Most Reasons for Failure of New Openers is Mistaken Site Selection – What is Trade Area Analysis? What is a Trade Area Analysis?

This report analyses the Japanese market.

Most reasons for new restaurant operators to fail are location selection errors

Why is it that once a location is decided, it should not be easy to change it, yet too many new restaurant owners, for their own reasons, such as wanting to rush the opening, open a restaurant without understanding the location strategy of the noodle business? In consulting with restaurant owners, I have seen many failures and successes.And there is a law.

In addition to selling noodle-making machines, I have seen many new udon, soba, and ramen restaurants open and fail, and in order to reduce the number of people who fail at opening new restaurants, I opened an udon school 20 years ago and a ramen school and a soba school 17 years ago.
During that time, we have sent countless graduates into the world.
The difference from when we opened the school is that the number of people who open new businesses and fail seems to be increasing, not decreasing.

As mentioned in the manpower shortage booklet and soup booklet I recently wrote, 42-3% of udon noodle and ramen stores close within one year after opening, and 72-3% within three years, with an average life span of 2.4 years. The number of closures is increasing and the average life span is getting shorter than before.
And, when I actually teach classes, I feel that the number of students who show interest in and seriously learn about manegement classes has decreased from previous years.

In short, the number of people who are opening new businesses and failing to do so is increasing greatly. One of the biggest reasons for this is a mistake in location selection.
There are three main factors that cause mistakes in location selection

1.Many people choose locations with a lot of rivals and stiff competition. (Businesses should never compete, and moreover, since they are in the position of a weak new entrant, they should never compete with a strong senior competitor)
2.They do not choose locations where their business model is viable (they do not choose locations where their target customers are for their business model. (In addition, they do not have a clear understanding of their business model.)
3.Many people do not understand the fact that most noodle businesses such as udon, soba, and ramen restaurants are location-dependent businesses and cannot be viable without customers. (Many people open noodle stores in locations with few seats or insufficient parking space. (Many people open restaurants with few seats or in locations where there is not enough parking space.)

A simple analogy for location selection is “ant hell.
The ant hell of the larvae of the Formicaeus vomeronata spends its larval stage in the soil for two to three years.
As the name suggests, the prey of the ant hell is ants walking on the ground. In order to catch the ants as prey, the ant hell builds a burrow where the ants roam around, and waits for them to fall into the center of the cone-shaped hole.
The ant hells risk their lives to decide where to position their burrows.
If ants dig a burrow in a place where they will not fall, they will starve to death.
And even if they dig a well-positioned burrow, if there is a large, senior ant hell nearby, they may snatch their prey.
For this reason, ants always risk their lives when digging their burrows.

The nest hole of an ant hell corresponds to a store in an udon or soba restaurant or a ramen store.
Therefore, for new udon, soba, and ramen restaurant operators, site selection is a vital theme.

It is said that the three major factors for success of a restaurant are product power, service power, and store power.
In other words, if a restaurant is opened in the wrong location, it will be difficult to recover later.
Even if the level of products and services is a little low at the time of opening, it may be manageable if you continue to work hard and raise the level of your products and services. However, if the location, which is included in store strength, is wrong, it cannot be corrected later.

In the cost of opening a new store, the largest portion of the cost is related to the store. Particularly costly are the kitchen construction costs and equipment facilities, followed by the interior and exterior. Since a large investment has already been made, it is not easy to relocate to a better location even if the location is different and you want to move to a better location.

The cost of this part of the business is 60-80% of the total investment, and at the same time, it is a part that must be taken care of from the beginning because it cannot be modified later.
However, I think that most new openers do not put energy and time into this part of the process and make the decision too easily.
When most new entrepreneurs decide to open an udon, soba, or ramen restaurant, the first action they take is to select a location.
As noted below, location selection is the last step.

It is natural to look for a suitable location after many things have been decided, but many people make the mistake of deciding on a location before anything has been decided.
Often, people have already decided on a location when they join our udon school, soba school, or ramen school.
As the class progresses, most of them realize that the location they are currently signing up for will not yield good results.

In the management lecture class, I show them a simulation of a business model to see what kind of results they could achieve if they were to open a business in that location. Then, not only is it not possible to secure the profit that was initially targeted, but most of the time, the store will not be profitable and satisfactory to operate.

Here is an example of a student who recently attended an udon school from a rural area. He wanted to make a monthly profit of 800,000 yen in a suburban store with 7 parking spaces and 30 tsubo (about 1.5 square meters). However, when we ran a simulation based on the actual sales per customer, turnover rate, and number of business days, we found that the monthly profit was only about 200,000 yen.

In this way, it is easy to understand what kind of business, in what kind of location, will generate what kind of sales, how much expense, and how much profit can be obtained by doing a simulation before opening the store.

Most students and new entrepreneurs start without a business model and without simulating profits, which is like going into battle without any weapons.

This is like going into battle without any weapons. Therefore, they are fighting a losing battle even before they begin.
As a result, you will lose your precious tiger capital and precious time of your life.

Therefore, if you understand all the necessary elements before opening a restaurant and start an udon, soba, or ramen restaurant in the correct order, you will not make a big mistake. Unfortunately, many people open a restaurant without having all the pieces in place.
I would like to discuss in detail the selection of a location to avoid failure in opening a restaurant.

As mentioned above, udon, soba, and ramen restaurants are businesses that are greatly influenced by their location. However, the delivery and home-delivery businesses such as Uber Eats, which have been growing remarkably recently, especially in urban areas, can be developed without being affected by location.
Therefore, it is also very important to keep abreast of new business opportunities.

Chapter 1: Failures that Restaurant Owners Make. Continue with the correct sequence to open a restaurant.

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