How do I make the most of exterior restaurant space

24 November 2005
How do I make the most of exterior restaurant space
We have a restaurant site with exterior access adjacent to our hotel and we're sure that we could make more profit from the space. What approach should we take?

Stefan Breg, Tribe Restaurant & Bar Creators
A good starting point is to get the site valued by a local agent. Leasing out is always an option, and the rental figure will give you a useful benchmark.

You then need to consider what effect leasing out will have on your hotel business. Are the site and its restaurant strategically important to the hotel offer? Would the hotel room business be sustained if you closed it? Would your hotel be affected if the leased operation had relatively low quality standards?

Next, consider the full implications of "insourcing". That is, you retain the operations. Do you, as manager, have the time and resources - people and capital - to genuinely change the offer?

If you are convinced you could deliver greater net profit than the lease valuation, then you need to start the process of understanding the potential target market for the site. Once you've identified this, you can begin to develop your concept.

Early in the process you'll need to identify what makes the concept unique, its personality, brand identity, interior design, operational format and, probably most importantly, whether you believe your current team can deliver the concept.

A preliminary feasibility study will also be essential to determine whether it is worth investing capital to change the concept. Your finance manager can build a cash-flow model for you to see whether you will get a healthy return from the money you're about to spend. Remember to allow for a slow start, plus the lost revenue when you close for refurbishment.

If the numbers still stack up and you and your team are still feeling confident, then charge ahead and don't look back. If there's no drive and passion, nothing's gonna happen!

Guy Holmes, The Restaurant Ingredient From a marketing perspective, I think you should give the image of a stand-alone restaurant rather than one that is part of the hotel. Hotel guests will obviously eat there anyway, and other customers are more inclined to go to stand-alone restaurants. The key issues are:

  • Whether to outsource? Being a hotel, you will already have the experience of preparing and serving food, but a stand-alone restaurant requires different skills. The key factors to consider are time and money. If you are short of both, then outsourcing the restaurant would seem an ideal proposition, especially as your risk is greatly reduced. Of course, if you take this option, your potential profit will be greatly reduced.
  • Design. Try to have as much flexibility as possible. Most hotels host a wide range of functions. Make sure you are able to section different areas off to cater for different types and sizes of functions.
  • Target markets. The best source of customers will come from the hotel, so the restaurant needs to cater to them. Prices, quality and decor need to be in the same league as the hotel.
  • Market research. Before doing anything conduct market research both of the potential competition and to find out what your target market wants.
  • Write a detailed business plan. Not only is this document essential if you need to borrow money, but it will also help you understand what you are doing and how you are going to do it before you incur any costs.

Julian Mitchell, Christie & Co Before you do anything, it's essential that you employ a specialist leisure or restaurant surveyor who will be able to advise you as to the marketability of the space.

The surveyor will be able to advise you on the current level of interest within the market for this type of space: who would be likely to want it, and at what rental levels. He will also advise you of any incentives that would have to be provided to the operator. These are more often than not in the form of a rent-free period to help with the cost of fitting out and starting up.

Any ingoing party might also consider a stepped rent to help with the opening of the restaurant. Your professional adviser should provide information in relation to this.

It would be essential to establish which type of operator would be acceptable to operate from the ground floor of the hotel, as this could be quite sensitive on the basis of the quality and star rating of the hotel, the type of clientele the hotel is trying to attract, and whether there is another restaurant operating within the hotel that might clash with the proposed external restaurant.

On the other hand, it might be beneficial to enter into a joint venture with a named chef, which will ensure that the hotel is able to maintain quality and standards by retaining a part-interest in the premises. People such as Gordon Ramsay, Gary Rhodes and Brian Turner have done this. The benefit is that the chefs will have a certain draw, and this can help bring in more business for the hotel.

Alternatively, you could operate the restaurant in-house. In this case you would need to calculate roughly the level of profit you could make from the premises yourself and compare this with the previous options.

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