How to Pick Your Next Location
Michael Davis
Tapan Patel
Allen Graber
Kevin Kim
Aug 11, 2025
Choosing your next location is one of the biggest decisions you'll make as an operator. It’s not just about where you’ll be. It’s about whether your business will thrive there.
A lot rides on this choice. Most leases last five to ten years. Build-outs can cost hundreds of thousands of dollars. And once you’re in, everything from customer foot traffic to landlord dynamics to economic trends can shape your success.
That’s why picking the right location means looking at the full picture. Who your landlord is. Who your customers are. What your lease terms really mean. And whether now is even the right time to grow.
This guide is grounded in real-world insights from operators who have opened second, third, and even tenth locations. These are the lessons they've learned and how they approach the decision to grow.
Too much to remember? Download Homegrown's location picking checklist to keep these lessons close as you expand.
Ask the Bigger Question
Before you even start looking at locations, take a step back and ask yourself whether you should be growing at all.
A lot of people get stuck on the idea of expansion. "I just want to get to two locations." But if you made $5K in profit last year and you are planning to spend $500K on a second unit, the math simply does not work. These are real scenarios we see.
Go deeper. Why do you want to grow? Is it for financial returns, personal validation, brand visibility, or something else entirely? Growth is hard. It will test your time, your finances, and your resilience. If you are not clear on your motivation, it is easy to lose your footing when things get difficult.
You also need to be honest about the economics. One rule of thumb we like is to aim for a full return on your initial investment within three to four years of opening. If you do not see a realistic path to that, your capital might be better off in the S&P 500.
Growth can be exciting, but only when the timing, numbers, and intention are aligned.
Start with the Landlord Partnership
If you’ve pressure-tested your reasons for expanding and the math holds up, it’s time to dive in. Before you get attached to a space, take a closer look at who owns it. Your landlord is not just someone collecting rent. They are a business partner for the next five to ten years, maybe longer. If you're putting serious capital into a build-out, the stakes are even higher. You are betting on that location and on the person behind it.
Over time, a lot can change. Customer behavior shifts. Local competition evolves. The broader economy goes through cycles. A strong landlord will work with you through the ups and downs. A difficult one will focus only on the lease terms, not on the long-term health of your business.
Here are a few questions to guide your evaluation:
Do they have a good reputation with other tenants? Ask around and look for patterns in how they treat operators.
Is the property well-maintained? Walk the space and pay attention to the parking lot, sidewalks, landscaping, and signage. These details signal how much care they put into the tenant experience.
How do they communicate? Are they responsive, clear, and open about their expectations? Can you get answers directly, or are you stuck behind layers of red tape?
Once you’ve vetted the landlord, protect yourself during the lease process by bringing in the right experts.
If you're negotiating through the landlord’s broker or agent, hire your own representative to advocate for your interests. This helps level the playing field and gives you a clearer understanding of what is negotiable.
You should also bring in a qualified attorney to review the lease. You might only do a lease negotiation a few times in your career, but a real estate attorney sees dozens of leases every month. Small language choices in the contract (like using “and” instead of “or) can have major financial consequences. Spending $5K up front is a smart investment when you are about to sign a lease worth $2M.
The best landlords care about your success, not just your rent check. Those are the ones you want on your side when the unexpected happens.
Evaluate the Fit Between Space and Strategy
Once you’ve confirmed the landlord is solid, shift your focus to the space itself. It’s easy to get excited about being offered a spot in a prestigious development or buzzy part of town, but remember that location within location matters. Just because a shopping center or district sees high traffic overall doesn’t mean your specific unit will benefit from it. You might end up in a tucked-away corner or basement level where customers rarely go.
That’s why it’s important to dig into the fundamentals and make sure the exact space you’re considering sets you up for success.
Key factors to evaluate:
Foot traffic and visibility: Does the area get consistent foot traffic? Can people see your storefront from the street or parking lot? A good landlord helps maintain a destination that draws people in, but it’s up to you to drive them to your unit.
Parking and access: Is there convenient parking for customers? For restaurants especially, make sure delivery drivers can easily pick up orders without delays or confusion.
Co-tenancy and nearby businesses: Are there complementary businesses nearby that help drive shared traffic? For example, a smoothie shop next to a gym tends to work well. The inverse can also be true: being next to a high-volume anchor like a grocery store doesn’t always help if customers are primarily focused on visiting that area for quick in-and-out trips.
Customer base: Who lives, works, or shops nearby? Are they the type of people who would buy what you're offering? Look at demographics, household income, and population density. Sophisticated operators compare their best-performing locations to new markets and look for similar audience profiles. This is why chains like SoulCycle, Trader Joe’s, or Whole Foods tend to land in the same types of neighborhoods across different cities — because they understand their customer base and build around it. Tools like Placer and Mapzot can help you assess whether a location aligns with your customer base.
Square footage and scale: Make sure the space matches what you actually need. Too much space drives up costs unnecessarily. Too little, and you will struggle to operate efficiently. If you’re aiming to open a flagship location or significantly upgrade your brand, know that this usually means a larger, more expensive build-out. Be sure that level of ambition is backed by the economics of the deal and by what the landlord is investing to help you succeed.
Affordability: Can you afford the rent while maintaining healthy margins? A good benchmark is to keep rent between 5-10% of your projected top-line revenue, depending on your business type.
Pro tip: Be especially cautious when a landlord offers free or deeply discounted rent. One of our team members ran a coffee shop that received two years of free rent in an office building. The deal looked great on paper, but the building never had enough foot traffic to sustain the business, and it eventually shut down. In other words, you get what you pay for. Make sure any incentives actually support your long-term success.Comparable performance data: Ask if the landlord is willing to share revenue comps or other performance data from similar tenants. These can be incredibly helpful when assessing whether the location makes sense financially.
If there's a downside to a property, there needs to be some mitigation, usually through negotiating better lease terms.
Understand the Real Economics
Here's something crucial that many first-time operators miss: if a landlord is giving you $400K in tenant improvement (TI), they're not actually giving you $400K. They're loaning you $400K that they're going to get back through higher rent every month.
That said, TI is often worth taking. In many cases, it is cheaper capital than what you could secure on your own. The key is to make sure the total rent still works for your business.
Look beyond just the base rent per square foot by factoring in common area maintenance (CAM) charges, which can increase your monthly cost by 20-30%. And that additional expense can dramatically change your budget. One entrepreneur who takes no TI might pay $2,000 a month in rent. Another operator who takes full TI might pay $7,000 a month. These are actual numbers from our portfolio.
Run the numbers carefully. TI can be a smart option, but only if the long-term economics are still sustainable for your business.
The Bottom Line
Choosing your next location is one of the most important decisions you will make as an operator. It shapes how your business grows, who your customers are, and whether your financial model can scale over time.
Opening a second or third location is not about repeating what worked before. It is about making the right move for where you want to go next.
Enjoyed this reading? Download the location picking checklist and keep these lessons close as you expand.