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How to find the right location

When I worked at McDonald's, [unit] volumes on the low side were a million," says Jim Rand. "On the high side they were $5 million. The point of differentiation was the quality of the real estate."

Rand, a 32-year veteran of McDonald's who eventually held the title of global chief development officer, was brought into LYFE Kitchen in 2010 to help devise the upstart's real estate strategy.

"I heard them talk about food, nutrition, ambiance, training. And from that we sat down and said, ‘Now here's what we would want as minimum potential counts of people [in the market areas] to make this concept successful."

Within a mile of a location they focus their attention on the demographics of workers and shoppers. They are targeting locations near trendy retailers like the Apple Store, Whole Foods, Trader Joe's, Lulu Lemon and Crate and Barrel. They also look at office density, with workers who skew younger and more educated.

"We are looking for customers who are referred to as ‘early adopters.'"

Within two miles they analyze the residential demographics.

"We want a minimum of 10,000 residents in a one-mile ring and 28,000 in a two-mile ring," says Rand.

They further screen residents looking at the number of people who hold master's degrees and the median household income.

In his years of analyzing real estate, Rand says his biggest mistakes have been in wavering from the filters he's built for judging if a site meets the restaurant's needs.

"The way I would make a mistake was to let somebody talk me into approving a location that didn't have all the right ingredients. I would violate my own rules," he says. "I learned that you put rules together for a reason… People try to say, ‘This [location] is going to be different.' Been there done that."

As Rand explains, the rules every restaurant needs to follow to help ensure solid real estate investments are:

1. "Make sure the restaurant is visible."

2. "Make sure it is easy for the customer to get into and out of the site. Customers are easily frustrated when they can't find parking and it is not easy to turn into and out of a location." (As this rule also shows, sometimes you can fudge your own rules: the Culver City LYFE has only on-street parking.)

3. "Make sure you get the proper signage package."

4. "Make sure you can lay out the store so customers can order easily and the dining room is comfortable."

5. "Establish a financial template for your real estate cost. A good rule is that the annual cost for real estate rent, taxes and [common area management] is 10 percent of sales. If you can't afford this number you are at risk."

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