Great Ideas for your Small Business: Be a Location Contrarian
Most young, cocky restauranteurs would rather die than open their cool restaurant in a suburban shopping mall. But Gary Leff, founder of Stir Crazy Enterprises, took a different spin. He headed for the suburbs, and it paid off.
“The first inclination is to open up in the city, and one of the main reasons is ego,” said Leff. “The city is sexy, you can see your friends, and the ‘big boys’ are in the city.”
But in downtown Chicago, restaurant owners face fierce competition, high rent, and safety concerns. “It’s also hard to get above the ‘noise’ in the city,” said Leff, who worked as a management consultant for five years before writing a business plan and raising about $5 million from investors to open his restaurant chain. His primary investor is a partner in JMB Realty, a major Chicago-based real estate firm.
The first three Stir Crazy restaurants are located in upscale shopping malls. Each one cost about $1.3 million to open, and they made money from the start. The first two units generated $5.5 million in revenues the first year. Knowing that many new restaurants fail, Leff spent years doing market research before launching his venture. “I felt there was a huge gap in the marketplace to do something fresh and fun with Asian food,” said Leff. Stir Crazy isn’t cheap; lunch averages $9 to $10 a meal, and dinner is $14. At Stir Crazy restaurants, patrons select a variety of vegetables, meats, and sauces to be stir-fried while they watch. They can also order dishes from an extensive menu.
“Creating your own stir fry is the biggest hit,” said Leff, who works with chefs and food consultants to dream up new dishes. “People love it because it gives them a lot of choice; plus, it’s fresh, healthful, and fun.
“Contrary to what people say, the suburbs are sophisticated. People who live in the suburbs used to live in the city,” said Leff. “We can also stand out because we are going to compete against the restaurant chains that people are sick of.”
Leff is now looking to expand and is searching for locations in Boston; Washington, D.C.; Denver; and several areas in Florida. “We are looking for the best real estate opportunities,” said Leff, adding that it took a year to find the right site for the first Stir Crazy location.
He doesn’t envision being the next McDonald’s or Red Lobster, but he would like to build forty units in the next five years and 150 in ten. “We will be a major player in Asian casual dining,” he predicts. Leff’s compensation and stake in the company are hinged to performance, so he hopes his predictions are right.
What to consider when looking for space
BASING YOUR BUSINESS in a shopping mall has certain advantages over renting space in a strip mall or in a traditional retail district. A mall has built-in foot traffic, good parking, and a mall wide marketing budget. It’s best to work with an experienced real estate broker who represents many malls in your area. Shop carefully; renting space is costly, and you don’t want to be stuck in the wrong place. When you go out looking, consider the following:
- How much space will you need for your sales and storage areas?
- What kinds of businesses are operating around you? Are they competitive or complimentary?
- How responsive is the management company to tenants? Speak to other small retailers in the mall to find out.
- What hours is the mall open on weekdays? Weekends? Holidays?
- Do you like the feeling of the place? Can you see yourself working here every day? Visit the mall at different times of the day and night to check foot traffic and parking availability.
- How many arrests for shoplifting were made in the recent months? Mugging? Vandalism in the parking lot? Check with the local police department to determine the safety and security of the mall.
- Will you be paying for utilities? Do you have to pay for all interior improvements? Can you sublease the space to another business? Make sure you understand exactly what your lease includes and sign the shortest lease possible to give yourself an out if your business fails.