The 10 most & least promising places to open a restaurant

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There’s no shortage of movies and TV shows about the plight of restaurant owners — their initial struggle and ultimate rise to success. But the restaurant industry can be punishing, leaving many entrepreneurs with only the effort and dashed dreams.

LendingTree analyzed the 50 largest U.S. cities to see which offers prospective restaurateurs the best shot at success. Many top spots are in once-overlooked Midwestern cities now experiencing urban renewal. The least promising cities have historically been the restaurant industry’s most competitive.

Image Credit: DepositPhotos.com.

Dining out: Still a great American pastime

The 10 most & least promising places to open a restaurant

Eating out has long been an American pastime — and growing. More than 1 million restaurants operate in the U.S., generating $799 billion in sales. Restaurants are expected to create 1.6 million new jobs by 2027. But despite the size and scope of the industry, it remains a challenging landscape for business owners. Changing consumer tastes and purchase behavior, as well as rising labor costs, continue to put pressure on restaurant owners, who must evolve their business models, menus and technology to keep their doors open.

However, it’s not all bad news for the industry. Restaurant sales have seen an uptick in recent years though it’s unclear if that’s due to an increased number of diners or Americans simply spending more. But a national rise in wages could motivate people to eat out more often. Either way, it creates a growing opportunity for restaurateurs. And despite commonly held beliefs that nearly all restaurants fail right away, their median life span is about 4 1/2 years.

Image Credit: DepositPhotos.com.

What we considered

The 10 most & least promising places to open a restaurant

To find out where prospective restaurant owners may have a better chance at succeeding, we looked at four factors within the 50 largest metros in America: Average estimated annual revenue, estimated payroll costs per employee, the

number of restaurants per 100,000 households with incomes of $50,000, and the number of restaurants per 100,000 residents aged 35-54. 

Gen Xers have a greater appetite for restaurant spending than millennials or baby boomers, according to the same BLS survey. This may present an opportunity for cities dominated by this generation with relatively few restaurants.

Image Credit: DepositPhotos.com.

Most promising places to open a new restaurant

The 10 most & least promising places to open a restaurant

While traditional foodie destinations like New York and San Francisco are saturated with restaurants,  up-and-comers have room to grow. You may not immediately think of Milwaukee and Cincinnati as foodie destinations, but they represent opportunities for new restaurant owners to find their footing. The restaurant population in these cities is less dense than in other areas while labor costs are lower, leaving room for newcomers to make a name for themselves.

Image Credit: DepositPhotos.com.

10. St. Louis

The 10 most & least promising places to open a restaurant

Final score: 68.7

Estimated median revenues (RPP normalized): $275,184

Avg. annual payroll per employee: $15,381

Establishments per 100K households (>$50K): 757

Establishments per 100K residents (35-54): 630

Image Credit: DepositPhotos.com.

9. Richmond, Virginia

The 10 most & least promising places to open a restaurant

Final score: 69.1

Estimated median revenues (RPP normalized): $299,232

Avg. annual payroll per employee: $15,221

Establishments per 100K households (>$50K): 781

Establishments per 100K residents (35-54): 634

Image Credit: Sean Pavone / iStock.

8. Hartford, Connecticut

The 10 most & least promising places to open a restaurant

Final score: 70.2

Estimated median revenues (RPP normalized): $472,800

Avg. annual payroll per employee: $18,119

Establishments per 100K households (>$50K): 748

Establishments per 100K residents (35-54): 685

Image Credit: DepositPhotos.com.

7. Kansas City, Missouri

The 10 most & least promising places to open a restaurant

Final score: 70.7

Estimated median revenues (RPP normalized): $255,120

Avg. annual payroll per employee: $16,489

Establishments per 100K households (>$50K): 709

Establishments per 100K residents (35-54): 588

Image Credit: TriggerPhoto/istockphoto.

6. Riverside, California

The 10 most & least promising places to open a restaurant

Final score: 71.8

Estimated median revenues (RPP normalized): $377,808

Avg. annual payroll per employee: $17,675

Establishments per 100K households (>$50K): 847

Establishments per 100K residents (35-54): 544

Image Credit: DepositPhotos.com.

5. Raleigh, North Carolina

The 10 most & least promising places to open a restaurant

Final score: 75.3

Estimated median revenues (RPP normalized): $356,022

Avg. annual payroll per employee: $15,396

Establishments per 100K households (>$50K): 786

Establishments per 100K residents (35-54): 600

Image Credit: Sean Pavone / iStock.

4. Louisville, Kentucky

The 10 most & least promising places to open a restaurant

Final score: 76.3

Estimated median revenues (RPP normalized): $360,000

Avg. annual payroll per employee: $14,979

Establishments per 100K households (>$50K): 794

Establishments per 100K residents (35-54): 600

Image Credit: traveler1116/istockphoto.

3. Minneapolis

The 10 most & least promising places to open a restaurant

Final score: 77.4

Estimated median revenues (RPP normalized): $293,100

Avg. annual payroll per employee: $17,094

Establishments per 100K households (>$50K): 629

Establishments per 100K residents (35-54): 574

Image Credit: StevenGaertner/istockphoto.

2. Cincinnati

The 10 most & least promising places to open a restaurant

Final score: 78.4

Estimated median revenues (RPP normalized): $370,944

Avg. annual payroll per employee: $14,813

Establishments per 100K households (>$50K): 757

Establishments per 100K residents (35-54): 613

Image Credit: aceshot / iStock.

1. Milwaukee

The 10 most & least promising places to open a restaurant

Final score: 82.5

Estimated median revenues (RPP normalized): $350,784

Avg. annual payroll per employee: $14,510

Establishments per 100K households (>$50K): 709

Establishments per 100K residents (35-54): 591

Image Credit: DepositPhotos.com.

Least promising places to open a restaurant

The 10 most & least promising places to open a restaurant

The lowest-ranking metros in our study are cities with world-renowned restaurant scenes. The local restaurant industry is overcrowded in these places, making it difficult for new restaurant owners to be successful.

Image Credit: DepositPhotos.com.

10. Buffalo, New York

The 10 most & least promising places to open a restaurant

Final score: 42.1

Estimated median revenues (RPP normalized): $152,064

Avg. annual payroll per employee: $16,309

Establishments per 100K households (>$50K): 869

Establishments per 100K residents (35-54): 735

Image Credit: mphillips007/istockphoto.

9. Miami

The 10 most & least promising places to open a restaurant

Final score: 41.2

Estimated median revenues (RPP normalized): $194,040

Avg. annual payroll per employee: $18,892

Establishments per 100K households (>$50K): 991

Establishments per 100K residents (35-54): 617

Image Credit: Art Wager/istockphoto.

8. Seattle

The 10 most & least promising places to open a restaurant

Final score: 39.1

Estimated median revenues (RPP normalized): $343,680

Avg. annual payroll per employee: $21,851

Establishments per 100K households (>$50K): 842

Establishments per 100K residents (35-54): 757

Image Credit: Lonnie Gorsline/shutterstock.

7. Los Angeles

The 10 most & least promising places to open a restaurant

Final score: 38.7

Estimated median revenues (RPP normalized): $355,536

Avg. annual payroll per employee: $19,634

Establishments per 100K households (>$50K): 1,036

Establishments per 100K residents (35-54): 717

Image Credit: DepositPhotos.com.

6. Portland, Oregon

The 10 most & least promising places to open a restaurant

Final score: 38.4

Estimated median revenues (RPP normalized): $271,308

Avg. annual payroll per employee: $19,125

Establishments per 100K households (>$50K): 916

Establishments per 100K residents (35-54): 748

Image Credit: 4nadia/istockphoto.

5. Boston

The 10 most & least promising places to open a restaurant

Final score: 38.0

Estimated median revenues (RPP normalized): $288,036

Avg. annual payroll per employee: $20,570

Establishments per 100K households (>$50K): 844

Establishments per 100K residents (35-54): 777

Image Credit: iStock.

4. Providence, Rhode Island

The 10 most & least promising places to open a restaurant

Final score: 32.9

Estimated median revenues (RPP normalized): $252,756

Avg. annual payroll per employee: $17,781

Establishments per 100K households (>$50K): 982

Establishments per 100K residents (35-54): 797

Image Credit: Sean Pavone/shutterstock.

3. New Orleans

The 10 most & least promising places to open a restaurant

Final score: 32.3

Estimated median revenues (RPP normalized): $251,520

Avg. annual payroll per employee: $17,426

Establishments per 100K households (>$50K): 1,069

Establishments per 100K residents (35-54): 759

Image Credit: Jorg Hackemann/shutterstock.

2. San Francisco

The 10 most & least promising places to open a restaurant

Final score: 24.8

Estimated median revenues (RPP normalized): $361,440

Avg. annual payroll per employee: $23,325

Establishments per 100K households (>$50K): 938

Establishments per 100K residents (35-54): 823

Image Credit: EarthScapeImageGraphy/istockphoto.

1. New York

The 10 most & least promising places to open a restaurant

Final score: 17.3

Estimated median revenues (RPP normalized): $224,640

Avg. annual payroll per employee: $22,581

Establishments per 100K households (>$50K): 993

Establishments per 100K residents (35-54): 791

Image Credit: DepositPhotos.com.

Financing can be an extra hurdle

The 10 most & least promising places to open a restaurant

In addition to the challenges brought on by location, new restaurant owners may have difficulty funding the operation as well. Obtaining financing can be challenging, especially if the owner has no previous experience owning or managing a restaurant, said Hunter Stunzi, senior vice president of small business at LendingTree.

Lenders often view restaurants as higher-risk businesses because of high turnover and failure rates, he said. Most new restaurants will have significant upfront costs, and owners usually need outside financing. Start-up costs could include:

  • Leasing or purchasing a location
  • Permits
  • Outfitting the building for the restaurant
  • Leasing or purchasing equipment
  • Hiring staff
  • Purchasing perishable inventory
  • Marketing

All of these expenses can add up quickly. Long before buying their first commercial stove, business owners should first visit a bank to seek financing from the Small Business Administration, Stunzi said. An SBA loan could cover fixed expenses such as the location purchase and buildout. Online alternative lenders could be a good option for leasing equipment or obtaining working capital to cover inventory, marketing and payroll, he said.

Whether submitting an application to a bank or an online lender, new restaurant owners should be prepared to submit a clear business plan and a detailed description of their past experience, as well as the current management team at the restaurant. New owners would also have a better chance of approval if they have a strong personal credit profile and assets to offer as collateral on a loan.

“Any lender to a new restaurant will be very focused on the business plan and the owner’s experience,” Stunzi said.

Prospective restaurateurs can learn more about the steps to starting a restaurant here.

This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.

Image Credit: DepositPhotos.com.

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