Business market analysis 

of 

Mexican restaurants 

in 

Los Angeles California 

This post is meant to be a scouting mission of sorts to figure out the potential for a Mexican restaurant in Los Angeles, California. We will be examining multiple venues starting in a specified location. Let’s start our search in University Park to determine if it might be a good area for a new Mexican restaurant.

 

Foursquare has a great repository of information for this application! We can see all the venues in the area and map them out to see what areas might be under or over served. We can also check out user information to find out if the venues in each area are frequented and how often and even how well people like each specific venue!

 

I stated earlier we are examining the University Park section of Los Angeles, California. This seems like a good location on the surface since there are relatively few Mexican restaurants in the area but not so few that we cannot find data points. Depending on the day and time Foursquare will populate anywhere from one to three Mexican restaurants in this area.

 

If we check out the associated map and data frame, we can see that there are many locations in Los Angeles with as many as five or six Mexican restaurants in a very small area. The majority of locations seem to only have one. While having as many as six available places to get Mexican food might show that these locations are places where there is high demand; it could also be a sign that the market is over-saturated with this particular type of venue. While it may seem advantageous to choose an area with only one Mexican restaurant this could lead to a problem where that particular restaurant is either really good or really bad giving us skewed information as to the demand for this type of venue in this particular location.

 

It appears that University Park has two Mexican restaurants that show up regularly when we run the data. There is also a third that does not show up very often and does not provide much, if any, data to go off of when it does show up. For the purpose of this study we will assume that this means very little attention is given to this restaurant and it’s marketing. Which also implies that there may be more Mexican restaurants in the area, or really any area we look at, that are not on Foursquare.

 

When we look at these two restaurants we see that La Valentina has a moderate price and Monarca has a cheap price, but when we look at the best photo from each of these venues, La Valentina uses plastic ramekins and chip buckets where Monarca uses glass. Is this because prices are self-reported? Or maybe one venue has an eye towards cost savings where the other has an eye towards a premium experience at a reasonable price. Since I’m a sucker for profit maximizing, let’s explore La Valentina and some similar venues.

 

I have decided to pull 13 parameters for each of these six venues. ID and name are for identification and pulling more data if need be. Whether or not the business is “verified” might give us a little insight into if they are actively pursuing marketing. “Likes count” and rating should show us how well the venue is liked by the people in the neighborhood. “Rating signals” and “tip count” should show us how often the venue is frequented, and we have also pulled “price” here and “price message” which say the same thing but one is for the use of the computer while the other is for a quick and easy glance by a human. “Created at” will let us know how long they have been on Foursquare and we have also pulled contact information in the form of “phone number,” “address,” and “URL” for further information gathering at a later date.

 

Chichen Itza seems to be the front runner for Mexican restaurants in the area. It has the highest rating at 8.9 and the highest level of likes counts at 176. It appears that El Torino has higher foot traffic but only marginally. It also has a price message of cheap. This might be a restaurant to look at for inspiration if we determine that opening one in University Park is a good idea

 

If we look at likes count, rating signals, and tips count they do appear to be relatively proportional to each other across all of the restaurants leading us to believe that we could likely use any one of these three as traffic estimations.

 

 When we look at a graph to show price versus traffic, in the form of rating signals, we can see that the more expensive restaurants are frequented less often than the cheap restaurants and have more rating signals by a significant amount.

 

Now let’s look at price versus rating. It does not appear that there's any correlation between these two variables. This would lead to the belief that a cheap restaurant might be more favorable because it would get more foot traffic without decreasing the likelihood of people enjoying their meal. Another thing that might support that hypothesis is looking back at Chichen Itza, which has a cheap price tier and the highest rating of the group.

 

After all of this, I would say that University Park would be a good place to look into opening a Mexican restaurant. I would recommend using a cheap price structure and focus on cost savings in places that are not food quality to keep traffic high and overhead low. That being said, this is only scratching the surface of the information required to make a final decision. We would still need to look into the real estate market to see if the cost of rent or mortgage are too high in the area; as well as to see the trend of people moving into or out of the neighborhood. Is this area mostly college students? people at work taking lunch? families going out to dinner? A couple pictures and reviews does not give us the “feel” of the venues we are looking at. We could also look at polling Foursqaure to see what times these places are most popular, but the venues in University Park do not provide much information to Foursquare so this may not be super accurate. We could also peruse the websites and call the phone numbers to see if these locations are putting effort into their experience outside the doors of the restaurant. There is still a lot to do for an investor, but we have a good starting point of reference to frame our future information!