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Opening a new restaurant can be a risky business. Owners need a solid business plan, an efficient yet friendly staff, delicious food and a little bit of luck.
Location is also key to the success of a new eatery. Entering a market that's oversaturated with dining options or where the population is on the decline can spell disaster for a fledgling restaurant.
There are some markets where demand for new restaurants is high and restaurateurs are thriving. NerdWallet crunched the numbers to help find those places across the nation.
NerdWallet examined 530 cities in the U.S., each with a population of at least 50,000. We used U.S. Census Bureau data to calculate the score for each location based on demand for new restaurants and local economic conditions that could affect the success of those restaurants.
To analyze demand, we looked at population growth and density, and we also factored in median annual income and income growth, as well as restaurant sales per resident and the number of new eateries.
To assess economic conditions, we looked at payroll costs, growth in labor and median monthly housing costs. For more details on our methodology, see the end of this article.
New residents, new restaurants. Cedar Park, Frisco and Round Rock, Texas; and Fishers, Indiana, each saw population increases of nearly 10% or more in a three-year span. Those new residents helped drive the need for new restaurants. In Cedar Park, for example, where the population jumped over 20%, the number of restaurants more than doubled.
Suburbs drawing new eateries. Nearly all of the top 10 cities are part of a larger metropolitan area, such as Dallas and Austin, Texas; and Nashville, Tennessee — cities that have experienced a culinary renaissance, which has been extended to neighboring suburbs.
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Best cities to start a restaurant
1. Cedar Park, Texas
The Greater Austin area is one of the fastest-growing metropolitan regions in the country, and Cedar Park, a major suburb, is reaping the rewards. The number of restaurants in Cedar Park doubled over five years, partly in response to a surge in new residents. Recent restaurant additions include In-N-Out Burger and Sushi Fever, which both opened in 2014. City officials don’t expect Cedar Park’s population growth to slow soon, so demand for new dining options should remain strong.
2. Mission, Texas
Heavy auto traffic can translate into heavy foot traffic for businesses, a fact that many restaurants in Mission are capitalizing on. New restaurants have popped up along the Interstate 2 corridor, which bisects this border city. Those eateries include Freebirds World Burrito, a fast-casual chain that opened in 2012, and the Tilted Kilt, a pub and restaurant that opened nearby. Owners of the Tilted Kilt looked specifically for a location along the expressway, which connects Mission with neighboring McAllen.
3. Franklin, Tennessee
Franklin is in the Nashville metropolitan area. The restaurant boom that has prompted chefs from across the nation to open up shop in Music City has extended to Franklin, as well. Residents in this wealthy suburb have a median annual income of about $60,000, and enjoy spending their hard-earned cash on a meal out. The number of restaurants in Franklin increased nearly 50% over a five-year period, while sales in the eateries top $190 million annually, which works out to over $3,000 per resident.
4. Smyrna, Georgia
Smyrna has transformed from a sleepy suburb to a modern bedroom community in the past few decades. The transition has brought an influx of residents — the city’s population increased nearly 30% from 2000 to 2012 — and so did demand for dining options. Four new restaurants opened in one month in 2012, including Happy Belly Truck, a mobile culinary endeavor that’s still going strong.
5. Round Rock, Texas
Round Rock is one of the fastest growing cities in the U.S. and is part of one of the fastest-growing metropolitan areas, to boot. The city’s rapid and continuing growth makes the market ripe for new restaurants. Round Rock residents welcome new eateries on a regular basis, including staples from nearby Austin such as Kerbey Lane Cafe, which expanded to Round Rock in May.
6. Frisco, Texas
Frisco is home to some of the wealthiest neighborhoods in the Dallas-Fort Worth area, a fact that has meant big business for the city’s restaurants. Sales at restaurants topped $200 million in recent years, and Frisco added 100 new restaurants in a five-year span. Those new restaurants were necessary to keep up with the city’s rapidly growing population that jumped over 15% from 2010 to 2013, making it one of the fastest-growing cities in the U.S., a common theme among cities on this list.
7. Alpharetta, Georgia
Alpharetta was recently named the best small city to start a business, partly due to the nearly 9,000 businesses that have set up shop in the Atlanta suburb. Those who live and work in Alpharetta enjoy dining in the city, too. Sales in Alpharetta restaurants top $300 million a year, which works out to about $6,000 per resident annually — second only to Miami Beach, Florida.
8. Fishers, Indiana
Fishers is affordable, has strong schools and residents have easy access to nearby Indianapolis. This combination has helped the city lure young professionals, families and the businesses that cater to them. Nearly 35% of Fishers’ residents are 35-54 years old, a prime target market for restaurant owners. Those residents and visitors in Fishers have helped restaurants ring up over $100 million in annual sales.
9. Milpitas, California
Like many cities on this list, Milpitas is among the fastest-growing places in the U.S. That growth has been good for restaurant owners in this San Jose suburb. Eateries in Milpitas see over $200 million in sales, or roughly $3,000 per resident annually. New additions to the city’s restaurant scene include Wayback Burgers, a casual chain that opened in January 2015.
10. Southaven, Mississippi
Mississippi might not be the first place that comes to mind when thinking about economic growth, but commercial and residential construction in Southaven is booming since the recession. The Memphis suburb saw a major expansion at Southaven Towne Center mall in recent years and a new outlet mall is slated to open this fall. A growing retail scene is good news for prospective restaurant owners hoping to capitalize on hungry shoppers and add to an already strong culinary scene that rakes in over $105 million in sales annually.
NerdWallet analyzed 530 cities in the U.S., each with a population of at least 50,000. We evaluated cities using data from the U.S. Census Bureau's American Community Survey and the Economic Census and the following metrics to determine demand for new restaurants and the economic conditions needed to support them.
Demand, 60% of the overall score, is based on seven metrics each weighted at 8.6% of the score:
Population growth from 2010 to 2013. Higher growth contributed to a higher score.
Population density. A higher concentration of residents per square mile contributed to a higher score.
Percentage of residents age 35-54. A higher percentage contributed to a higher score.
Median annual income. A higher median income contributed to a higher score.
Median annual income growth. A higher growth rate contributed to a higher score.
Sales in restaurants per resident. Higher sales contributed to a higher score.
Number of new restaurants opened from 2002 to 2007. Higher growth contributed to a higher score.
Operating conditions, 40% of the overall score, is based on three metrics, each weighted at 13.3% of the score:
Payroll costs as a percentage of revenue. A lower percentage contributed to a higher score.
Restaurant labor cost growth per employee. Lower growth in labor costs contributed to a higher score.
Median monthly housing costs. Lower housing costs contributed to a higher score.
NerdWallet staff writer Kelsey Sheehy contributed to this article.
Image via iStock.