to geographical limitation:

1) Rent. Good spot will have high rent. Period. What's even better? Rent renewal. Your beloved landlord will for sure notice your  business is doing great and he wants to increase rent. Do you leave or stay?
2) Changes in your surrounding environment. A good spot may not stay good forever. Road construction, traffic diversion, relocation of some offices etc will certainly have deep effect on your sales. Something you can never foreseen and control.
3) Some personal matters happen to you and you need to leave town. Your business cannot come with you.
4) F&B business requires high usage of electricity. Any increase in electricity tariff will have impact on your profit margin.
5) Town council decides to increase annual land assessment rate which will certainly cause your rent to go up.

I told this gentleman all these and he is now in doubt what business he should do. ;) Well, off course you can always get into Franchise business. Not that franchise restaurant doesn't have those limitations but at least the brand itself will help to bring in more sales. Over a longer period, those limitations will eventually have an impact on franchise restaurant too. That's the reason why a lot of franchise restaurants offer delivery or drive thru service. Delivery service expands the geographical coverage of the outlet while drive thru increase hourly sales by creating short waiting period for customers.