Despite renting a space for VND80 million per month on a major street, one restaurant, for example, had to close down, suffering heavy losses after five months of operation.

In 2023, Nguyen Thi Diep, 35, a bank employee, and her husband started the restaurant business in Hanoi with the advantage of her husband being a former chef at a 5-star hotel.

When looking for a location, she found a street-front house on a crowded central route. The traffic flow was bustling from morning to night, the sidewalk was wide, and the surrounding area had many office buildings. The rental price was offered at VND80 million per month, excluding electricity, water, and other incurred costs.

After a few days of consideration, she made a deposit. The total capital of nearly VND2 billion was mainly allocated for rent, deposit, and site renovation. About 80 percent of the money was poured into repairs, interior design, and a new industrial kitchen, as well as wooden tables and chairs, warm lighting, and prominent signage.

During the opening month, the restaurant was quite crowded. Friends and acquaintances came to support, and curious customers dropped by because of the highly visible location. Revenue in the first few weeks made her more confident in her decision.

But when summarizing the costs after the first month, the financial picture appeared much less optimistic. Fixed rent was VND80 million. Personnel costs were nearly VND90 million per month because the restaurant operated all day. Electricity, water, gas, ingredients, marketing, and promotion costs combined for tens of millions of dong more. There was revenue, but profit was almost zero, or even negative if all costs were fully calculated.

Three months later, the number of customers began to decrease. Although the street was crowded, most passers-by were office workers who have a quick lunch or walk-in guests. Prices also had to be set higher to compensate for the high rental costs, making many customers hesitant.

Before the restaurant could build a loyal customer base, the pressure of fixed costs became a burden. By the fifth month, the reserve fund was nearly exhausted. She was forced to post a notice for business transfer, accepting a loss of hundreds of millions of dong.

Sharing about the failure, she believed the mistake was thinking that a good location would automatically bring customers. But a large crowd does not mean the model is suitable for that area.

A beautiful location does not guarantee success

Tran Khanh Minh Son, a respected consultant, said that Diep's story is not unique. Many entrepreneurs often confuse a beautiful location with an effective model.

Location is only one variable in the business equation. If the rent accounts for too large a proportion of the cost structure, the business will face very high revenue pressure from day one.

According to F&B industry standards, rental costs should be controlled at a safe level compared to expected revenue. In addition, new entrepreneurs need to prepare a reserve cash flow sufficient for at least 6six months of operation, the stage of building a brand and a stable customer base, instead of expecting immediate profit.

An expensive location shows its value only when a business already has a brand or a model that has been proven elsewhere. Without that foundation, a “diamond” location can become a burden.

The story of a restaurant owner losing VND2 billion after just five months in Hanoi highlights a painful reality: a well-located retail premise does not guarantee success. Experts warn that when rent consumes too much of the cost structure, even a 5-star chef cannot save a business from the pressure of fixed expenses and exhausted cash flow.

Before signing a lease, business owners need to clearly answer three questions: Is the target customer truly concentrated in that area? Is the expected revenue enough so that the rent only accounts for a safe proportion of the cost structure? Is the reserve cash flow sufficient to maintain at least six months of operation if revenue does not meet expectations?

“A beautiful location does not mean a suitable one. A space that fits the budget, matches the customer base, and suits the model is much more valuable than a diamond location that exceeds financial endurance,” the expert said.

Tuan Nguyen