Why do some restaurants work and some don't?
Why do some software startups successfully scale while others flare out?
In the software world we constantly talk about authentic demand and product-market fit. Now that we’re in the real estate business – particularly in an unproven market, there are several parallels to the software industry.
Quick refresher: the simplest definition of product-market fit to us at Atlanta Ventures is 10 unaffiliated (no Uncle’s or cousins) paying customers who rave about the product.
There is a continuum of product-market fit as well that transfers over to the real estate world.
We’ve all heard the saying when it comes to real estate: location, location, location!
If I put a Tootsie roll store in Times Square that exclusively sold tootsie rolls, people would buy them. With so many people walking by, more people would buy them than arguably any physical location in the world, maybe even enough to pay the rent but who knows. Inversely, if the best restaurant in the world was in the middle of a desert 4 hours to the closest town, one would be hard pressed to make it work no matter how great the chef or food. These are absurd extremes but when we narrow those extremes to cities and neighborhoods it becomes much more nuanced.
We have several food tenants in and around South Downtown. Hotel Row is where the sparkle shines the most with Spiller Park Coffee and Tyde Tate Kitchen. Both establishments have word-of-mouth good food. People eat or drink there and tell their friends about it.
For restaurants to excel in South Downtown, meaning they produce remarkable results comparable to their other stores, they need to have a strong restaurant-market fit. What is restaurant-market fit? There are several levers a restaurant can use to generate money: have good food, utilize delivery, push alcohol sales, and adjust hours.
Each tenant will have their own restaurant-market fit based off what they sell. For example, a bar may not open until 11:00 a.m and stay open until midnight, whereas the coffee shop opens at 7 a.m. and closes in the afternoon.
As of today, South Downtown has limited residents and sporadic government workers who default to remote work. This is all code and reasons (excuses) as to why it’s hard in downtown, at this moment. However, for tenants to excel today they need all the levers pulled down on the restaurant-market fit.
From my experience that currently includes five things:
- Fantastic food
- Delivery via Uber Eats / Door Dash
- Alcohol (margins are so good)
- Open on the weekends
- Maximize daily week-day hours (find what works best for each restaurant)
To not just succeed but thrive in South Downtown, these levers all need to be pulled down. The levers change as the market adjusts too. For example any of the following would alter the market: the Atlanta Tech Village just got their CO so now entrepreneurs will add more valuable foot traffic. Executive orders have been signed where all federal workers must go back to the office. Between the Richard B. Russell Federal Courthouse, San Nunn Federal Building, and MLK Federal building, there is approximately 4M sqft of office space for anywhere between 8k-10k workers. Welcoming them back in our downtown would drastically change the market. The new hotel and 315 apartment units going online this summer with Centennial Yards alters the market. All of these, or a combination changes, the restaurant-market fit in South Downtown.
As of today, the restaurants who have all five of the above “features” turned on will excel in South Downtown.